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36 Comments on Should tenant pay rent when Landlord is not making the house payment?
Here it is my understanding through out attorney and the boards that till it is foreclosed on they still have to pay rent to the current owner and I have had two that are still renting from the banks.
Tracy lee~ In California I believe a renter is obligated to the contract unless otherwise canceled! If a landlord owns the property and has it contracted out, the lessee must keep its obligation...JMO
It's too bad when the owner is not making mortgage payments and the renter is paying the rent. I think the owner shouldn't be able to get away with NOT paying their mortgage and pocketing the tenant's hard earned, which will eventually have them out on their ear. Pity.
Tough situation. Since the lease contract is between the owner and tenant I understand that the owner's default on the mortgage doesn't relieve the tenant from their obligation to pay rent. After all they are living in the property. But, I wonder if the lease agreement had a stipulation something like: "landlords default on the mortgage invalids the terms of this lease" could provide some relief to the tenants?
In CA we use a Deed of Trust and Assignment of Rents. It's different from a mortgage. After a Notice of Default is recorded the lender can collect rents from the tenant directly. They usually don't unless it's a big commercial property.
Tracy - This is such a frustrating situation for the tenants and a hard place to be.
Tracy Lee: Although I think it is very wrong of the sellers to be doing this... as they are misleading the tenants... as it could end up with some unfortunate consequences. The rental agreement is between the tenant and the home-owner... even if the home-owner is not making the mortgage payments.
One major problem that could develop is that the home may go into foreclosure while the tenant is living there. What a horrible surprise for them to find the local sheriff at the door... with a notice to vacate immediately.
I have seen this happen.
I've had my first such situation and have offered the tenant their deposit back when they vacate so I can provide the property to the bank when the owner negotiates a deed in lieu....
Each party to a contract has to fulfull their obligations.
If you are a tenant, you need to pay rent.
Phil
Tracy, I agree the tenant should continue to pay the rent per their lease.
Hi Tracy Lee. Talk about a tenant being between a rock and a hard place...
Any landlord that allows this to happen should be penalized severely. For that landlord to not notify their tenants of the problem(s) is inexcusable. It is amazing how some people treat people in general; let alone those who trust and depend on them.
Bruce
Yes because they have an agreement to do so...But , what if they don't? The landlord has one foot out the door already and needs the other foot to keep from falling. Here is a wild card to consider as well. Does the NOD notice of default bring into question the ownership rights? The trustee is challenging that pre-agreed to position by filing the notice of default....good post here
Richie: Without having seen it, I am going to guess that the original purchase agreement also included an "assignment" clause which would have the lease pass on to the new owners.
I am not an attorney, so I do not have any idea how this would affect things in a case like this.
While it would be tempting to not make a rent payment if the owner was not making a mortgage payment, remember the contract (lease) is between you and the landlord, not you and the landlord's lender. And I'm sure there's not a solid, legally defensible way to make a case that you didn't need to pay YOUR rent simply because the owner of the property was not current on his mortgage.
If there is an issue with the owner/landlord, it should be dealt with in the appropriate context, legal or otherwise. Withholding rent does not imply the real matter (where you are going to live once the home is foreclosed) is being addressed.
This is a great post. Most renters assume they should not. Thanks for pointing out to them, that they really should.
Thanks for all the comments! We do have to follow the law on these situations as property managers. That is why we like to escrow the security deposits.
Tracy~ great post & comments. I think the thing that gets lost in translation, "commitment", just like the owner of the building has a commitment, so does the tenant. Renters have rights just like property owners, if a renter or property manger has an issue, small claim court is the perfect solution. Owners must abide by the laws, just like renters and property managers!
No one ever wants to be a lout by not paying the rent, just like no one wants to get screwed-over!
Tracy -- interesting that you should bring this up -- have a client who is trying to buy the house he is renting, and he is concerned that the homeowner is not making the mortgage payments. I told him, keep making the rent payments-- don't kneed to have that clunker in the process of buying.
@Karen Anne..most worthy and relevant point...thank you and thank the original poster (OP) too
In AZ the lease will survive a foreclosure, and if they are paying "market" value for the home and up to date on lease payments, they can stay in home till the end of their lease, per the AZ Landlord Tenant Act. They may have a hard time getting back their deposits, but the new owners, be it a bank or new owner who picked it up at trustees sale will not have the deposts to give back. Problem is most tenants stop paying rent when they find out owners home is going to foreclosure.
It is the same here, the lease is a powerful document and does a lot to protect the tenants, but in a case like this it is sad, however the tenants do still have a roof over their heads.