My landlord is being foreclosed on. Questions as tenant, as prospective buyer.
August 9, 2011 11:13 AM Subscribe
I found out recently the house in Minneapolis I'm renting a room in is being foreclosed on. Will I be in a bind trying to sublease my room 8 months down the road? What can I do to ensure I don't lose my security deposit? Should I consider buying this place? Full story and additional questions inside. Thanks for any help.
I moved into a house in June to finish out a 3 month sublease, and then planned to renew a new lease for 12 starting in Sept (but possibly sublease the 4 last months of which). This shouldn't be difficult given the area, but for a recent development...
Last week one of my housemates got a notice that the house is being foreclosed upon. The deliverer tried to serve it to the landlord who lives downstairs (it's a duplex), but he didn't answer. Before my housemate dropped it off at the landlords, he gleaned from the document that the loan is for $525,000 originally, but only $22,000 (!) remains to be paid. I know this seems ludicrious that it's being foreclosed upon with only $22,000 remaining due that the landlord can't scrape together.
We spoke to the landlord about it, and he confirmed the $22,000 shortfall. (Though part of me remains skeptical this still isn't some wacky misunderstanding. The landlord has an ok job and gets $1900 / month from us tenants. But the landlord is odd and difficult to talk to).
The landlord also said that the repossession wouldn't be until at least March, and probably extended beyond. And he might still be able to sell the property or come up with some sort of deal. I don't know what he has in mind, but am surprised it's even gotten to this point for him if the facts are as they ostensibly are. So I'm not sure what the think of the situation.
Formally the house is now in preforeclosure stage, I believe.
I'd like to stay in the house because moving stinks. But I worry that if I sign a 12 month lease and want to vacate after 8 as was my original plan, I'll have trouble subletting under these circumstances. I suggested a shorter lease time to the landlord, but he didn't go for it.
Are there any laws I have on my side to get me off the hook of finding a subletter if the foreclosure come next spring appears imminent, as it is currently scheduled to be?
Are there any laws requiring the landlord keep the tenants apprised on the foreclosure status so we don't just return from work one day to find a sheriff's auction notice up on our door? If the notice hadn't originally accidentally been delivered to my housemate, I'm sure we'd still be in the dark now.
What can to do to help ensure I'll get my security deposit returned? I'm anxious that if the landlord gets foreclosed upon he might declare bankruptcy, in which case it's toast.
Lastly, I've semi been in the home buying market and this seems like a potentially good opportunity. Any suggestions on getting the best deal out of this mess?
Thanks tons for any help.
I moved into a house in June to finish out a 3 month sublease, and then planned to renew a new lease for 12 starting in Sept (but possibly sublease the 4 last months of which). This shouldn't be difficult given the area, but for a recent development...
Last week one of my housemates got a notice that the house is being foreclosed upon. The deliverer tried to serve it to the landlord who lives downstairs (it's a duplex), but he didn't answer. Before my housemate dropped it off at the landlords, he gleaned from the document that the loan is for $525,000 originally, but only $22,000 (!) remains to be paid. I know this seems ludicrious that it's being foreclosed upon with only $22,000 remaining due that the landlord can't scrape together.
We spoke to the landlord about it, and he confirmed the $22,000 shortfall. (Though part of me remains skeptical this still isn't some wacky misunderstanding. The landlord has an ok job and gets $1900 / month from us tenants. But the landlord is odd and difficult to talk to).
The landlord also said that the repossession wouldn't be until at least March, and probably extended beyond. And he might still be able to sell the property or come up with some sort of deal. I don't know what he has in mind, but am surprised it's even gotten to this point for him if the facts are as they ostensibly are. So I'm not sure what the think of the situation.
Formally the house is now in preforeclosure stage, I believe.
I'd like to stay in the house because moving stinks. But I worry that if I sign a 12 month lease and want to vacate after 8 as was my original plan, I'll have trouble subletting under these circumstances. I suggested a shorter lease time to the landlord, but he didn't go for it.
Are there any laws I have on my side to get me off the hook of finding a subletter if the foreclosure come next spring appears imminent, as it is currently scheduled to be?
Are there any laws requiring the landlord keep the tenants apprised on the foreclosure status so we don't just return from work one day to find a sheriff's auction notice up on our door? If the notice hadn't originally accidentally been delivered to my housemate, I'm sure we'd still be in the dark now.
What can to do to help ensure I'll get my security deposit returned? I'm anxious that if the landlord gets foreclosed upon he might declare bankruptcy, in which case it's toast.
Lastly, I've semi been in the home buying market and this seems like a potentially good opportunity. Any suggestions on getting the best deal out of this mess?
Thanks tons for any help.
Lots of federal grant money went to setting up legal aid for homeowners and tenants (and ordinary folks trying to buy) impacted by the "foreclosure crisis"--call around to the local legal aid agencies and say "I'm a tenant in a duplex being foreclosed. I'd like to talk to someone about my rights and options, including buying the place." until someone says "we can help you."
The uptick in foreclosures and the legislative & judicial & political responses to it made it complicated even for seasoned professionals. It'll be hard to navigate this without help.
posted by crush-onastick at 11:28 AM on August 9, 2011
The uptick in foreclosures and the legislative & judicial & political responses to it made it complicated even for seasoned professionals. It'll be hard to navigate this without help.
posted by crush-onastick at 11:28 AM on August 9, 2011
None of this is legal advice:
The landlord also said that the repossession wouldn't be until at least March, and probably extended beyond.
And he knows this how? The bank will dictate the timeframe of the foreclosure and even if they give him an estimate, they could be wrong. In my opinion it would be very difficult to sub-lease this place unless you lie to the subletter about the foreclosure status.
Hennepin County has this site with information for renters about foreclosures. It explicitly says you cannot break your lease because of the foreclosure. There is a phone number and website there for further advice.
posted by soelo at 11:36 AM on August 9, 2011
The landlord also said that the repossession wouldn't be until at least March, and probably extended beyond.
And he knows this how? The bank will dictate the timeframe of the foreclosure and even if they give him an estimate, they could be wrong. In my opinion it would be very difficult to sub-lease this place unless you lie to the subletter about the foreclosure status.
Hennepin County has this site with information for renters about foreclosures. It explicitly says you cannot break your lease because of the foreclosure. There is a phone number and website there for further advice.
posted by soelo at 11:36 AM on August 9, 2011
I'd like to stay in the house because moving stinks. But I worry that if I sign a 12 month lease and want to vacate after 8 as was my original plan, I'll have trouble subletting under these circumstances. I suggested a shorter lease time to the landlord, but he didn't go for it.
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Length Restrictions for Some Leases
If an owner has received notice of a contract for deed cancellation notice or a mortgage foreclosure sale, the owner may not enter into a long-term lease with a tenant until one of several events happens: for example, the contract for deed is reinstated, payments under the mortgage are caught up, the mortgage is reinstated or paid off, or a receiver is appointed for the property. Instead, the owner or landlord may enter into a periodic tenancy lease with a term of two months or less, or a definite term lease with a term not extending beyond the cancellation or redemption period.
More here.
posted by rtha at 11:36 AM on August 9, 2011
------
Length Restrictions for Some Leases
If an owner has received notice of a contract for deed cancellation notice or a mortgage foreclosure sale, the owner may not enter into a long-term lease with a tenant until one of several events happens: for example, the contract for deed is reinstated, payments under the mortgage are caught up, the mortgage is reinstated or paid off, or a receiver is appointed for the property. Instead, the owner or landlord may enter into a periodic tenancy lease with a term of two months or less, or a definite term lease with a term not extending beyond the cancellation or redemption period.
More here.
posted by rtha at 11:36 AM on August 9, 2011
It seems wrong, but no, the landlord does not have to keep you in the loop as to when/if the house is going into forclosure. The landlord should be able to work out something and keeps the house if we feels like it. He may not care.
Just anecdata, my ex is still holding on to a house that he has not made regular payments on for a couple of years, they just keep working out "deals" its really weird, but the bank absolutely does not want the house, its just dead weight. They will usually work with you to get you back on track, and even if both parties (bank and landlord) do nothing to better the situation, it takes a long time , up to a year, for the house to actually be foreclosed on. Then you will probably see a notice to vacate from the bank. That will give you more time if you want to work with the bank to buy it.
posted by stormygrey at 11:37 AM on August 9, 2011
Just anecdata, my ex is still holding on to a house that he has not made regular payments on for a couple of years, they just keep working out "deals" its really weird, but the bank absolutely does not want the house, its just dead weight. They will usually work with you to get you back on track, and even if both parties (bank and landlord) do nothing to better the situation, it takes a long time , up to a year, for the house to actually be foreclosed on. Then you will probably see a notice to vacate from the bank. That will give you more time if you want to work with the bank to buy it.
posted by stormygrey at 11:37 AM on August 9, 2011
are you sure that the $22K doesn't represent arrears owed, rather than merely $22K left on the principal? if that's the case, your landlord would owe $22K in addition to whatever balance he has on the mortgage. that would make more sense to me given he doesn't sound like he's trying very hard to scrounge up that relatively little amount and just letting the house go into foreclosure. or that he wouldn't be able to work out some payment arrangement with the bank if such a relatively low amount was left owing on the mortgage. i honestly think the $22K amount is the amount in arrears he owes, in addition to the outstanding principal on the mortgage, which would be a considerably greater amount of money.
and as others have said, he's not obligated to keep you in the loop about the foreclosure. if you really want to stay but are worried about the stability, i would tell him that and then try to negotiate different lease terms, such as a month-to-month lease or that you will be able to get out of the lease and have your deposit returned should the house be foreclosed on before your lease comes to term.
posted by violetk at 12:55 PM on August 9, 2011
and as others have said, he's not obligated to keep you in the loop about the foreclosure. if you really want to stay but are worried about the stability, i would tell him that and then try to negotiate different lease terms, such as a month-to-month lease or that you will be able to get out of the lease and have your deposit returned should the house be foreclosed on before your lease comes to term.
posted by violetk at 12:55 PM on August 9, 2011
Your landlord is underwater on his mortgage and has decided to default. $525,000 is very pricey for a duplex in Minneapolis (outside of a few hot neighborhoods), and $1900 a month is way too little to cover the mortgage + property tax + insurance. The landlord now has zero incentive to perform basic upkeep on the house, or even pay for utilities.
If you stick it out and the house does get purchased, the new landlord could evict you anyway. Or, if they don't, the purchaser could be a terrible landlord who doesn't fix anything either.
You could try insisting on a month-to-month lease. The landlord has nothing to lose -- there's no way he'll get a new tenant before he loses the house altogether. Be firm and explain this logic to him, backing it up with a threat to move out. He'll probably cave. Then, when the water gets cut off or the heater stops working in the middle of winter, you could just move out rather than dealing with a deadbeat property owner.
posted by miyabo at 1:17 PM on August 9, 2011
If you stick it out and the house does get purchased, the new landlord could evict you anyway. Or, if they don't, the purchaser could be a terrible landlord who doesn't fix anything either.
You could try insisting on a month-to-month lease. The landlord has nothing to lose -- there's no way he'll get a new tenant before he loses the house altogether. Be firm and explain this logic to him, backing it up with a threat to move out. He'll probably cave. Then, when the water gets cut off or the heater stops working in the middle of winter, you could just move out rather than dealing with a deadbeat property owner.
posted by miyabo at 1:17 PM on August 9, 2011
These people may be able to give you the info you need: Minneapolis Housing Services at 612-673-3003
I got the info from this website, which oddly serves all Minnesotans except Minneapolis residents.
posted by Maarika at 7:43 PM on August 9, 2011
I got the info from this website, which oddly serves all Minnesotans except Minneapolis residents.
posted by Maarika at 7:43 PM on August 9, 2011
Also, check out the MN attorney general website for tenant rights pertaining to foreclosures vs. regular sales of buildings. You do have some options.
posted by Maarika at 7:48 PM on August 9, 2011
posted by Maarika at 7:48 PM on August 9, 2011
Sorry for the multiple posts, but I thought I'd pull out a couple relevant sections of the tenant rights handbook:
(13) The security deposit cannot be used by the tenant to pay the rent, except that a tenant may withhold payment of rent for the last month of a contract for deed cancellation period or mortgage foreclosure redemption period. A mortgage foreclosure redemption period is the time following the sheriff’s sale during which the owner of the property can pay the sale price plus interest and certain costs and avoid losing his or her ownership interest in the property.
And
Further, as discussed above, a landlord must disclose to a prospective tenant that he or she has received a notice of contract for deed cancellation or notice of mortgage foreclosure prior to entering into a lease with a tenant or accepting payment of rent or a security deposit. In addition, a bank which forecloses on a landlord’s property generally must provide a foreclosure advice notice to a tenant at the same time it serves the landlord with a notice of sale. A bank may be liable to the tenant for $500 if it violates this statute. (46)
Good luck.
posted by Maarika at 7:57 PM on August 9, 2011
(13) The security deposit cannot be used by the tenant to pay the rent, except that a tenant may withhold payment of rent for the last month of a contract for deed cancellation period or mortgage foreclosure redemption period. A mortgage foreclosure redemption period is the time following the sheriff’s sale during which the owner of the property can pay the sale price plus interest and certain costs and avoid losing his or her ownership interest in the property.
And
Further, as discussed above, a landlord must disclose to a prospective tenant that he or she has received a notice of contract for deed cancellation or notice of mortgage foreclosure prior to entering into a lease with a tenant or accepting payment of rent or a security deposit. In addition, a bank which forecloses on a landlord’s property generally must provide a foreclosure advice notice to a tenant at the same time it serves the landlord with a notice of sale. A bank may be liable to the tenant for $500 if it violates this statute. (46)
Good luck.
posted by Maarika at 7:57 PM on August 9, 2011
Response by poster: Thanks for all the great advice and information everyone.
I'll give a call to the Minneapolis Housing Services and further explore the various links provided.
@violetk It does seem to make more sense logically that he's just behind by 22k on the mortgage payments rather than that being all that's still owed. Maybe I'll see if I could confirm this with him.
@rtha Thanks much for digging up that legal language. I was stoked about it until I realized that the property doesn't yet fit those criteria. I'm guess that's the very reason why he's so adamant about pushing through long-term leases now -- he knows he won't be able to later.
@Maarika Thanks a lot for the great information as well.
Stayed tuned for my findings...
posted by grammalvsu at 9:24 PM on August 9, 2011
I'll give a call to the Minneapolis Housing Services and further explore the various links provided.
@violetk It does seem to make more sense logically that he's just behind by 22k on the mortgage payments rather than that being all that's still owed. Maybe I'll see if I could confirm this with him.
@rtha Thanks much for digging up that legal language. I was stoked about it until I realized that the property doesn't yet fit those criteria. I'm guess that's the very reason why he's so adamant about pushing through long-term leases now -- he knows he won't be able to later.
@Maarika Thanks a lot for the great information as well.
Stayed tuned for my findings...
posted by grammalvsu at 9:24 PM on August 9, 2011
This thread is closed to new comments.
I think your best bet is probably to find yourself a real estate agent. Just because the house isn't listed as on the market doesn't mean that you can't buy it. He'll be able to help you with that transaction as well as provide you a lot of information about the property that you don't have access to right now. He'll also be able to put you in touch with a reputable real estate attorney.
But note that it's unlikely that you're going to be able to buy it for $22,000. If the bank does foreclose and take possession, it may not ask for the full $525,000, but it's still going to list it* for some significant fraction of that. There's also little reason to believe that the current owner will be terribly motivated to sell it for a pittance.
Also, there's a decent chance you have misunderstood the numbers. It's one thing for the landlord to be $22,000 behind on his payments. It's another thing for there to be $22,000 left on the mortgage. One is not the other.
But no, there is no general duty for a landlord to advise his tenants as to the status of the mortgage or any pending foreclosures. It's really none of your business.
*Assuming it lists it at all. There are tons of houses all over the country which have been foreclosed on, but which are sitting vacant. Banks are afraid that flooding the market with foreclosures will drive down prices. They may not be wrong, but this shadow inventory isn't helping things.
posted by valkyryn at 11:22 AM on August 9, 2011 [1 favorite]