Is the bank obligated to honor our lease once our rental property is foreclosed?
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Is the bank obligated to honor our lease once our rental property is foreclosed?
We have a year’s lease that ends in 6 months. The homeowners have informed us that the property is in foreclosure and will be finalized in 3 months. Is the bank obligated to honor our lease to its completion? Would we just continue to pay rent to the bank after the property is foreclosed?
Asked on May 1, 2012 under Real Estate Law, North Carolina
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
Unfortunately, unlike a sale of the building, in which instance the buyer takes the property subject to all then-in-force leases, when a property is foreclosed upon, the foreclure terminates all leases and any rights to possession on the part of renters. You can and should speak with the bank once the foreclosure occurs--they can certainly continue to lease to you--but they do not automatically become your new landlord.
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