The whole nation is suffering a foreclosure epidemic. How will you know if your landlord is next?
It would be nice if your landlord gave you a heads up. More likely, you’ll find out when you receive a pile of papers from the Public Trustee’s Office or the court.
Don’t panic. You won’t be kicked out overnight.
Don’t celebrate, either. You don’t get to stop paying rent, and it doesn’t give you an excuse to suddenly move out.
The stress-free way to survive your landlord’s foreclosure is to understand the legal timeframe of foreclosure.
A new law went into effect Jan. 1 that changes the timeframe. If you’re in the middle of a foreclosure that began before Jan. 1, come see Student Legal Services and we’ll explain the old rules.
Foreclosure is a process put into motion by a lender when a borrower has stopped paying on a loan. The lender starts the process by sending a “notice to foreclose” to the Larimer County Public Trustee’s Office, which sets a sale of the property 110-125 days later. During this “cure” period, an owner can try to work something out with the lender, refinance, or even try to sell the property himself.
If no cure occurs, the property will be sold at a public auction. At the conclusion of the sale, the owner’s rights to the property end.
The paperwork you receive from the Public Trustee and the courts will state that you may have certain rights in the process. It will tell you of an upcoming hearing at which the court will authorize the sale date.
You do not have to appear at the court date. While you do have a right to respond to the court’s paperwork, it is rare for a tenant to have a legal justification for stopping the foreclosure. That’s because a tenant’s rights under a lease are almost always inferior to the rights of the lender. In addition, a buyer at the foreclosure sale does not have to honor your lease.
What is important to you is the sale date. You can find out who the new owner is by going to the Public Trustee’s office after the sale.
You can contact the new owner and ask to enter into a new tenancy, but if you don’t reach agreement, you must move out immediately or the new owner may start an eviction action against you. You are not entitled to any grace period after the sale date to move out. It is safest to assume that the new owner will not want you to stay.
Sometimes, the bank that made the loan becomes the new owner at the sale, and banks are not in the landlord business.
Until the sale date, you still owe rent to your landlord, unless you’ve received notice from the court that a “receiver” has been appointed to receive rents. After the sale, if the new owner wants to keep you on as a tenant, you would sign a new lease and pay rent to the new owner.
Before the sale date, you can ask your landlord to let you out of the lease, but the landlord may want to keep collecting rent as long as possible. If you stop paying rent before the sale date, the landlord has all the usual remedies against you — to evict you, turn you over to collections and sue you for rent. Certainly, the landlord can report unpaid rent to the credit bureaus and blemish your credit rating.
If the sale date lands at a bad time, like smack in the middle of finals, you may decide to take a risk, give your landlord notice that you’ll be moving out before the sale date, and stop paying rent at that time. You may even decide to take the risk of letting your security deposit cover the last month’s rent based on the assumption that a landlord in money trouble may not return your security deposit.
Applying the security deposit to the last month’s rent is not appropriate under normal circumstances, but it is a risk that may be reasonable depending on the circumstances. It would certainly not be appropriate if your security deposit is necessary to pay for damages you made to the property.
The Public Trustee’s Office expects to see more and more foreclosures. It already gets multiple calls a day from tenants caught in the middle.