• Gary Sandler
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    Published 23 September 2019

    Are you a tenant residing in a home, apartment or mobile home? If so, do you know if the owner of the property is paying the mortgage? Better yet, do you know whether the property is in some stage of foreclosure? The answer is that you probably don’t. So, how would you typically learn that a foreclosure is looming? Often, it’s when the lender comes-a-knocking.

    Because lenders have no formal relationship with tenants and seldom know who, if anyone, might be occupying a property, the first time most renters learn their “home” is in foreclosure is when the lender’s representative knocks at the door. It was those types of interactions between lenders and tenants that caught the attention of Congress.

    In the past, lenders’ representatives would inform the tenant that the property was in foreclosure, or had been foreclosed upon, and that the tenant had to be out in a very short period of time. In some documented cases, tenants were forced to move with as little as three-days’ notice. It was that heavy-handed behavior that motivated Congress to pass the “Helping Families Save Their Homes Act of 2009.”

    Under the law, tenants must receive 90 days’ notice prior to being evicted. In addition, tenants must be allowed to stay in the property through the end of their lease, with two exceptions. One applies if the new owner wants to occupy the property as a personal residence. The other applies when there is no lease (month-to-month tenancy), or there is a lease, but state law allows it to be terminated at any time upon notice (which is not the case in New Mexico).

    Even with the exceptions in place, the law requires that tenants receive a 90-day notice before they can be evicted. Notice must be given by the “immediate successor in interest,” which may be the bank or the new owner who acquired the property. There is a catch, however. The protections of this law apply only to “bona fide” tenants who have a written contract, the lease was the result of an arms-length transaction, and the rent is not substantially less than the fair market rent for the property. Here’s what that mumbo jumbo means in the real world.

    Let’s say you have an iron-clad one-year lease on a home or apartment and are current on your rent. Under the new law, the bank or new owner must honor the full term of the lease. On the other hand, if your lease is expired and has reverted to a month-to-month tenancy (which leases do when they’re not renewed), or if you had a written month-to-month agreement from the get-go, the maximum time you’ll be allowed to stay in the property is 90 days. You my leave any time prior to that if you choose to do so.

    Keep in mind lenders have no right to toss you out of a home they don’t own. Until the foreclosure is complete and the lender or buyer at the foreclosure sale assumes ownership, the owner of the property is still your landlord. You’re still required to make your payments on time, however. If you don’t, or if you violate any other terms of your lease or rental agreement, you can be evicted.

    Don’t know where to send your payments? Simply stash them away in a savings account until you verify who is legally authorized to collect the funds. If you don’t have the money on hand and can’t make up the back rent, you won’t be considered “current” and the protections afforded by law won’t apply.

    In addition, most mortgages contain an “Assignment of Rents” clause, which authorize the lenders to collect the rent prior to the actual foreclosure if the owner is not making payments. Lenders will notify tenants of this provision and provide instructions regarding how and where to send payment. When it comes to your security deposit, the law affords little protection. Since the property owner usually holds your deposit, your chances of getting it back are slim-to-none unless the owner finds compassion for your situation.

    Be on alert for a “Cash for Keys” opportunity. Lenders are not in the rental business and would like nothing more than to take possession of the property. To expedite the process and encourage you to vacate sooner rather than later, they may offer you a cash “bonus.” Depending on the circumstances, lenders have been known to offer as little as $500 and as much as $2,000 to $3,000 to inspire a tenant to hit the bricks sooner rather than later. Should you be so lucky and accept the lender’s terms, insist that the offer be made in writing. You’ll then be protected if the lender or owner develop a serious case of amnesia.

    See you at closing.

    Gary Sandler is a full-time Realtor and owner of Gary Sandler Inc., Realtors in Las Cruces. He loves to answer questions and can be reached at 575-642-2292 or Gary@GarySandler.com.

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      Gary Sandler