Law Advice: Resolving Issues with Foreclosure Sales on Current Rental Properties

31 Jan Law Advice: Resolving Issues with Foreclosure Sales on Current Rental Properties

In these times of economic turmoil, many who have the liquidity to do so have chosen to invest their money in buying property at foreclosure sales. While these properties may end up being a good investment over time, potential buyers need to understand that these properties often come with additional headaches. Many times those who lose their homes leave the property in very bad condition, either by intentional acts or as a result of neglect. Also, and the subject of this blog entry, is the situation in which the owner has rented the property to non-family members.

 In Virginia the process by which an owner/landlord has a tenant removed from real property is by filing a Summons for Unlawful Detainer. In this circumstance, it is an Unlawful Detainer based upon a foreclosure as opposed to an Unlawful Detainer based upon non-payment of rent. After sending a “5 day notice to quit” letter and upon filing and serving a Summons for Unlawful Detainer the court will enter an order for immediate possession (if the renter does not appear at the first return) or for 10 day possession (if the renter appears at the first return).

 There have been many situations over the years when I have appeared for a first return on a Summons for Unlawful Detainer that a renter does appear. The renter, usually unaware of the landlord’s financial situation, is taken by surprise that a foreclosure sale has taken place. The renter generally comes to court saying that he/she is current on the rent and should not be evicted from the property.

 The court, usually sympathetic to the tenant, would then explain to the tenant that the property had been sold at a foreclosure sale; that the landlord no longer owns the property; that the tenant will have 10 days within which to leave the premises; and that upon the expiration of the 10 day period the new owner may apply to the court for a writ to have the personal possessions remaining in the premises removed by the Sheriff. The court would then advise the tenant that he/she could speak with me to get an extension of the 10 day period. Sometimes the new owner agreed, and sometimes the new owner did not agree to the extension,

 In May of 2009 the “Helping Families Save Their Homes Act of 2009” which included the “Protecting Tenants At Foreclosure Act of 2009” changed the 5 day “notice to quit” period in certain circumstances. The act protects bona-fide tenants, i.e. tenants (not family member of the mortgagor) who have 1) a written lease (entered into prior to the notice of foreclosure); 2) that was the result of an arms-length transaction; and 3) the rent is not substantially less than the market rate.

 If the tenants are bona-fide tenants, such tenant must be given 90 days notice by the bank or individual that purchased the property at the foreclosure sale of a notice to vacate. Additionally, if the tenant has a valid lease, the tenant may stay in the property until the end of the lease term, unless the new owner wishes to use the foreclosed property as a personal residence. In such instance the 90day period applies, unless the terms of the lease are violated.

 The sunset provision of this act has been extended from December 31, 2012 until December 31, 2014.

 This blog entry is a summary of the law and should not be used or relied upon as a substitute for reading the entire law and how such law may relate to facts of any particular case. This blog entry is not intended to be “legal advice” and is not meant to create and attorney-client relationship. Should anyone wish to explore facts of a specific case, the attorneys at the law firm of Nolan, Mroz & McCormick welcome the opportunity to be of service.

Sincerely,

Francis E. Mroz

Stephen P. Zachary

To continue providing quality content to our readers, we enjoy hosting Guest Bloggers for the AH Management Blog. This post was contributed by: