Your Rights as a Tenant if Your Landlord Goes Into Foreclosure

What happens if your landlord goes into foreclosure? Should you keep making your rental payments? If the bank forecloses, will you be evicted immediately? What about the security deposit?

With foreclosures continuing to plague our state, the rental occupancy rate in Arizona is the highest it’s been in decades; that’s good news for rental property owners, but the slumping housing market has many tenants wondering what happens if their landlord goes into foreclosure. If your landlord can’t pay the mortgage and your rental home or apartment building goes into foreclosure, you have rights thanks to a tenant-friendly federal law that took effect in 2009.

Title VII of the Helping Families Save Their Homes Act applies to all states and broadly covers “any foreclosure on a federally related mortgage loan or on any dwelling or residential real property” and “any successor in interest to such property.”

Part of this law assigns protection for tenants who are in a lease at the time of the foreclosure, provided the loan going into foreclosure is a “federally related” loan (which by definition covers almost all residential property loans. See  The law protects “bona-fide tenants,” which is defined as: (1) the lease had to be signed before the notice of foreclosure was issued, (2) the defaulting borrower cannot be the tenant, (3) the lease must be an “arm’s length” transaction, and (4) the rent must be “fair market value rent.”

Assuming you qualify for protection under this law, what happens when your landlord goes into foreclosure depends on whether you have a lease or signed rental agreement.

If you do not have a lease, the law says you have at least 90 days after the date of the property foreclosure to vacate. You must continue to pay the rent amount during those 90 days to the Trustee, bank or new owner; you will be notified regarding rent payments.

If you do have a signed lease or rental agreement that ends before 90 days following the foreclosure date, you still have the full 90 days to vacate. If you have a signed lease that ends after 90 days from the date of foreclosure, you can continue occupying the property through the end of your lease term. For example, say you just renewed a lease for twelve months and the property was foreclosed on today; you can continue to occupy until your lease expires – roughly a year from now. One important exception to note: if the foreclosed property is sold to a buyer who wants to make it their primary residence and you have a lease, then your lease expires on the date of the sale, but you still have 90 days (from date of sale) to vacate the property (this primarily affects tenants who rent houses or condos rather than apartments). In all cases, you must continue to pay the rent during occupancy. In addition, the same lease or rental agreement terms you had with your old landlord will transfer to the new owner, so the new landlord cannot evict you simply because you have a pet, for example.

A major concern among tenants who are dealing with landlord foreclosure is the security deposit. The previous landlord is obligated to transfer your security deposit to the new owner, just as if it were a regular property sale without a foreclosure. In Arizona, rental owners are required to keep security deposits in separate bank accounts. When you move out, the new owner must honor your security deposit in accordance with the terms outlined in your original rental agreement.

What is the best way to know if your landlord is at risk for foreclosure? If you want to check to see if your landlord is in foreclosure you should review the county Lands Records and Deeds of the property in your county; in the foreclosure process, a Notice of Default must be filed and is a recorded document that will show up in the records. When a property goes into foreclosure a written notice is typically placed on-site, either at the main property office or front door if you rent a house.

If your landlord is going into foreclosure and you need legal advice specific to your situation, feel free to contact us at Nagle Law Group via email ( or call us at 602-595-3156.

TUNE IN TO 910AM on Saturday at 11AM- Nagle Law Group founder and managing partner Robert Nagle will be discussing tenant rights and take questions live on  “Money Line” w/Eric Lay!

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  1. Pingback: Tenant laws | ThalabyhalabyLaw

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