Landlord is delinquent...what do we do?

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Submitted by Immy on January 10, 2011 - 6:07pm

Very long term lurker (since 07), and have been renting like many of you.

I walked out of my condo today to find a large official envelope from the bank addressed to our landlord. I didn't open it, but have come to find out she is behind on her payments. The unit is not in foreclosure yet. My wife and I have been living there 2 years, and have a long term lease.

My question is what do we do now? What rights do we have? Do we continue to pay the rent despite it not being used for the mortgage payments?

Thanks for the help!

Submitted by Effective Demand on January 10, 2011 - 6:43pm.

I've been in this situation in early 2009.

Your agreement (lease) with the owner has no relation with the owners agreement (mortgage) with the bank. So continue to pay rent, there are much stronger controls to protect renters now and the lease will remain in effect even after foreclosure with the new laws on the books. If the property goes into disrepair because of the LL being in a bind then you are able to break the lease but being behind on payments or in foreclosure isnt enough to break the covenant of quiet enjoyment.

I thought if my LL issues persisted back then I would give notice when my lease was up but not pay the last month rent, that way the LL would have to come after me for the difference between the security deposit and any damages + rent they listed. This way I was assured of getting my security deposit back. I was planning on paying for any legitimate damages listed and not making a court fight over it.

Submitted by patb on January 11, 2011 - 12:29am.

escrow rent.

you will never see your deposit nor
will you get much notice.

your LL is losing the place, you are now
in the morass

Submitted by KCTxr on January 11, 2011 - 5:08am.

Been there, done that. Call Dan. Continue to pay your rent. Move if you can and not have a problem with the lease. Use security as last month rent, but pay for items in lease, etc. If you can get out before the foreclosure, you might save a bunch of emotional collateral.

Submitted by Navydoc on January 11, 2011 - 6:46am.

As many on this forum know, I was in this exact situation spring 09. I talked to a Jag first, and he reiterated what was said before, the lease is between you and the landlord, not the bank. You have no right to escrow your rent, you made an agreement to pay them the money, and they can toss you out if you don't. I realize it doesn't seem fair, as the bank is likely to toss you when he/she loses the place, but that's a different battle.

I found what worked for me was after I found out what my rights were, (you may be able to break the lease if you can prove the place is delinquent, but that will necessitate a move on your part) I simply confronted the landlord with the facts. I worked out a deal where I was able to use my security deposit as the last 2 months rent, and they were cool with that. In all likelihood you're going to have to move anyway, so this might be an option for you. Good luck whatever happens, I can tell you from personal experience what a frustrating/maddening situation this is.

By the way, I'll never forget what my landlord said when I asked him if he was planning to walk away: "It go down!" (the value of the property of course)

Submitted by EconProf on January 11, 2011 - 7:19am.

You are in a bind because you may get shafted on your deposit, and/or be forced to move on short notice. At the same time, your landlord is in a bind because if you move or demand your current deposit be immediately applied to rent (one approach you could offer now), he stands to lose.
Here's another approach out of left field: Offer to rewrite the current rental agreement at 80% (or 90%) of the current monthly rent, on a month-to-month basis. He gets to keep cash flow until he loses the property, which could be a year or two at current rates. He doesn't have to deal with a month or two of vacancy before finding a new tenant (whom he'd have to decide whether or not to inform about the default), so money-wise he is neutral or ahead. As for you, you get to bank the rent reduction for what could be a long time and still have the flexibility to move on a month-to-month basis.
Piggs, what do you think? Slings and arrows welcomed.

Submitted by SD Realtor on January 11, 2011 - 7:28am.

I am sorry but tend to look at this the other way. You may not get your deposit back but I would call it far from being in a bind.

When we purchased homes at trustee sales we HATED IT when they were tenant occupied. The fact of the matter is that there are UBER protections for tenants who occupy foreclosed homes. First and foremost, you cannot be evicted as long as you continue to honor the lease. This is an assumption that the lease is bona fide and was an arms length transaction AND is charging market rent. It must be honored by the new owner to FULL TERM.

In all probability if the home IS foreclosed on you can negotiate a sweet offer with the new owner for a buyout. As someone who used to negotiate these with the tenants we just wanted them out asap so we gave them a great deal covering their deposit and moving costs.

So if I were you I would be rather optimistic. Check with any attorney you want. As long as that lease is valid, you are in the catbirds seat.

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