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You and the Law: When your landlord stops making the mortgage payment

by Dennis BeaverThe Lemoore Advance
September 10th, 2009

Today's story will be of special interest to anyone who is renting a house or apartment that falls into foreclosure. There have recently been major changes in federal law which you need to know.

While most often we think of homeowners losing their house through foreclosure, renters are also affected, and usually without any notice that their lives are about to change in dramatic ways. It was that way for Hanford readers, Terry and Denise, as they explained in an e-mail.

"We returned from a week's vacation to find a letter in our mailbox and a red notice from a bank taped to the front door of the house we are renting. It said that our home is in foreclosure! We've been paying rent to the landlord on time for two years. We had no idea he was not making the mortgage payments. What's going to happen to us? Is there anything we can do besides moving out?"

Tenants are innocent victims

Attorney Dean Preston knows this situation well, as he is executive director of California's only statewide organization for renter's rights, "Tenants Together," based in San Francisco.

"I have been working with low-income tenants for my entire legal career as a housing lawyer, but with today's real estate crisis, it's not just low-income tenants who are getting hit. Middle-class renters are facing the very same foreclosure problems," he observes.

"This nightmare for tenants often begins with a landlord who is collecting rent but not paying the mortgage, and just like with your readers - the home is suddenly owned by a bank."

"Tenants are truly innocent victims of foreclosure. They had no involvement with the underlying loans on the property, and yet face unfair displacement from their homes, water and other utility shut offs, loss of the security deposit, and other major problems during the foreclosure process," he points out.

Time line

I asked Preston to set out the time line - what specifically happens when a landlord stops paying the mortgage.

"In the typical situation, after the landlord misses a few mortgage payments, the bank sends the landlord a notice of default, and files that notice with the county recorder. At this stage, the tenant has no idea that any of this is happening."

"The landlord has at least 90 days after the notice of default is filed to try to work things out with the lender to avoid the foreclosure. If they can't, the next step is for the bank to record a notice of trustee sale. This is a notice that the property will be sold at a foreclosure auction. The first legally required notice to the tenant is just 20 days before the Trustee's sale, when the bank must notify the tenant. That is often the first sign of the pending foreclosure."

"Tenants who take action early - if they suspect something is going on - can contact our organization or their local county recorder's office, as foreclosure documents are public records. Depending upon the county, they could be online within hours, but, sadly, in others, weeks go by before these records are updated."

"All tenants need to be concerned about possible foreclosure in these very difficult times, and there are warning signs. Has the landlord vanished? Have documents from the bank begun showing up at the property? Has a representative from the bank dropped by? These things can tip off a tenant, but at present, there is no legally required formal notice to tenants, until 20 days before foreclosure."

"In some cities, local governments are taking action to make sure tenants know about foreclosures earlier in the process. For example, in San Francisco, the county recorder sends out a notice to the residents of a property where a notice of default has been filed. Others counties are considering doing this. It's really a matter of basic fairness. Tenants shouldn't be kept in the dark about what is happening to their homes," he maintains.

What to do if you find out months in advance?

I advise my rental clients to keep an eye on ownership of the property, seeing if the landlord loses it. Often, the landlord loses the property to foreclosure, yet keeps on collecting rent from the tenant. Don't just rely on your landlord's statements. It is important to check public records to see who owns the property.

Also, take action proactively to protect your security deposit. At the time the property changes hands, the landlord is required to return the deposit to the tenant or transfer it to a new owner. In most cases, defaulting landlords keep the money. Tell him to refund the deposit, or you'll sue!

Attorney Preston has this specific advice, "If you discover that the mortgage hasn't been paid, let the landlord know that you are knowledgeable as to what going on. Accepting rent and not paying on the underlying mortgage can, in some situations, be a felony. It's called rent skimming."

After foreclosure - new legal protection

Tenants can stay in the property after the foreclosure, but unless there is a city just cause for eviction law, the bank may be able to evict the tenant. However, in May 2009 an important new federal law went into effect, giving month to month tenants the right to remain in the property for 90 days. And if tenants have a lease in place, they may remain there through the end of the lease as long as they pay the rent and comply with the terms of their lease.

"Unfortunately, banks do not always comply with these requirements and tenants are still being evicted. Tenants who are served with eviction actions need to seek legal help at once. Often banks and their agents tell them that they need to be out by Friday or the Sheriff will throw them out. Rule number one is to get help, learn what your rights are. Do not be afraid of asserting your rights against the bank," Preston stressed.

Just cause for eviction laws have been enacted by a number of cities and require that in order to terminate a tenancy, the landlord (including the bank) must have just cause to evict tenants. Just cause is defined to include non-payment of rent, breach of the lease, nuisance, or the owner's desire to move into the property. Foreclosure is not a basis for eviction under these laws.

"These laws stop arbitrary evictions which are unfair, and which lead to vacant houses and widespread blight. More California cities should pass them. A just cause for eviction law is a cost-free way for local governments to protect renters and the entire community," Preston said.

For a great deal of interesting landlord tenant information, go to

Dennis Beaver practices law in Bakersfield and welcomes comments and questions from readers, which may be faxed to him at (661) 323-7993, or you may e-mail him at

FAIR USE NOTICE. This document may contain copyrighted material the use of which may not have been specifically authorized by the copyright owner. Tenants Together is making this article available on our website in an effort to advance the understanding of tenant rights issues in California. We believe that this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the U.S. Copyright Law. If you wish to use this copyrighted material for purposes of your own that go beyond 'fair use,' you must obtain permission from the copyright owner.

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