Renters Affected by Foreclosure
When a landlord's rental property goes into foreclosure, tenants are affected. With little or no warning, they may have to find new housing. Many renters have no idea that their rental home or building has been foreclosed on and they continue to pay rent to the former owner, who often pockets the money.
If a landlord (former owner) stops maintaining the home or unit, and the new owner, usually the bank, never makes repairs or pays the delinquent utility bills, basic utilities can be shut off and properties being condemned for lack of service or code violations.
Renters who lose their homes to foreclosure don’t fit a single profile. Many of them live in smaller buildings, condos and single family homes. They’re located in cities and surrounding suburbs, in low-income and upscale neighborhoods.
If you are a renter living in a foreclosed home or building and you have questions, please see the information and resources listed below for help.
- Timeline of Mortgage Foreclosure process in Minnesota (English) (Spanish)
- Tenants and foreclosure in Minnesota
What you should know
You and your landlord must continue to follow the terms of your lease:
- You must keep paying rent unless you have a legal reason to withhold it.
- Your landlord must keep the property repaired. Utilities must be paid under the terms of your lease or under state law.
- Moving out of the property early might be a violation of your lease. Read your lease to see if it says anything about your rights if the property is in foreclosure.
- You and your landlord must still give legal notice to end your lease.
- The new owner may have the legal right to ask you to move even if your lease is not over, but they must still give you a written notice stating they want you to leave.
Your landlord has six months after the sheriff’s foreclosure sale to pay off the mortgage. If your landlord does not stop the foreclosure, there will be a new owner of the property.
You may be eligible for a property tax refund based on your household income and property taxes paid on your principal place of residence, even if you rent.
Frequently asked questions
What is foreclosure? How do I know whether the place where I live is in foreclosure?
If the owner of your property fails to make mortgage payments, the lender can order the county sheriff to auction the property. Until recently, tenants may have learned about the foreclosure by opening the “Notice to Occupant” delivered by the Sheriff or another representative of the financial institution. After August 1, 2008, notice directly to tenants is required at least four weeks before the Sheriff’s Sale.
What rights do tenants have who are victims of foreclosure? How long can I live there?
Tenants can remain in their homes for six months following the Sheriff’s sale. This is called the “redemption period”. Tenants must continue to pay rent to the landlord and follow the terms of the lease during redemption. After the end of the redemption period, tenants will be dealing with the new owner. Tenants must be given two month’s written notice before they are ordered to leave. If tenants have Section 8 Vouchers, the lease may extend beyond the redemption period.
What if I’ve moved in during the six-month redemption period?
You must now be notified in writing at the time you sign the lease that the property is in redemption. The lease may be for no more than two months or the time remaining in the redemption period, whichever is less.
I’ve been paying my rent, but the landlord hasn’t paid for utilities. I’m afraid that everything will be shut-off. What can I do?
If utilities are shut off because the landlord did not pay the bill, you may have to go to court to have them turned on again. Call the utility company. You will have to pay for what was used last month. A tenant in a one-to-four family dwelling can also take over the account and become a new customer with no deposit required. For water, tenants can continue to pay charges for the most recent billing period and continue to receive service.
I have received a notice of eviction because my rental unit is in foreclosure. What can I do? I don’t want this on my rental records because it may be harder to find another place to live.
After August 1, 2008, tenants can erase the eviction on their record if they vacated prior to the end of the redemption period or never received the required notice to vacate.
I don’t think my landlord will return my security deposit and last month’s rent. I can’t afford to pay for new security and rental deposits in another place. Can I withhold my last month’s rent?
You have the right to get your security deposit back within 21 days of moving out. If the property is sold, the landlord must transfer the deposit to the new owner or return it to you. If your deposit is never returned, you can sue the landlord for twice the amount owed plus $200 in penalties. It is recommended that you sue both the former and current landlord. Legal assistance is strongly advised. Tenants in foreclosure situations that occurred after August 1, 2008, now have the right to withhold the last month’s rent without penalty.