Is it possible to take over property from my landlord who is in forclosure now?

Question

My landlord has a judgement of strict foreclosure against him. My family is one of the tenants of a 4 family home in state of CT. I am still a newbie at REI but I thought this might be something to consider. Is it possible I can take over ownership if the foreclosure process has started? Who would I talk to about it?

Karin Crompton · Answer

Kristine Marie Poe interpreted it correctly: once a judgment has been rendered in CT, the property belongs to the bank. There is no redemption period (the owner being foreclosed on already had his chance) and no way to buy the property directly from the landlord, who would be considered the previous owner. If you figure out how to work directly with the bank, let me know! I haven't been able to do so and have had to wait for the property to be listed w/an REO agent. The angle I'm not sure about is what happens to the existing lease, if one exists. I'm not sure the bank would be obligated to abide by the existing lease the way most new owners would. Knowing how banks generally do whatever they'd like, the answer is probably no ... but that's a question for an attorney.

Account Closed · Answer

I feel the same way about lenders. It's a total guess what's going to happen to the tenants if the law isn't extended or made permanent. Do we just revert to state law where tenants have as little as 30 days after foreclosure and longer term leases aren't honored at all? Tenants truly had almost zero rights after foreclosure prior to this current law. The law is far from perfect. Its definition of "notice of foreclosure" ended up getting re-defined as being the date of the completed foreclosure (?!). So it allows tenants and borrowers to execute lease agreements right up until the last minute. It also doesn't cover all residential loans. I vote for something permanent and reasonable at the federal level to protect tenants. But no one's asked me. :)

Account Closed · Answer

Hi Karin and thanks for clarifying CT foreclose. Your CT foreclosure is a foreign planet to me. I've never been able to buy an REO directly from the lender either, unless it was a private seller carry back or hml. Notes, yes. Discounted payoffs, yes. But no REOs. As for the lease: I believe the tenants are protected by the Tenants in Foreclosure Act (of 2009?) which goes through end of 2014 and may be extended. The bank is obligated to honor leases as long as they are fair market value rents, and the tenants must be bonafide tenants (not former owners or relatives ). If the tenant is month to month, they get 90 days notice to terminate tenancy. My understanding is that this overrides state law unless state law is more generous with time. Additionally if the property is in a rent controlled or rent stabilized area, foreclosure is not a valid reason to vacate tenants. With the exception of the owner occupying the property as a primary residence. I write all this hoping the OP sees it and does some research if necessary. Tenants after foreclosure have rights. They don't have to vacate just because someone posts something on the door and they don't have to accept cash for keys unless they agree to the amount and terms. They do have to pay rent though. So if no one shows up to claim the rents, I'd be putting the money into a special account or escrow to prove good faith. That's me though, because I know how sloppy lenders and their property mgmt. can be.

Karin Crompton · Answer

Kristine Marie Poe sees it! (Also, I should not have chimed in w/my sarcastic guess, which was little more than an uneducated barb at the banks. I'm glad you followed up w/some useful info.) Thanks!

Wendell De Guzman · Answer

Lynelle, as per the Protecting Tenants at Foreclosure Act of 2009, you have 90 days to move out.

Lynelle Fidalgo · Answer

@Jon Holdman, @K. Marie Poe, @Karin DiMauro , Thank you all for responding. It was just a thought because I really do like the place where I am at. I am not quite financially ready to buy. I just wanted to know if it has been done before. CT foreclosure laws are also new to me. I checked public records and the Law Day is Set for May 19 2014. I am on a month to month lease now after 2yrs. Does this mean I will have to prepare to move when and if the bank takes over? Thanks again.

Account Closed · Answer

I just looked the def. of strict foreclosure in CT. If there is already a judgment, it means the property already belongs to the bank. And that likely it had no equity. So you'd need to work with the lender to buy it from them. It's nearly impossible to buy a foreclosure directly from the lender. Typically you have to wait for them to list it.

Account Closed · Answer

I don't know CT foreclosure law. Once the strict judgment is final, is there then a sheriff's sale to auction off the property? Does the borrower have any redemption rights and/or can he reinstate the loan for back payments?

Jon Holdman · Answer

"Take over ownership" means to buy the property. So, your question is, can I buy this property from my landlord. Yes, you can. You would need to talk to your landlord and see if he want's to sell. And you would have to figure out how to buy it. Are you in a position financially to do that? Do you have something else in mind?