When the tenant makes the rent payment on time every month, he can remain assured that he will not have to face any unnecessary trouble. But, if the landlord does not pay the mortgage on the rented property at the right time, a foreclosure may take place. The effect that the foreclosure may have on the tenant varies depending upon as to what may happen during the foreclosure process.
The process of foreclosure
The process by which a bank or a mortgage lender look for reclaiming a property that has been rented to the owner after the owner fails to make his mortgage loan payments on time is known as foreclosure. The lender tries to get back his money after it is clear that the owner is not abiding according to the terms of the lease. But, foreclosure does not take place suddenly. The lenders usually allow some mercy when the landlord misses out few mortgage payments. Thus, the landlord may be able to repay the money, interest rate and the penalty charges in order to avoid the process of foreclosure.
Foreclosure may not be looming
There are situations when the landlord has not made the mortgage payments on time or has missed out one or two payments. Foreclosure may not be looming in these circumstances. The tenant needs to find out whether or not the landlord has got the notice of foreclosure. Once the lender sends the foreclosure notice, the process will start. The landlord gets a certain period of time to pay off the entire outstanding amount so as to avoid the foreclosure process. In case, the landlord fails to repay the debt amount on time, the property will be taken away and sold off by a new owner.
Landlord is the owner of the property during foreclosure
The landlord still possesses the property during the process of foreclosure. Thus, any rental payments that he has made on the property should be showed to him. The rent is also in effect, so the tenant will have to abide by the terms of the lease. When the property gets sold finally, the tenant should get the information about the new owner of the property and where he will have to send the payments. However, the transfer of ownership of the property may leave an effect on the tenant’s rent.
The US laws that have been enacted in the year 2009 protect the tenants from being thrown out when the property of the landlord is foreclosed upon. The tenant can stay on the property during the time period of the lease. There is a case of exception when the new owner plans to make use of the property as a primary form of residence. In such a case, the tenant should be provided at least 90 days notice period so that he must check out when the 90-day notice period ends.