OCT 15, 2024
In the complex world of real estate, one common question landlords face is whether they can continue collecting rent when a property is in foreclosure. As a real estate broker and investor in NYC, I work with first-time homeowners and landlords navigating these types of challenges, so let’s dive into the details.
Foreclosure doesn’t automatically strip a landlord of ownership rights. Until the property is sold at auction or transferred to a new owner, the landlord still legally owns the home. This is key because it means they retain the right to collect rent during this period, even though the property is in financial distress.
Yes, in most cases, landlords can collect rent while their property is in foreclosure. The foreclosure process is long and can take years to finalize—often involving multiple legal steps, such as default notices, court filings, settlement conferences, and auctions. During this time, the landlord retains legal ownership and is still responsible for the property's upkeep and managing tenants.
There’s an important caveat here: the creditor (the bank or financial institution holding the mortgage) may have a provision in the loan agreement allowing them to collect rent if the borrower (landlord) defaults. This is usually done to protect the creditor's interest in the property. However, unless the tenant receives formal notice from the creditor or a new owner, the landlord can continue to collect rent.
For tenants, this situation can be confusing. If you're a tenant in a property under foreclosure, it’s essential to know that you’re still responsible for paying rent to the legal owner unless you're informed otherwise by the court or a new owner. Always request proof of ownership before making any changes to whom you pay rent. If there’s a dispute, tenants can set aside the rent payments and bring the money to court if necessary.
Foreclosure can be a lengthy and complicated process, but landlords still have rights during this period—including the right to collect rent. It’s a reminder that even in tough financial situations, knowing your rights as a landlord or tenant is critical to navigating these challenges smoothly.
If you’re a landlord or a tenant facing foreclosure concerns, feel free to reach out—I'm here to help you understand your options and protect your interests.
Disclaimer: This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice.
