What Are My Rights as a Renter When My Landlord Is Facing Foreclosure?

 Posted on October 07, 2019 in Foreclosure

If you are a homeowner, there is a good chance that you bought your home with a mortgage loan and that you make payments on your mortgage every month. If you are a renter, you make rental payments each month, but instead of making payments to a bank or lending institution, your rent goes directly to your landlord. Presumably, your landlord is using your payments to make payments of his or her own on the mortgage for the property in which you live.

You are most likely aware that failing to make your mortgage payments on a home that you own could result in foreclosure, with the bank seizing your home. Similarly, you know that failing to make your rental payments could result in eviction, with the landlord taking possession of his or her property. So, what happens when you make your rental payments each month but your landlord does not make his or her mortgage payments?

Continue to Make Payments

While it might be concerning to live in a building that is being foreclosed on, Illinois and federal statues provide protection for renters in such a situation. It is unlikely that your landlord will be forthcoming about his or her finances, so by the time you discover that he or she is facing foreclosure, the process could be well underway. Once you learn about the situation, however, your best options will probably be to continue making your rental payments in accordance with your lease.

Your lease is a contractual agreement between you and your landlord, which means that you must live up to your end of the agreement. The landlord’s mortgage agreement is between him or her and the bank, which means the failure to make mortgage payments does not allow you to stop paying rent. In fact, if you stop, the party who buys the property after the foreclosure could evict you for non-payment.

Your Rights and Important Timeframes

In 2013, Illinois lawmakers passed a measure to protect renters in foreclosed properties. The law specifically provides for renters with “bona fide leases”—which are essentially fixed-term leases that facilitate rentals at fair market value, with allowances for subsidized or reduced rent. Most bona fide leases are written contracts, but the law does recognize that an oral lease could be considered bona fide.

In most cases, the new landlord can only terminate a bona fide lease at the end of the specified term. For example, if you have eight months remaining on your lease when a new owner buys your building in a foreclosure sale, you will be generally be permitted to stay as a tenant for the remaining eight months. The new owner must provide 90 days’ written notice in order to terminate your lease at the end of the term. The same notice requirement applies for week-to-week and month-to-month leases.

If the new owner intends to use the property as his or her primary residence, however, the owner is not required to honor the term of your lease. Instead, he or she may give you 90 days’ written notice and terminate your lease at the end of the 90-day period.

Contact a Gurnee Real Estate Attorney

If you are renter who recently learned about a pending foreclosure on your building, contact an experienced Lake County real estate lawyer to ensure that your rights are fully protected. Call 847-549-0000 for a free phone consultation at Newland & Newland, L.L.P. today. We will work with you throughout the process.

Sources:

https://realestate.usnews.com/real-estate/articles/when-your-landlord-is-facing-foreclosure-options-for-tenants

https://www.illinoislegalaid.org/legal-information/finding-out-if-landlord-foreclosure