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Your rights and responsibilities as a tenant do not change if the home you're renting is foreclosed. To learn more about your rights, read Tenant Rights and Responsibilities. Read this article to learn about being a tenant during and after a foreclosure.
Finding Out About the Foreclosure
You may learn about the foreclosure from a notice posted on your home advertising a sheriff’s sale. This is not an eviction notice. This notice is required by state law to tell you and your landlord the home will be up for auction if the landlord does not pay off the debt on the home. Tell your landlord about the notice.
How Foreclosure Happens
If your landlord defaults on a mortgage loan and doesn’t work something out with the lender, the home may be sold at a sheriff’s sale. The buyer is usually the lender, but not always.
After the sheriff sale, there is a redemption period. During that time (usually six months) your landlord can stop the foreclosure by paying the sheriff sale price and some costs. The buyer won’t own the property until the redemption period has ended.
Paying Your Rent
Continue paying rent to your landlord after the notice is posted. Your landlord still owns the home and can evict you if you stop paying. Your landlord’s responsibility to maintain the home continues until the redemption period ends.
Ask your landlord for details about when the buyer will take ownership of the home. After the buyer has ownership of the property, you owe your rent to the buyer.
Your Security Deposit
Before the buyer takes ownership of your home, you should ask your old landlord about your security deposit. Your security deposit is legally your money unless it needs to be applied to unpaid rent or repairs.
Your old landlord can either refund the money to you or transfer it to the new owner. If your old landlord returns it to you, you might have to use it as a security deposit with your new landlord. Your old landlord should mail you notice if it’s been transferred to your new landlord.
To learn more about your rights regarding your security deposit, read Your Security Deposit: What It Is and How To Get It Back.
After the Foreclosure
After the foreclosure is completed, most tenants have protection from immediate eviction. Some have 90 days to find a new home after the redemption period ends. Others can stay in their home until the term of their lease ends. Generally, how long a tenant can stay in their home depends on when the lease was signed. If it was signed before the complete title to the property was transferred to the new owner, then the tenant gets to stay in the home until the lease ends. If the lease was signed after that date, then the tenant probably can stay in the home for 90 days from the date the redemption period ends. For these protections to apply, the lease or tenancy must be legitimate, and the tenant can't be the parent, child, or spouse of the foreclosed landlord.
If you are willing to give up your right to stay in the home, you may be able to make a cash-for-keys deal. In a cash-for-keys deal, you negotiate with the new owner to give up your lease and move out early in exchange for money. When deciding if a cash-for-keys deal is right for you, keep in mind the amount of time you have left on the lease, how badly the new owner seems to want you out of the home, and how much it will cost to find other housing.
If you’re a tenant in a foreclosed property, it can be confusing trying to figure out how long you are able to stay in your home. You may want to speak with a lawyer who could help. Use the Guide to Legal Help to find lawyers in your area. If you qualify for free legal help from your local legal services office, the Guide will give you their contact information.
Legal Help
If either your old or new landlord doesn’t keep your home in good repair during and after foreclosure, you may want to seek legal help. Visit the Michigan Foreclosure Prevention Project’s Partner Programs to contact a legal services office in your county.
If you have low income, you may qualify for free legal services. Whether you have a low income or not, you can use the Guide to Legal Help to find lawyers in your area. If you are not able to get free legal services but can’t afford high legal fees, consider hiring a lawyer for part of your case instead of the whole thing. This is called limited scope representation. To learn more, read Limited Scope Representation (LSR): A More Affordable Way to Hire a Lawyer. To find a limited scope lawyer, follow this link to the State Bar of Michigan lawyer directory. This link lists lawyers who offer limited scope representation. You can narrow the results to lawyers in your area by typing in your county, city, or zip code at the top of the page. You can also narrow the results by topic by entering the kind of lawyer you need (divorce, estate, etc.) at the top of the page.