Tenants Adversely Affected By Foreclosures

October 1st, 2007

Renters are badly hit by foreclosures. To keep on collecting rent the so-called landlords are keeping them in the dark until the last minute. As per law, tenants have to vacate as soon as foreclosure begins and a new owner is installed. However the previous owner is not legally bound to inform the tenants about the condition. The agents of the bank give them a month’s time to get out. There have been many instances of new tenants being installed just few days before the auction date.

In this way a tidy sum is collected by way of deposit and advance rent. When the ownership changes hands the lease with the tenant is automatically cancelled. The grace period for leaving is either 30 days or 60 days if the tenants have resided here for more than a year. At other places the time period is relaxed to 90 or 120 days depending on the rental market situation. In some cities like Berkeley, East Palo Alto, Hayward, Oakland and San Francisco foreclosures are not legally tied with eviction of tenants. In the latter case the tenant is spared. If the agreement with the tenant was made before the taking of the mortgage the renter is is not bound to leave.

In the Silicon Valley, foreclosures are reaching Himalayan heights – 9,500 units sold in just the one month of August. Of these 44% were not occupied by the owner. The ousted tenants are rushing about to find new rentals. The number is increasing so rapidly that counseling services are entering in.

More often than not tenants have no rights. Frequent visits from potential buyers invade their peace and privacy. They forfeit their security deposit. Under the strained circumstances they are in no mood to take legal measures – they just want a place to stay in. But the rental market is getting tighter by the day. Those under long-term lease have to pay rent till the auction date.

Given the circumstances many tenants wanted to continue as tenants under the new owners but bankers refused to take on the role of landlords. Many tenants are unaware that new landlords are willing to offer cash for keys to effect a smooth transfer without damage to property. However as per law the tenant has to continue with the rent or vacate. They just can’t sit tight and look the other way.