Renter May Stay After Foreclosure Sale
Question: Last summer, we stopped making the mortgage payments on our Peoria home. At that time we consulted with an attorney who told us that, if our home was in good condition at the time of the foreclosure sale, we would have no liability to our mortgage lender. Three weeks ago we received a notice of foreclosure by certified mail, and a notice of foreclosure was also taped to our front door. Although the foreclosure sale is more than two months away, we have now moved into a nice apartment. Our neighbor’s daughter recently got divorced and wants to rent our home for the next six months to determine whether she even wants to stay in Arizona. If we sign a six-month lease to rent the home to our neighbor’s daughter, will she have to move out in two months when the foreclosure sale occurs?
Answer: If you and your neighbor’s daughter sign a “bona fide” lease, that is, a reasonable rental amount — at least 80% of fair market rent — before the date of the foreclosure sale, your neighbor’s daughter generally will be entitled to stay in the home for the entire six-month term of the lease. After the foreclosure sale, your neighbor’s daughter will have to pay rent to the bank or other new owner of the home.
Note: If your neighbor’s daughter pays you a security deposit, the bank or other new owner of the home will have no obligation to pay that security deposit back to the neighbor’s daughter.