Lessee Unsure Over Owner’s Foreclosure
Question: I have leased my full-service car wash in Glendale for more than 15 years. My current lease does not expire for another year. The bank is now foreclosing on the owner of the building. Although the owner is current on his monthly payments, the entire loan became due more than six months ago and the bank has refused to renew the loan. The bank’s attorney has contacted me to say that foreclosure proceedings will begin next week and that all lease payments should now be made directly by me to the bank’s attorney. The bank’s attorney also told me that, upon completion of the foreclosure sale, I will be evicted unless I sign a new lease for higher rent. Do I have to make my lease payments to the bank now? Will I be evicted after the foreclosure sale?
Answer: Until there is a court-appointed receiver to manage the property, you are still required to make payments to the building owner. If you are served with paperwork by a court-appointed receiver, then you will need to make the lease payments to the court-appointed receiver. After the foreclosure sale, your lease may be subject to termination and the bank then would have the right to evict you. If you want to stay in the property after the foreclosure sale, you probably should begin negotiations with the bank now for a lease to become effective at the time of the foreclosure sale. You should first have an attorney review the lease to see if there is non-disturbance language or similar language in the lease that would require the bank to honor your lease after foreclosure. Many leases have some form of SNDA (subordination, non-disturbance, and attornment) language affecting the rights of the landlord and tenant after a sale, foreclosure, or other transfer of a building.
If you would like assistance regarding commercial or residential transactions, potential litigation, HOA issues, estate planning or other legal matters, please call our office at 602.957.9810 and arrange for an initial consultation with one of our real estate attorneys.
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