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Tenants’ Rights Following Foreclosure or Short Sale of their Rented Home: Part 2

Seattle Short Sales - Wednesday, March 13, 2013
This article is Part 2 of a two-part series about the rights tenants have when the home that they are renting is threatened with foreclosure. Part 1 explained tenants’ rights when foreclosure is pending. This instalment looks at how much notice must be given to tenants to vacate the home in the case of a short sale, or following foreclosure and a Trustee Sale.

The regulations governing how much notice renters must receive to vacate is different for a property that has been foreclosed upon than it is for a property that has been sold (including through a short sale). Here is some general information regarding the regulations in Washington State, and on the rights and obligations of tenants:

Eviction following foreclosure:

Within the context of a foreclosure, the 20 days-notice to vacate is not applicable. Following a foreclosure trustee sale and after the transfer of the property to a new owner, regardless of whether it’s a fixed-term or month-to-month lease, the new owner may give notice to the tenants to vacate.

Washington State law requires a new owner to given tenants a minimum of 60 days notice to vacate, but this is effectively superceded by federal law, which requires a minimum of 90 days notice. These timelines apply only to the case of a new owner following foreclosure and a Trustee Sale. As a tenant, you must choose whether to take the 60 days notice, or assert your federal right for the 90 days notice - because you receive different benefits depending upon which you choose.

If you intend to continue occupying the home for the full 90 days, you should let the new owner know that that is your intention. Since you are asserting your right to occupy under federal law, you must also obey  federal law, which requires you to continue paying rent. You are also required to meet any other obligations specified under the original lease contract.

However, if you only intend to occupy the property for the 60 days specified by state law, the state law mandates that you cannot be evicted for failing to pay rent. In effect, you may continue to occupy the property for free for up to 60 days following foreclosure. (You still could be evicted during this period for committing waste or nuisance, however). If you stay beyond the 60 day “free” period, the new owner may file suit against you and force the eviction through an unlawful detainer action. You don’t want that eviction to come up during a background check in the future when apartment hunting.

You can, of course, always decide to sign an updated lease with the new landlord if that is presented to you as an option following foreclosure. 

Eviction following a short sale:

When the property changes hands through a normal real estate transaction or though a short sale, the new owner enters into the same lease agreement with the tenants as the previous owner had. The previous owner transfers the security deposit that the tenants paid to the new owner. In other words, the prior lease agreement is binding on the buyers.

If the rental agreement is on a month-by-month basis, according to Washington State law, the landlord must give the tenants a minimum of 20 days notice to vacate. If the 20 days are within a rental period that the tenant has already paid rent for, the tenant may be due a pro-rated partial rent refund.

If the rental agreement is for a fixed time period, the new owners must honor that agreement. 

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/

You can also contact Lambros Politis on Google+ or to find more up to date information on this subject, go to the Ark Law Group Blog. 


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