Advice in AL: what to do with tenants in foreclosed properties?

Question

Hello BP Pros in Alabama:

I'm looking for advice on applicable Landlord/Tenant laws concerning occupants of foreclosed property now up for sale. My venture-specific partnership is about to purchase a block of REOs in Birmingham, AL, all 120 days or more in arrears. Six of the properties are occupied. Our first step will be to reach out to the tenants (we assume they are tenants, not buyers) and determine what their situations are. Do they have leases, what rent are they paying, proof of payments, etc..

Does anyone know what rules apply to a tenant's right to stay in the property when it has been foreclosed?  Will we need to honor any existing leases (assuming the tenant can bring payments up to date in the specified period)?  Since the property ownership is changing hands, can we go ahead and ask them to move out by a certain date?

We are not planning on holding any properties as rentals, unless it's a short-term arrangement while a lease expires.

Thanks for any help.

Denise Evans · Answer

@Lynn DeShazo, @Adam Mykel Cox and @Dominique Pradel-Lewis are both right.The tenant is allowed to stay, but they must pay you the rent specified in their lease. Be sure to request a copy of the fully executed lease. If they can't produce one, then they don't have a lease.

Denise Evans · Answer

After the real estate crash and all the foreclosures, Congress passed a law called the Protecting Tenants At Foreclosure Act. It said you could not kick out a tenant after a foreclosure, as long as they pay their rent on time and otherwise do what they are supposed to do. They are allowed to stay to the end of their current lease term. If they are on a month to month lease, they are allowed to stay 90 days after notice to leave. The only exception is if the foreclosure buyer intends to live in the property as their primary residence. In that case, even if the tenant has a lease that will not expire until later, they can give the tenant 90 days notice to vacate. You just say in the notices that they have 90 days to move out. If you don't tell them they have 90 days, then the notice is void and counts for nothing.

The law expired on December 31, 2014. BUT, it was just revived and put into effect again in June of 2018. I don't know why, but now we are stuck with it. Sorry.

Even if the lease has a clause allowing the landlord to terminate upon a sale, that is not enforceable after a foreclosure.

The law expired on December 31, 2014. BUT, it was just revived and put into effect again in June of 2018. I don't know why, but now we are stuck with it. Sorry.

Even if the lease has a clause allowing the landlord to terminate upon a sale, that is not enforceable after a foreclosure.

Lynn DeShazo · Answer

@Denise Evans, that is great input. Thanks very much for this information! You are my favorite person on the BP forums on all things Alabama.

Lynn DeShazo · Answer

@Adam Mykel Cox, Yes, that is a good tactic for the situation. At this point, we have no idea what the lease arrangements are. I appreciated that input.

And we certainly would ask for payment in full of all past due rents @Dominique Pradel-Lewis, per lease terms, and up until tenancy ends.  Good advice there, too.

Dominique Pradel-Lewis · Answer

@Lynn DeShazo Regardless of your plans, you should ask for rent for the time they wish or are allowed to remain on the property.  Recently I met an investor who bought a foreclosure, he thought he was going to have to evict but at his request they started paying their rent again.

Adam Mykel Cox · Answer

Hi Lynn,

When I take on new properties, I typically mail a letter to their home explaining the situation and ask for them to reach out by a certain date. If I do not hear from them I post it on the door with some sort of DEMAND OF ACTION for them to reach out. I've had a time or two that it has took me to post an eviction notice on their door that they'll finally reach out. I really just want to get them to call me so I can chat with them. Most of mine are with rental properties I take over, so they have leases already that I'm assuming. If they decide to stay, I have them fill out application just so I have their contact info.

However, the guys before are correct, if they have a current active lease you have to abide by it. Refer to Landlord Tenant Law. Also, align yourself with a local attorney who handles evictions. I'm in the process of locating a new eviction attorney myself, as mine decide to practice in another area of law.

Good luck and let me know if I can ever be a sounding board!

Lynn DeShazo · Answer

@Edwin K. and @Isaac El, thanks for the input. And Edwin for the link.

We're hoping the occupants can produce copies of the lease the day we visit, as we won't have any paperwork related to these properties until we close the deal.

Isaac El · Answer

What I have done, is tell them simply, you bought it as foreclosed property, and you want to offer them a little amount of money to leave willingly, some go for it, and some are more stubborn, so you have to negotiate to "buy them out"

Edwin K. · Answer

Disclaimer I am not an attorney.

From what I was told you have to honor their lease if there's no clause saying you can break the lease on sale of the property. Read the lease carefully to see what the clauses are. Some leases have a clause that allows you and the tenant to mutually agree to terminate the lease. Check to see if the leases are on month to month. If so you can terminate the lease given 30 days notice. Once again it's all about what is in the lease. I will advise you to get an attorney to read over the leases. The last thing you want is to get sued for breaking the Alabama Landlord and Tenant Code.

Advice in AL: what to do with tenants in foreclosed properties?

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