Tenants Protected During Foreclosure

Question: We have four months remaining on our one-year lease of our Chandler home. When we came home yesterday, we noticed a piece of paper posted on our garage door saying that there is a foreclosure auction scheduled in less than three months. When we contacted our landlord, he said he was trying to refinance the home so that the foreclosure auction will be cancelled. If there is no refinancing, will we have to move before the end of our lease? If the house is in foreclosure, do we have to continue to pay rent to our landlord?

Answer: If a tenant signs a bona fide lease at a reasonable rental rate before a foreclosure auction, the tenant under federal law is generally protected during the remainder of the lease term. Second, the landlord has a contract with the lender to pay the mortgage. You have a contract with the landlord for a one-year lease. These are two separate contracts. Therefore, even though the landlord is not honoring his contract with the lender to pay the mortgage, you may still be obligated to honor your contract with the landlord to pay rent.

The federal law protecting  tenants after foreclosure originally only protected tenants who signed a bona fide lease before the notice of the foreclosure action was recorded, which must be at least 90 days before the actual foreclosure auction. This federal law was recently amended to state that the protection applies if the lease is signed before, even one day before, the actual foreclosure auction.