The other day, I read and commented on another member's "Foreclosure is not a get out of jail free card"- type post, which more than accurately illustrated how some owners either fail to comprehend the financial repercussions of simply walking away from their mortgage obligations- or in worse instances do understand and simply don't care. Today, I'd like to address the impact that an owner's foreclosure has (and doesn't have) on a tenant. I stress that this is by no means legal advice, simply observations and enlightenment gleaned from years in the property management business.
Not many years ago, mold was the proverbial "get out of lease free" card. Tenants knew it and shared the info with their friends, real estate practitioners of the property management-type knew it and showed a great deal of concern for it, and property owners knew it and feared it. Over time, though, education and sharing amongst everyone has reduced (but still hasn't fully dispelled) this line of thinking. Tenants are for the most part are aware of what is "gonna make you sick or kill you"-type mold, what is "you need to start using your vent fan and take some Clorox to clean that spot over your shower"-type mold, and the differences between the two. Many property managers have also been enlightened to the differences, and they now work to better preserve their owner-clients' revenue streams by not letting a tenant walk when it's not warranted.
The same learning curve exists with regard to tenants in receipt of foreclosure papers. I think of Glinda, the "Good Witch" in The Wizard of Oz, who asks Dorothy "Are you a good witch or a bad witch?", as a similar question bounces through their heads- "Is my owner a good owner or a bad owner?". And while I may very well be asking myself the same question when I first hear of the papers, the bottom line is the same for all of us- it doesn't matter. There is no correlation, repeat- no correlation, between an owner's payment of a mortgage and a tenant's obligation to pay their rent. The obligations are for the most part mutually exclusive.
Leases are legal documents, and tenants are expected to fulfill them- period. Federal laws, specifically the "Protecting Tenants at Foreclosure Act of 2009" afford tenants in bona fide leases prior the filing of lis pendens against owners, but I've never seen a law at any federal, state or local level that allows a tenant to simply walk away from their lease due to the singular fact that a lending institution (or HOA in many cases these days) has looked to effectively repossess their home. As a property manager, it's my duty to protect my client (the owner) and work with my customer (the tenant) towards ensuring they remain in the home and fulfill their lease as agreed.
These situation are unpleasant, and whether an owner is a "good witch" (one who's simply fallen on hard times and is struggling to do what's right) or a "bad witch" (one walking from their obligations with little to no regard for the tenant while at the same time expecting the tenants to live up to theirs) can surely be debated in another forum along with the owner's route to financial despair.
What's not debatable is the fact that the "get out of lease free" card is worth about as much as the piece of Monopoly cardboard that it's written on.
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