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Renters and Foreclosure

If you’re renting a home that goes into foreclosure, federal and state laws offer you some protections.

Your Rights under North Carolina Law

  • If your lease is entered into before the notice of foreclosure, the federal Protecting Tenants at Foreclosure Act usually requires the mortgage holder and foreclosure buyer to honor your lease.  If you do not have a lease, if your lease allows for the landlord to terminate it at will, or if the foreclosure buyer wants to move into the home, you must be given 90 days’ notice to vacate.  These protections do not apply if your landlord is a close relative or if your rent is substantially less than fair market rent.
  • If you rent a house or an apartment in a complex that has fewer than 15 units, state law allows you to end your lease anytime between 10 and 90 days after the foreclosure sale without paying early termination fees if you give your landlord written notice.
  • If your lease is recorded at the county Register of Deeds, you’re entitled to receive notice of a foreclosure hearing.
  • If you rent a house or an apartment in a complex that has fewer than 15 units, you’re entitled to 20 days advance notice of a foreclosure sale, by first class mail.

Consider the following tips to help avoid trouble if your landlord goes into foreclosure:

  • Get a written lease. While verbal leases are enforceable under North Carolina law, a written lease makes it easier to prove that you have a bona fide lease.
  • Record your lease at the local Register of Deeds office. This will provide a record of the lease. Keep copies of your lease and other important paperwork in a safe, easy to find place.
  • Look for warning signs. Pay close attention to notices posted on apartment bulletin boards and watch for signs that the property owner may be in financial distress, such as failure to perform regular maintenance or make repairs.
  • Don’t violate your lease. Even if you receive a notice of foreclosure, don’t stop paying rent or adhering to other rules outlined in your lease. Just because your landlord goes into foreclosure doesn’t mean you’re off the hook for paying rent.
  • Remember your security deposit. A landlord facing foreclosure will likely have spent your security deposit. Your best chance to recover your deposit is to try to work out an arrangement with your landlord. A second possibility:  if the money is held by a real estate company, ask the company not to release the funds until the foreclosure is resolved.
  • Negotiate with the buyer. Once the property has been sold, you’re free to try to negotiate with the new owner. Options include signing a new lease, offering to purchase the property, or agreeing to vacate early in exchange for  money to cover your moving expenses.

We Can Help

If you have questions about your rights as a renter during foreclosure contact us for help or call toll free within North Carolina 1-877-5-NO-SCAM.