A Florida Tenant's Guide to Foreclosure

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Updated April 1, 2009.

(Note: The section on paying rent is located near the end of this essay)

If you are reading this, you probably have discovered the house or condo you rent (the “property”) is in foreclosure. You may have been notified because a process server gave you a copy of the foreclosure lawsuit or posted a notice on your door. If so, consider yourself fortunate because increasingly more tenants are first finding out when the Sheriff arrives to change the locks and clear the property.

Many unscrupulous landlords will continue to collect their tenant’s rent payments, even though they know eviction is inevitable and just a few weeks to months away. For those tenants, the shock of being forcibly evicted combined with the apparent loss of their security deposit and last month’s rent money, causes anger, embarrassment and rudely disrupts their lives. Students, families, retirees – no one is immune from this risk, but with a little knowledge and some determination you can keep from becoming a victim and minimize the disruption this event will have on your life.

The information below is being provided as a public service to help educate those tenants who have just found out their property is in foreclosure. As a tenant of a property in foreclosure, you have limited options to stop your eviction. However, you do have some options to delay the actual eviction date, which can give you enough time to find a new place and get back on your feet. To start, let’s do a quick overview of what foreclosure is and how it works.

Simple Overview of the Foreclosure Process

Foreclosure is the name of a lawsuit filed by a bank when a property owner stops paying their mortgage. In a foreclosure lawsuit, the bank asks a judge to order the property to be sold at public auction. This process, from filing to auction, takes at least 4-6 months. At the auction the bank gets an automatic bid for the amount owed. If no one bids higher, then the bank gets the property, free and clear of anyone else’s claim. This transfer breaks the lease between owner and tenant. The bank now owns the property and typically the first thing a bank does is ask the Sheriff to clear the property and change the locks.

As a tenant, there is practically no way to stop the foreclosure lawsuit and auction.

So what can a Tenant do?

There are limited tenant rights when foreclosure happens. If a tenant finds out early in the process, they can continue to stay on the property and pay rent for many months before they have to leave. There is a section near the end regarding paying rent for tenants early in the foreclosure process.

If the tenant finds out late in the process, then a tenant really has only two options – move out before eviction or delay the foreclosure process. If you can move out without much difficulty, then by all means do so. But most people simply can’t move on short notice and without the money needed to sign a new lease. For them, delaying the foreclosure process is their only option. To delay you either need the bank’s attorney to agree to delay the auction or ask a judge to do so.

Delaying Foreclosure

For ease of presentation, let us break the foreclosure process into three different phases: the filing of the foreclosure; the auction of the property; and the eviction of the tenant. By determining which phase you are in, you will be better able to choose a proper course of action in postponing or eliminating eviction.

Foreclosure Timeline

Phase 1

Phase 1 is what we call the period from the filing of the foreclosure until 30 days before the auction. There is nothing really to do at this point, because the auction and eviction dates are unknown. One thing a tenant should check is if the property’s mortgage was recorded after the lease was signed. If so, the lease may survive the foreclosure auction and you may be able to remain in the property until your lease ends. To see if this applies to you, look at a copy of the foreclosure complaint you received or that was filed with the court. The mortgage will be attached and the date it was recorded should be on the first page near the top.

Phase 2

Phase 2 starts 30 days prior to the foreclosure auction and ends at the actual auction. At this point, a tenant’s best strategy is to try to delay the auction. By delaying the auction, you in turn delay the eviction thus ending up with more time for you to stay in the property. This can be done by filing a “Motion to Delay Auction” with the local circuit court. A judge must approve this motion and the better your reason, the greater you chance of success. Examples of good reasons are: you were unaware until now the foreclosure was pending; you have a work/family emergency that requires your attention and thus cannot properly respond to the foreclosure lawsuit; you do not have the money saved yet to rent a new house/condo; recent job loss; recent health issues; you are a senior citizen with limited mobility; you are disabled/handicapped. Even if none of those apply, you can always request leniency from the court, and a judge may agree to delay the auction to give you more time to move out. When you file your motion, ask the judge’s chambers to schedule a hearing date and you should mail a notice of hearing to the bank’s attorney and your landlord. Be sure to dress appropriately for the hearing and be respectful to the judge. Calmly explain your situation and the judge may give you additional time.

Phase 3

Phase 3 is the period between the auction and the eviction. A few weeks after the auction a Sheriff’s Deputy will come to the property and post an eviction notice. Once an eviction notice has been given, you will usually have only 48-72 hours to pack and leave. You do not have much time and need to act quickly! In Phase 3 you have two options to delay eviction. Option #1 is to file a Motion to Extend Sheriff’s Execution. If granted by the judge, this will prevent the Sheriff from returning to evict you for a period of time set by the Judge. Option #2 is to call the REO Agent and ask for “cash for keys.” This is exactly as it sounds; the REO Agent will compensate you for having to leave the property before the end of your lease. When you leave the premises, you will receive a set amount of money provided you leave the premises clean and in good condition. You can expect between $250 to $2,500 for this, depending on the property value, what you agree to leave behind, and the resources of the REO Agent.

Calling the Bank’s Attorney

The phone number and name of the bank’s attorney is listed on the foreclosure complaint and on the lis pendens. When you call, be polite and respectful. Being angry about the situation can only hurt you. After all, it is not the attorney’s fault the property is in foreclosure and they are just doing their job. Tell the attorney how much time you need to delay the foreclosure auction. Having a good reason (finances, family issues, travel plans) helps a lot. Ideally they will understand and delay the auction. But realistically, this is a 50/50 shot – sometimes foreclosure attorneys do not have the authority to grant any delay and even getting one on the phone is difficult as they handle hundreds of cases and cannot attend to every call.

Recent Developments

Foreclosure filings have grown significantly, and the process appears to have slowed down. It appears that in many counties, the process is taking around 8 months, and in more and more cases a year or longer. Foreclosure firms, court clerks and bank REO managers are finding themselves swamped with the sheer number of filings and cases pending 18 months or longer are not uncommon.

Should I Keep Paying Rent?

The most frequent question we hear from tenants is "If my landlord is in foreclosure, can I stop paying rent?" A tenant's first thought is that if their landlord isn't paying their mortgage, why should they pay rent? However, stopping rent payments can be a mistake. The landlord owns the property until the auction, and we have seen landlords evict a tenant who refuses to pay rent in order to re-rent to another tenant for the remaining months before the auction and to keep the first tenant's security deposit. The good news is there are legal defenses that may allow you to stop paying rent, provided you are willing to move out of the property at some point.

There is no one-size-fits-all solution to each tenant. For some tenants, a landlord's foreclosure is the perfect opportunity to get out early from a lease, for others, it's a good opportunity to lower their rent payments. Sometimes tenants and their landlords can have a frank discussion and reach a new understanding about their rental situation. Sometimes, that's not possible. If talking to your landlord doesn't help, or you don't want to talk to your landlord, we suggest a tenant consult with an attorney to fully understand their rights before attempting to stop or modify their rent payments.

Conclusion

Forclosure is disruptive for a tenant. However, armed with a little knowledge, you can handle it on your terms and minimize the problems. Hopefully you find this information useful. If you have any suggestions for information you think should be added during future updates, please contact us at 305.808.7300.

Still have questions?

Need legal advice on what to do next, whether to pay rent or how to recover your deposits? If so, contact us for a telephone consultation regarding your specific situation. There is a $250 fee for this initial consultation. Come by our office, email or call us.

KLF Law Main #: (305) 808-7300

Media Articles

South Florida Sun Sentinel: Coping in tough times

http://www.sun-sentinel.com/business/yourmoney/sfl-foreclosure-coping-c040109sbapr01,0,1943239.story

NPR: Fannie tries to cut Renters some slack

http://marketplace.publicradio.org/display/web/2009/01/09/fannie_rules/

Hernando Today: Foreclosure Brings Blues to Renter

http://www2.hernandotoday.com/content/2008/jul/19/ha-foreclosure-brings-blues-to-renter/