Talking About Foreclosure Law:  Protection for Tenants When the Landlord is in Foreclosure

Renters Become Victims of Foreclosures

Many innocent renters have been victimized by foreclosures in Nevada.  The scam goes like this:  A Borrower who intends to default on his mortgage payments moves out of the home and rents it to a Tenant, who pays the usual deposits and rent.  While Tenant is dutifully paying rent, Borrower/landlord pockets that money instead of passing it on to the lender.  Borrower did not, of course, inform the Tenant of the impending default or of the eventual foreclosure.  Once the house is foreclosed on, Tenant is suddenly faced with a new landlord who wants the Tenant out of the house and Tenant does not get credit for his deposits, etc.

Legislation Aimed at Protecting Renters

The legislature passed a few laws aimed at protecting Tenants from this type of situation. Lenders foreclosing on most residential property must, in addition to all other notices, physically post notice on the property.  The Notice of Breach and Election to Sell must be posted in a conspicuous place, contain the physical address of the property, and provide the contact information of the person conducting the foreclosure.  The Notice of Sale must also be posted on the property and must be sent via mail to any tenants who occupy the property.

This legislation makes it unlawful to remove or deface the notice of sale posted on real property.  Further, a landlord must disclose in writing to a prospective tenant if the property to be leased is subject to foreclosure proceedings.  Failure of the landlord to comply with this law constitutes a deceptive trade practice.  The problem with this law is that it only applies, by its language, to a situation where the property is presently in foreclosure when the landlord leases the property.  If the Notice of Default and Election to Sell has not yet been served, the landlord is seemingly free to enter into the lease knowing that he has every intention to default and walk away from the property without an obligation to inform the tenant.

Tenants who elect to stay in the premises after foreclosure may be evicted by the purchaser.

Assembly Bill 140 requires the new owner to provide the tenant notice if he elects to evict.  The amount of time the tenant may be allowed to stay in the home (holdover) is determined by the type of lease the tenant had with the prior owner.  The purchaser must give the tenant notice of the change in ownership and the election to evict.  The notice must give the tenant the right to continue according to the terms of the prior lease (conditioned on payment of rent and otherwise complying with the lease obligations) for not less than 60 days except where the prior lease was for less than one month, (e.g., a weekly rental), and then for a period not less than the number of days in that prior lease period.  The purchaser may also offer payment to the tenant in exchange for the tenant vacating the property prior to the notice period discussed above.



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