Landlord-Tenant Relationship

The Landlord-Tenant Relationship after Foreclosure

Tenancy

In Massachusetts, foreclosure does not automatically terminate any tenancy. Regardless of what the bank or another new owner tells you, you do not have to leave your apartment just because your landlord has lost the property in foreclosure.³ If you are a tenant at will, tenant with a lease, or tenant with a housing subsidy (such as Section 8 and MRVP) your tenancy continues to exist after foreclosure. Tenancies at will and subsidized tenancies continue on the same terms as with the former landlord.⁴ Leases are automatically converted into tenancies at will.⁵

The person or company that purchases the property at the foreclosure auction becomes the new owner and landlord. This frequently is the bank or lender who started the foreclosure. If an agent from the bank, or some other party, tells you that you must leave because of the foreclosure, do not move out, unless you already wanted to leave anyway and have somewhere to go.

Payment of Rent after Foreclosure

Don't Pay the Old Landlord

As a tenant, you are responsible for paying the rent. Until a foreclosure sale, you should continue to pay rent to your old landlord. If you cannot locate your old landlord anymore, hold on to your rent and put it into a separate bank account, if possible.

If there has been a foreclosure sale, do not continue to pay rent to your old landlord. The old owner no longer has the right to collect rent from you. But being in a foreclosed building does not mean that you get to live rent-free. After a foreclosure, the new owner has the right to collect rent from you.

Sometimes, though, the old landlord will try to hide the fact that she has lost the property in foreclosure and will improperly continue collecting rent. If this happened, you could sue the old landlord to get your money back. Whether you sue or not, if you paid rent to the old landlord after the foreclosure sale, you should hold on to any receipts or other proof you have that you made these payments. If the new owner tries to collect rent from you for the months you paid the old landlord, these receipts may help support your claim that the new owner must collect from the old landlord and not from you.

Protect Yourself if New Owner Refuses Rent

If a bank or other lender is the new owner, it may decide not to ask you for rent. It may even refuse to accept rent if you offer it. You should still offer to pay rent by sending a letter to the new owner and asking to whom you should pay your rent. You can use the sample Rent Offer letter, Form 27. Make sure to keep a copy of the letter for your records.

You may have to do some research to find out who the new owner is (see section in this chapter called How to Get Information about a Foreclosure). If you cannot figure out who the new owner is, or if the new owner ignores or rejects your offer to pay rent, save the rent money. Put it into a separate bank account if possible. Lenders often refuse to accept rent, then bring an eviction case against the tenant and sue the tenant for the back rent. The best way to protect yourself against eviction or ruling by the court that you owe the landlord money is to have the money set aside.

Tenants in Condos

If you rent a condominium, you pay rent to the owner of the condo and the owner is probably required to pay a monthly condo fee to the building's condo association. When condo owners are facing foreclosure, they sometimes stop paying the condo fee. If the owner loses the condo in foreclosure, then the condo fee must be paid by the person or company that buys the condo at the foreclosure sale. However, a bank or other lender that buys the condo at the foreclosure sale may also not make the required condo fee payments. If the condo fee is not being paid for the unit you are renting, then the condo association is permitted to collect rent from you until the balance owed by the owner is paid off.⁶ If the condo association asks you for rent, be sure to get a written receipt for any payments you make.

Utilities

Who's Responsible for Paying

Banks or lenders who take over residential buildings after foreclosure frequently do not pay the water bills and other utilities for which they are responsible. If you had a lease with your old landlord, the new owner—even if the new owner is a bank—is responsible for all the utilities your previous landlord was required to pay under your lease. If you were a tenant at will, the new owner must pay for all utilities, except those you had agreed to pay in a written agreement with the old landlord. For more information about what utilities are your responsibility, see Chapter 6: Utilities.

Dealing with a Shut-off

If one of the utilities for which you are not responsible is shut off, or if you receive a notice from a utility company threatening to stop your service, you should notify the bank or other new owner immediately and demand that it take action to prevent the shut-off or restore service.

You should also contact the utility company and request that the service be restored or not be terminated due to the foreclosure. Tell the utility company that your landlord lost the property in foreclosure. Utility companies often will not shut off utilities if they are informed that you are in a foreclosed building.

If the utility company does not agree to prevent the shut-off or restore the service, you can call the consumer hotline at the Department of Telecommunications and Energy (DTE) at 800-392-6006 (outside Boston) or 617-305-3531 (in the Boston area). The consumer hotline is staffed by advocates who are trained to intervene on behalf of consumers when companies do not follow the law.⁷ You can also obtain a court order for the bank or other new owner to pay the utility bills. For more information on preventing utility shut-offs, see Chapter 6: Utilities.

4. Repairs

Notifying the Owner

If there are bad conditions in your apartment, you should always notify the owner about these problems as soon as possible. You can also notify the owner's real estate agent, property manager, superintendent, or lawyer.

If you know that your landlord is about to lose the building in a foreclosure, but the foreclosure auction has not yet occurred, notify your current landlord. After the auction, notify the new owner (even if it is a bank) because the new owner is now responsible for all repairs in your apartment and the common areas of your building, including snow removal.⁸

Whenever you notify the owner (whether it is the old owner, the new owner, the real estate agent, or the owner's attorney) of any problems, put it in writing. Also, it is very important to keep a copy. This is your proof that you notified the owner about problems. See sample Repair Letter, Form 9.

For more information about getting repairs made, see Chapter 8 and the House Code Checklist Booklet 2.

Document the Problems

To document the problems, it is best to call the local Board of Health or Inspectional Services Department to do an inspection. When they do an inspection, they put together a report, which documents the problems.

If you know the name, address, and phone number of the owner or its lawyer or real estate agent, give that information to the inspector so that she can deliver her report to the right party and follow up to ensure that the repairs are promptly made.

If you can, you should also take pictures of the problems. At some later date, you may need to prove these bad conditions existed and pictures will help.

Getting Repairs Made

If the situation is very serious (for example, no heat in the winter), you should ask the Board of Health to do an emergency inspection. Then take the inspection report and go to court and request an emergency order called a temporary restraining order. This order will instruct the owner or its representative to correct the problem immediately. To do this you need to file a form. See the Temporary Restraining Order form (Form 15) at the end of this book. If you do not know the identity of the new owner, you can take this legal action against the owner's representatives, such as a property manager or real estate agent who is contacting you on behalf of the bank or other new owner.

If the new owner is accepting your rent, you can also withhold some or all of your rent and put it aside in a bank account until the repairs are made. You can also work together with other tenants in the building, form a tenant group, and pool your rent money to make repairs. Use these options only after informing yourself how to do them correctly so that you protect yourself against an eviction. See Chapter 8: Getting Repairs Made for more information.

Tenants should also try to contact both a tenant organization or community group to help you organize and a lawyer to help you protect your rights. Visit a list of local tenant organizations at MASStenants.net. Visit a list of legal services programs.

Some cities and towns have developed special programs to help tenants and neighbors get buildings repaired or cleaned up after a foreclosure. For example, the City of Worcester encourages tenants and neighbors to report 'abandoned' or 'troubled' properties to the city by calling its S.A.V.E. hotline at 508-799-8485. (S.A.V.E. means Stabilize, Assist, Value, and Enforce.) The city will then send out a team of fire, police, housing, and public health officials to monitor the property and help ensure that important repairs are made. If you are having trouble getting repairs done or cannot figure out who is responsible for making repairs, you can try contacting your city or town and asking about programs available to help you.

³ For foreclosure sales that took place prior to November 29, 2007, the law was less clear, but has since been clarified by Chapter 206 of the Acts of 2007, Sections 8 and 9 (approved November 29, 2007), which amended G.L. 186, §§13, §13A. Before the law was changed, there were different opinions as to whether all tenancies at will or only some survived foreclosure. Some cases held that all tenancies at will survived foreclosure. Deutsche Bank Trust Company v. Baxter, Boston Housing Court, No. 06-SP-01673 (Edwards, J., July 26, 2006); Vo v. Pierre, Boston Housing Court, No. 00-SP-01687 (Chaplin, J., May 25, 2000); Citicorp Mortgage v. Gates, Boston Housing Court, No. 96-SP-06324 (Daher, C.J., October 14, 1997); First NH Mortgage Corp. v. Garcia, Hampden Housing Court, No. 91-SP-1708 (Abrashkin, J., August 2, 1991). Other cases held that a foreclosure automatically terminated a tenancy at will, although a 'reasonable notice' or 'waiting period notice' of 30 days was still required. Deutsche Bank National Trust Company v. Zayas, Boston Housing Court, No. 07-SP-00812 (Muirhead, J., May 3, 2007); Federal National Home Loan Corporation v. Cameau, Boston Housing Court, No. 98-SP-02864 (Winik, J., July 17, 1998). If a tenancy at will started prior to the execution of the mortgage, the judges in the minority may hold that it survives forclosure. Federal National Home Loan Corporation v. Cameau, Boston Housing Court, No. 98-SP-02864 (Winik, J., July 17, 1998) (dicta). In terms of tenancies with leases, leases survived foreclosure if the tenancy started before the mortgage was signed. Gorin v. Stroum, 288 Mass. 6, 11 (1934). If the tenancy started after the mortgage was signed the tenancy was automatically terminated. Eagle International Paper Co. v. Priscilla Co., 281 Mass. 22, 29 (1932), Eagle Mortgage Corp. v. Matthews, Boston Housing Court, C.A. 28886 (Daher, C.J., December 11, 1990). Cases were clear, however, that all federally-subsidized tenancies still survived foreclosure. German v. Federal Home Mortgage Corp. [IV], 899 F. Supp. 1155, 1162-1165 (S.D.N.Y. 1995); G.E. Capital Mortgage Service v. Dillard, Northeast Housing Court, No. 96-SP-02565 (Kerman, J., May 23, 1997); Federal Home Mortgage Corp. v. Surzhukov, Hampden Housing Court No. 95-SP-1487 (Abrashkin, J., August 9, 1995 and January 22, 1996); EMC Mortgage Corp. v. Smith, Boston Housing Court No. 95-SP-04794 (Winik, J., January 4, 1996); Federal Home Loan Mortgage Corp. v. Hobbs, Boston Housing Court, No. 95-SP-04475 (Winik, J., December 18, 1995); Bank for Savings v. Rea, Boston Housing Court, No. 91-SP-01561 (Smith, J., Aug. 12, 1991).

⁴ G.L. c. 186, §13, as amended by Chapter 206 of the Acts of 2007, Section 8 (approved November 29), 2007, which added to the last sentence the following bolded words: 'A tenancy at will of property occupied for dwelling purposes shall not be terminated by operation of law . . . or by foreclosure.'; G.L. c. 186, §13A, as amended by Chapter 206 of the Acts of 2007, Section 9 (approved November 29, 2007), which states: 'Foreclosure shall not affect the tenancy agreement of a tenant whose rental payment is subsidized under state or federal law.'

⁵ G.L. c. 186, §13A as amended by Chapter 206 of the Acts of 2007, Sections 9 (approved November 29, 2007), which states: 'Upon a foreclosure of residential real property pursuant to chapter 244, a tenant, occupying a dwelling unit under an unexpired term for years or a lease for a definite term in effect at the time of the foreclosure by sale, shall be deemed a tenant at will.'

⁶ G.L. c. 183A, §6.

⁷ 220 C.M.R. §25.04.

⁸ During the period between the foreclosure auction and the execution of the foreclosure deed, the 'mortgagee-in-possession,' i.e., the lender that conducted the foreclosure sale, is responsible for repairs. See definition of 'owner' in 105 C.M.R. §410.020.

Produced by Esme Caramello and Rafael Mares
Created April, 2008