Can I Collect Rent From My Tenants If I’m In Foreclosure?
October 17, 2008
When a property that is being rented faces a foreclosure (http://en.wikipedia.org/wiki/Foreclosure), many owners wonder if they can continue to collect rent from the tenants. Once the notice of foreclosure is received, some tenants may balk at the idea of paying rent to someone who they believe is no longer the owner of the property. However, until the foreclosure proceedings have been completed, the tenant is still required to pay rent.
A notice of a pending foreclosure is just what it appears to be: a notice. It simply means that foreclosure proceedings have begun. The property remains under its present ownership until it is sold at auction. Until that time, nothing has changed and tenants must follow the rules and regulations contained in the lease, including the timely payment of rent.
If a property owned by a landlord should face a foreclosure, the best thing the landlord can do is address the tenants directly. He should explain in no uncertain terms that he will legally remain the owner of the property until it is sold at auction. He should also let the tenants know that he does not plan to void the lease by allowing the property to fall into disrepair and that they still have the legal obligation to pay rent.
Of course, many mortgages contain what is called an “assignment of rents” from the borrower to the bank. This means that if you fall into foreclosure, you may be required to turn over all rents received to the bank. Before spending that rent money, you should review your loan documents carefully to be sure that you are entitled to keep the money.
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