Rent Payments When Owner Stops Paying the Mortgage

In a situation where your landlord stops paying their mortgage, you as a tenant are still required to pay rent to the landlord until the landlord is no longer the legal owner of the property. This typically occurs when title passes to a buyer at a foreclosure sale. Your landlord does not owe a duty to you, to pay the mortgage. Additionally, while seemingly inequitable, their financial problems have no impact on your legal obligation to fulfill the terms of your lease; chief among them continuing to make your rental payment. In fact, if you do not pay your rent you can be evicted, taken to small claims for the money that you owe and have a judgment issued against you for that amount, and have your credit rating impacted. Also, a landlord whose rental property is in foreclosure can clear up the problem at any time - they can catch up on back payments, they can refinance, they can file a Chapter 13 bankruptcy, etc. You, on the other hand, can get an eviction long before foreclosure is completed. Therefore, that’s just one more reason why you should to continue paying your rent.

With respect to any security or other deposit that you paid, see if your landlord will let you apply it to this month's rent. If they’re in financial straits there's a good chance that you will not be seeing it again.

Finally, you might find yourselves in a position to get ”cash for keys". This is where the new owner will pay some amount of money towards a tenant’s relocation costs if the tenant voluntarily vacates the premises sooner than they legally have to. This gives the owner the right to occupy the premises or sell it that much sooner.

If you have any questions regarding your rights and/or responsibilities in a foreclosure situation, you should consult with an attorney in your area that specializes in landlord-tenant matters. They will best know how to advise you so as to help you maximize your legal position.