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Your Options After a Foreclosure

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Produced by Mariah Jennings-Rampsi
Reviewed May 2017

Your options after a foreclosure depend on what the new owner wants and does, and what you want.

You could:

Stay and continue renting,
Stay until eviction,
Take “cash for keys,” or
Buy the property.

Read more to understand these options before you decide what to do.

1. Stay and Continue Renting

a. Bona Fide Tenants

Most bona fide tenants in Massachusetts can stay and continue renting after a foreclosure if the foreclosing bank or other mortgage lender buys the property.¹⁴ If you were renting the property before the foreclosure, you have the right to stay even if the new owner wants you to move.

You are a bona fide tenant and you can stay if:

You moved in before the foreclosure,
Your rental agreement was not based on a personal relationship with the old owner (lawyers call this an arm’s length agreement) and
You are not the old owner’s spouse, parent or child.¹⁵

Caution! Even bona fide tenants have to move out sometimes.

You can stay in your unit after the foreclosure unless:

The foreclosing bank sells the property to someone else;¹⁶ or
You do something wrong that gives the owner just cause to evict you. See Foreclosing Owner Must Have Just Cause to Evict.

Important

If a person or real estate investment company buys the property, you have fewer rights than if the bank buys it. A person or real estate investment company does not need just cause to evict you. They can evict you for no reason unless you are a Section 8 tenant. But, if you are a tenant, you have tenant’s rights and the new owner must take you to court to evict you.

To learn how to fight an eviction, see Chapter 12: Evictions.

b. Section 8 Tenants

If you have a Section 8 or other subsidy, you can stay in your unit and pay the same amount of rent after a foreclosure.¹⁷ The new owner must accept payment from you and the housing agency. It is a good idea to let your housing agency know about the foreclosure. The new owner can only evict you for reasons under your lease or for just cause if you are also a bona fide tenant or tenant at will.¹⁸

Tenants at Will Tenants at will, who are month-to-month tenants, have the same rights as a bona fide tenant if the foreclosing bank buys the property at the auction. They can only be evicted for just cause or if the property is sold to someone else. You know you are a tenant at will if you paid rent to the former homeowner. Sometimes you are a tenant at will even if you paid discounted or irregular rent.¹⁹

c. Tenants who are NOT “bona fide tenants”

Some people do not have bona fide tenant rights. For example, former owners, their immediate family, and people who did not pay rent before the foreclosure are not bona fide tenants. See What is a “Bona Fide Tenant”? in this chapter.

If you are not a bona fide tenant or tenant at will, you may have other rights:

Tenant Rights – Those who paid rent before the foreclosure, even if they are not tenants at will, do not have to leave the unit just because of the foreclosure.²⁰ If the new owner wants to make you leave, she must ask a court to evict you.²¹

Licensee Rights – If you were living at the property before the foreclosure and you had the old owner’s permission but did not pay regular rent, you are probably a licensee. Licensees have fewer protections than tenants.²² The new owner must ask a court to evict you if she wants you to leave.²³

Trespasser Rights – If you moved into the property after the foreclosure and you did not have the new owner’s permission, you are a trespasser. It does not matter if you thought you had permission. To make you leave, the new owner must go to court for an eviction order or an Injunction.²⁴ You get shorter notice and have fewer legal protections than tenants.²⁵

If you are not a bona fide tenant and you want to stay, ask the new owner to rent to you. Some new owners are happy to have good tenants who already live in the property. They may be willing to rent to you. Others will try to evict you quickly so they can sell the property or rent the apartment to someone else. Either way, you only need to move out if a court orders you to leave.

2. Stay Until Eviction

After a foreclosure, the new owner may give you a Notice to Quit. You do not have to leave. After you get the Notice to Quit, the new owner will probably ask the court to evict you. You only have to leave if the court orders you to.

If the new owner asks the court to evict you, you can fight the eviction or make an agreement to leave in a certain number of days. Learn how to fight an eviction. See Chapter 12: Evictions. Also see What the New Owner Must do to Evict You, below.

If you know you want to move, go to court to see if you can make an agreement to leave. An agreement will let you pick a move out date you and your landlord agree on. You may also receive money or “cash for keys” if you agree to move out. See how to make an agreement Negotiating a Settlement of Your Case (Booklet 10). An eviction will be on your public record.

Sometimes tenants stay in their homes for many months after a foreclosure and do not hear from the new owner. If you need help getting repairs made and you do not know what to do see Repairs After Foreclosure.

3. Take “Cash for Keys”

Sometimes after a foreclosure, new owners look for less expensive ways to get you to leave than eviction. Some owners send a letter or visit you at home to offer you money to move out quickly. Sometimes their real estate agents will make these offers. They may offer you money if you leave by a certain date. This is called a “cash for keys” offer.

If you do not accept the first “cash for keys” offer, and you decide to fight the eviction, you can usually stay in your home longer than the offer. You may still be able to move out at a later date if you want, and may get more money.

Warning!

Before you accept a cash-for-keys offer, make sure you understand what it means for you. Most cash-for-keys agreements make you give up more than just the keys. They may ask you to sign a paper “giving up all legal claims” against the new owner, including your right to:

Get your security deposit back,

Get money for utility shutoffs, or

Make them responsible for bad conditions or injuries at the property. If you sign a cash-for-keys offer, but change your mind later, you can stay. You only have to leave if a court decides to evict you.

4. Buy the Property

The new owner may put the property up for sale, or you can make an offer, even if it is not for sale. Sometimes the new owner will wait until all tenants move out before she puts the property on the market.

If you want to try to buy the property:

If you or a family member have good credit, you should apply for a home loan. Contact a First-Time Home Buyer Program. They can give you more information and help with your down payment or closing costs.
If you have a bad credit rating, you may be able to get a loan from a non-profit lender, like Boston Community Capital (BCC). BCC can buy the property from the bank or the new owner, then sell it to you with a BCC loan. You may have to pay a higher interest rate. They also have a rule that if you sell the house later you share the profit with them.

Tip

Buying the property may not be easy. But if it is a good price that you can afford, do not give up!

Endnotes

¹⁴ . A mortgage lender may be the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac).

¹⁵ . G.L. c. 186A, §1. Even if you are a family member of the former homeowner, you may still be able to stay if you are a tenant at will.

¹⁶ . G.L. c. 186A, §2. A foreclosing owner can evict a tenant if a binding purchase and sale agreement has been executed with a bona fide third party purchaser.

¹⁷ . G.L. c 186 §13A.

¹⁸ . G.L. c 186 §13A.

¹⁹ . Ducker v. Ducker, 1997 Mass. App Div. 147 (Northern District, September 22, 1997)(Court finds that payment of taxes, water, and sewer and utility bills is sufficient consideration to support creation of tenancy at will and 90 days’ notice was required prior to eviction.) See also FNMA v. Duarte, 84 Mass. App. Ct. 1136 (2014) (In a Rule 1:28 decision, the court noted that a tenancy at will requires consideration and the consent of both parties, and although consideration usually takes the form of rent, any consideration that would support a contract is sufficient. Affidavits and exhibits submitted by Ms. Duarte and her mother created a triable issue as to whether their “arrangement” was an oral agreement to create a tenancy at will and was supported by adequate consideration, and if there was a tenancy at will, whether the notice to quit was adequate.)

²⁰ . Wells Fargo Bank v. Robert, Northeast Housing Court, No. 12-SP-2836 (Kerman, J., October 23, 2013) (Daughter of former mortgagor had a written lease with the former owner prior to the foreclosure. The notice to quit informed her she had 90 days to vacate "if you are a tenant", but the new owner commenced summary process prior to the expiration of 90 days. The Judge dismissed the case based upon this.) See also FNMA v. Rodriguez, Northeast Housing Court, No. 13-SP-3622 (Kerman, J., April 23, 2014) (At least a 30 day notice to quit was required for sister of former mortgagor who paid rent prior to the foreclosure pursuant to G.L. c 183, §§12 & 13.)

²¹ . The use of injunctions as a substitute for summary process is frowned upon, because summary process is considered an adequate remedy at law. See Attorney General v. Dime Savings Bank, 413 Mass. 284, (1992) (barring foreclosing bank from evicting former owners or tenants of former owners by injunction for trespass). See also Serreze v. YWCA of Western Massachusetts, Inc., 30 Mass. App. Ct. 639, (1991) (Although a classic tenancy relationship did not exist, the court found a breach of quiet enjoyment under G.L. c. 186, §14 after a self-help eviction as the plaintiffs, as "occupants" of "residential premises," qualify for its protections and remedies). In some cases, though, even if summary process is required, an owner may be able to get injunctive relief where there is an immediate danger that needs to be addressed pending the outcome of the eviction. New Bedford Housing Authority v. Olan, 435 Mass. 364, (2001) (while public housing tenant is entitled to request jury trial where tenancy is annulled under G.L. c. 139, §19, preliminary injunctive relief prior to trial is possible if there is ongoing violence or drug activity in unit).

²² . Licensees are not allowed to raise certain defenses in court. Spencer v. Reynolds, Boston Housing Court, 12-SP-1987 (Muirhead, J., June 27, 2012) (Defendant moved into property at owner’s invitation, but relationship deteriorated. Court finds that defendant was a licensee and not a tenant and finds license properly revoked. No G.L. c. 239, §8A rights to defense or counterclaim for licensee. As occupant, defendant can bring claims for breach of warranty and habitability, but would have to be pursued separately. )

²³ . Owner cannot evict person lawfully in occupancy except through summary process under G.L. c. 239 or other appropriate civil process. G.L. c. 184, §18. Beacon Park Associates v. Corbett, Mass. App. Ct. (unreported), No. 96-J-693 (Lawrence, J., October 25, 1996) (single justice opinion authorizing injunction to exclude occupant who was licensee) See, Schachtel v. Hassan, Boston Housing Court, 08-CV-974 (Muirhead, J., December 18 2008) (Court finds that defendant allowed plaintiff to occupy premises and he had key and was free to come and go. No evidence to support claim Plaintiff paid rent. Court finds that it was plaintiff's burden to show that he paid rent, and absent such proof, he was a licensee; licensee entitled to reasonable notice of revocation of license, and if licensee then fails to vacate, licensor can only obtain relief through court. Court enters judgment for plaintiff and permanent injunction against removing him from premises without due process; owner is free to utilize summary process.) The criminal trespass statute, G.L. c. 266, §120, which allows arrest of persons not lawfully on property, does not apply if the person was an authorized occupant at some point prior to a claim of trespass.

²⁴ . Housing Courts allow the use of civil injunctions to declare that someone is a trespasser or licensee without right to occupy. See Beacon Park Associates in previous note (single justice opinion authorizing injunction to exclude occupant who was a terminated licensee.) Seeking such an injunction avoids illegal self-help (and possible damages for doing that). However, if there is a colorable claim of a tenancy, courts will usually deny an injunction.

²⁵ . U.S. Bank National Assn. v. Adekunle & Anjorin, Boston Housing Court, 12-SP-3433 (and related civil action) (Winik, F.J., April 13, 2014) (Court authorizes changing of locks without further notice and holds that any personal property remaining in the property is deemed abandoned.)