What Happens to Tenants When the Property They Are Renting Is Foreclosed?
by: Georgia Legal Services Program®
Foreclosure and Tenants
Susan Reif
Georgia Legal Services Program
Last Revised: December 2003
A tenant who remains on rental property after the owner, who is his landlord, has been foreclosed upon becomes a tenant at sufferance. The lease between the tenant and the original owner/landlord is terminable by the purchaser. If the purchaser wants the tenants to vacate, he must first demand possession of the property and, if refused, file a dispossessory warrant.
The purchaser can choose to become a landlord, either by offering a new lease or accepting payment under the prior agreement. A purchaser at foreclosure who accepts rent from existing tenants has entered into a tenancy-at-will which can be terminated with sixty (60) days notice and which the tenant can terminate with thirty (30) days notice.
A tenant residing in property that is threatened with foreclosed should attempt to contact the new owner or the attorney handling the foreclosure to determine if the tenancy will continue. If a tenant does not receive assurances of continued tenancy from the foreclosure attorney or the purchaser, the tenant may argue that the lease was terminated by the foreclosure. A tenant who becomes aware that his landlord is facing foreclosure might want to consider doing the following:
* Check the local newspaper which carries the legal notices and see if the property is being advertised for foreclosure sale.
* Write to the landlord asking for information on the status of the mortgage. You may want to consider asking the landlord to let you out of your lease. If your landlord agrees, make sure to have him put it in writing.
* If the property is being advertised for sale, the legal notice should contain the name and address of the party foreclosing on the property. You may wish to write to the party intending to foreclose, tell them that you are renting the property, explain your situation, and that you would like to be notified of what happens with the property.
After rental property has been foreclosed, the tenant's right to continue living in the property depends on whether the lease was signed before or after the mortgage and upon the language of the lease. If the mortgage exists before the tenant signs the lease and the mortgage is not paid resulting in foreclosure, the tenant loses the right to remain on the property and becomes a tenant at sufferance. The foreclosure terminates the tenant's lease. The party who gained legal title through the foreclosure can demand that the tenant move and, if the tenant does not move, immediately file a dispossessory affidavit to gain possession of the property and have the tenant removed.
If the property owner mortgages the property after signing the lease with the tenant, and that mortgage is not paid resulting in foreclosure, the lease may not be terminated. In this situation, the party that foreclosed must recognize the tenant's lease, unless the lease states that the tenant will be subject to any later mortgages entered into by the landlord.
After foreclosure, the tenant will probably be dealing with the party that gained title through the foreclosure. Foreclosure may not necessarily mean that the tenant's lease is terminated. The new landlord, who gained ownership through foreclosure, may choose to continue the tenant's lease. If the tenant living in a foreclosed property wishes to continue to live in the property, he or she may try to have the new owner accept a rent payment, in most cases this will create a new landlord tenant relationship called a tenancy at will. Once a tenancy at will is created, the landlord must give the tenant 60 days notice to terminate. O.C.G.A. § 44-7-7.
Susan Reif
Georgia Legal Services Program
Last Revised: December 2003
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