Like other types of property, real estate that is used as rental property can be sold, or may be affected by foreclosure proceedings. Sales and foreclosures are major events for the owner of rental property, but tenants or renters of the property are affected as well.

But, a sale or foreclosure can have just as big an impact on someone who doesn’t own the property, such as a tenant or “renter.” What happens to the tenant when the residential property where he or she lives is either sold or foreclosed upon? In general, your lease continues if there’s a sale, and it ends or terminates when there’s a foreclosure.

As a renter, you can protect your rights and interests if you know some things about what happens on the foreclosure or sale of rental property.


Generally, if your landlord sells the rental property where you live, your lease doesn’t end or terminate. Rather, the buyer of the property becomes the new landlord, and the buyer, as new landlord, is entitled to the same remedies against you for recovery of rent and for failing to meet the terms of the lease that the old landlord-seller had.

The new owner-landlord can’t evict you, can’t raise the rent on your existing lease, and he or she must get the security deposit that you paid to the old landlord and then refund it to you when the lease expires.

Likewise, you’re bound by the lease and must perform all your obligations and duties under it, such as paying rent, keeping the premises clean, and not destroying or damaging the property.

There’s one exception to the general rule that the sale doesn’t terminate the lease: if the lease states that it terminates automatically on a sale of the property by the landlord, that clause will be enforced, if challenged in court, so long as the sale was bona fide, that is, not fraudulent.

For example, if your landlord sells the property solely for the purpose of terminating the lease, a court would likely find that the lease did not terminate and that you’re entitled to stay on the premises or receive damages for the landlord’s wrongful conduct.

Often, the landlord-tenant laws will require your landlord (or the buyer) to notify you of the sale and to give you the buyer/new landlord’s name and address so that you know where to make rent payments and who to contact about maintenance and repair issues.


Foreclosure is the legal process in which a lender files suit against a property owner because the property owner defaulted or failed to repay a loan. In the landlord-tenant area, it’s when a bank or mortgage company sues your landlord because the landlord defaulted or failed to pay the mortgage on the rental property. The bank’s goal is to take over ownership of the property to satisfy the debt owed by the landlord.

If your landlord is in foreclosure, there are two critical questions: when did your lease begin and when did the landlord take out the mortgage? Generally, if your lease was in existence before the landlord took out the mortgage on the property (making you a “long-term tenant”), your lease continues in existence after the foreclosure and sale of the property, and you can’t be evicted.

More often than not, however, your lease won’t pre-date the mortgage. In such cases, you’ll be named as a defendant in the foreclosure action so that the lender can terminate your lease and have you evicted if you refuse to leave the premises.

If your landlord’s property is in foreclosure, he will have to give you “Notice to Quit,” that is, notice to leave the premises, usually 30 days before the any eviction action can be started against you. If you’re a long-term tenant and the bank or buyer at the foreclosure sale doesn’t want to renew you lease after it expires, you’re entitled to 60 days’ notice to quit under some states’ laws.

Finally, the old landlord is required to refund your security deposit, unless the bank or new owner gives you a signed statement acknowledging that it has your deposit and is responsible for returning it to you when the lease expires or ends.

As for the foreclosure process itself, it can be complicated for any tenant. If you’re named as a defendant in your landlord’s foreclosure action, it is important to continue to pay rent, that way no one-not your landlord or the bank-can begin eviction proceedings based upon your failure to pay rent. Then, it’s a good idea to hire an experienced real estate lawyer to act on your behalf. But, in simplified form the process is:

  • Either by certified mail or delivery by a sheriff, you’ll receive a complaint, which is the document filed by the bank that starts the foreclosure and which usually states that the landlord has defaulted on a mortgage held by the bank. At the same time, you’ll receive a summons, which is a demand for you to appear in court
  • You then have to file an appearance with the court, which basically tells the court that you’re aware of the foreclosure and will be taking part in it
  • A hearing date will be set and the court will either enter a judgment for the bank or the landlord. At this time you can raise any defenses to the foreclosure, but most tenants have no good defense in a landlord’s foreclosure
  • If judgment is for the bank, the property will either be ordered to be sold, called a “foreclosure sale,” or the bank is given the property
  • After the sale or after the bank takes ownership, you’ll be give notice to quit, and if you stay beyond the time given in the notice (usually 30 days), the bank or buyer can begin eviction proceedings to have you forcibly removed from the property

One way to avoid losing your home, at least for a while, is to contact the bank or lender as soon as you hear of the foreclosure. Sometimes you can negotiate a new lease that will allow to stay on the premises after the foreclosure is completed.

Questions for Your Attorney

  • How much will charge to represent me in my landlord’s foreclosure?
  • I just found out about my landlord’s foreclosure, which started about 3 months ago. I’ve been paying rent regularly, but now he’s nowhere to be found. The bank says I’m late on rent and it wants to evict me. What can I do?
  • I heard that tenants in rent controlled buildings can’t be evicted in a landlord’s foreclosure action. Is that true?
  • I just received a summons and complaint on my landlord’s foreclosure action. Should I start looking for a new place to live right now, or will the bank keep my lease in place? Do I have any say in the matter?