Foreclosure Facts

• I am a Tenant Living in a Foreclosed Property. What are My Rights?

Previously there was a federal law to protect tenants caught in a foreclosure, however this law expired as of December 31st, 2014. The state law is still in effect, and offers important protections for tenants. This guide is meant as general information about foreclosure protections for renters and is not to be considered legal advice. If your rental property is going into foreclosure, or if you have received a notice to vacate after a foreclosure, it is essential that you speak with an attorney about your specific situation. See the Legal Assistance Guide for more information on how to access legal services in your area.

Tenants who find themselves in a property facing foreclosure should be aware of the following:

• Tenants must continue to pay rent and comply with all terms of the rental agreement or lease, even if the rental property is going into foreclosure.
• Tenants do not make rent payments to the original landlord after the property is lost in a foreclosure sale. They are no longer your landlord because they no longer own the property. Payment must go to the new owner. (Continue to read below to determine if the landlord still owns the property.)
• Tenants are not required to immediately vacate after the foreclosure sale.
• Tenants must always receive proper written notice to vacate before a new owner or bank can begin an eviction action.
• If someone contacts you claiming to be the new owner, ask to see the “Trustees Deed” for the property to confirm ownership. You can also attempt to confirm authenticity with your county’s auditor or records office.
• If your landlord is responsible for utility bills and the utility company cuts your services, this can be an indicator that your landlord is in foreclosure. If the landlord lacks the money to pay for utilities, they may also lack funds to pay the mortgage. Research the publicly recorded documents in the county where the property is located to see if a “Notice of Trustee Sale” has been filed to indicate an upcoming foreclosure.

Before the Foreclosure Sale

• RCW 61.24.040

If your landlord stops paying their mortgage the bank will often begin the foreclosure process to take back the building. The bank will use a “Trustee” to facilitate the foreclosure process, who will issue notices to the landlord or tenants. The Trustee will establish a date for a foreclosure sale, or sometimes called a foreclosure auction, where if the landlord can’t get caught up on the mortgage they will lose ownership of the home. The Trustee merely facilitates the process; they do not make decisions on who ends up owning the property.

State law requires that the foreclosing party, such as the bank or trustee, must provide renters with at least 120 days’ written notice before the date of the foreclosure sale. This notice does not terminate your tenancy; it only informs you of a pending foreclosure sale. The document the tenant receives is called the “Notice of Trustee Sale,” it will have the date of the foreclosure sale listed. This notice is filed with the county auditor’s office. If you have seen or received notice of a pending foreclosure sale, it is very important that you pay attention to it, even if your landlord tells you not to worry about it, or reassures you that they’re “taking care of it.”

Sometimes a landlord will remove the Notice of Trustee Sale so the tenant is not aware of the foreclosure. It is a good idea to find out more information about the status of the property if you can. You can try researching or communicating with the trustee that sent the notice. Often the trustee won’t tell you much information, but it may be a good idea to contact them as you get closer to the foreclosure sale to make sure the date has not changed. For example, sometimes your landlord will get caught up on the mortgage after you’ve received the notice, which could cancel the foreclosure sale and they would continue to be your landlord. If a Notice of Trustee Sale has been filed, you can also try doing a public records search in your county to see if they have more information. The King County Recorder’s Office has an online Records Search. For other counties, see Washington Land Records and Deeds Directory

Remember, you must continue to pay rent up to and, in most cases, past the date of foreclosure sale. Failure to do so could put you at risk of having an eviction lawsuit filed against you.

If you know that a foreclosure sale date is coming, it may be a good idea to think ahead about documenting your rights to both the old and new property owners. You can remind the landlord being foreclosed on of their obligation to send any deposit money and last month’s rent you paid to be returned to you or transferred to the new owner. RCW 59.18.270 states that the old landlord must refund the deposit back to the tenant, or transfer the deposit to the new owner of the property. If the old owner fails to do either they can be liable to the tenant for twice the amount of the deposit, court or arbitration costs, and attorney’s fees. Also, you can use this sample Notice of Non-Abandonment to alert the mortgage company and any subcontractors that the home is occupied and not abandoned.

After the Foreclosure

1. If the New Landlord Wants You to Continue as a Renter

The new owner of the property after the foreclosure sale may not want you to vacate the unit. They may want to keep you on as a renter. In this case, they should contact you to provide you with the new address to send your rent money. There are a few specific guidelines written out in the Landlord-Tenant Act that regulate the changeover of one property owner to another in a rental unit. RCW 59.18.270 states that the old landlord must refund the deposit back to the tenant, or transfer the deposit to the new owner of the property. If the old owner fails to do so, they can be liable to the tenant for twice the amount of the deposit, court or arbitration costs, and attorney’s fees.

The state law allows landlords to ask tenants to sign a new rental agreement if they are going to stay on in the unit.

If the new landlord does get a hold of you and asks for rent money, it’s a good idea to ask for some form of documentation from the new landlord to ensure that they are indeed the new owner of the property. Beware of scams. You can ask the new landlord to provide a copy of the Trustee’s Deed as proof of ownership. Contact the County Auditor to ensure that the Trustee’s Deed is legitimate. You can look up the contact information for the County Auditors at Washington Land Records and Deed Directory. A local title insurance company may also be useful in helping you obtain this information.

2. If the New Property Owner Wants You to Vacate

State foreclosure protections for renters may come into play after a foreclosure sale. Consult with an attorney to get information and advice on your specific situation. See our tenant Legal Assistance Guide.

State Law

• Washington State Law SB 5810
• RCW 61.24.146

Washington state law entitles renters to 60 days’ notice to vacate a foreclosed property before the new owner can begin an eviction action. The notice period starts after it was served on the tenant, who must vacate 60 days or more before the end of the monthly rental period. The state law does not require the new property owner or bank to honor your lease with the old landlord, unlike the federal law.

State law also says that the new property owner or bank cannot evict tenants for non-payment of rent during the 60-day notice period. The only reason the new owner can evict tenants during those 60 days is for “waste or nuisance”. Waste and nuisance are terms that indicate a gross offense on the part of the tenant, for example major destruction of the rental unit or an arrest on the property. It may also include criminal offenses, including drug- or gang-related crimes. Tenants utilizing the state law may be able to avoid paying rent during the 60-day notice period. Consult with an attorney to get information and advice on your specific situation. See our Legal Assistance Guide for legal resources in your area.

However, there are significant risks and potential complications for renters associated with not paying rent during the 60-day period. Anytime a tenant does not pay rent, they put themselves at risk of having an eviction lawsuit filed against them. Though state law is clear, this law has not yet been tested in court, so it is unclear how this will play out for tenants. Seek legal advice and assistance before making any decisions on how to utilize legal protections for tenants in foreclosed properties. See the tenant Legal Assistance Guide for more information on how to access legal services in your area.

3. Cash for Keys

It’s possible that the new owner, trustee or bank will offer you money to move out of the unit at the time of the sale. This is sometimes called “cash for keys.” Tenants can agree to vacate the unit before their legally entitled 60-day notice period if they want to, but certainly don’t have to. A cash for keys offer will almost always require the home to be in broom clean condition before payment will be made. If you do agree to accept a cash payment in exchange for vacating the unit early, be sure and get the terms in writing, signed and dated by both parties.

4. If There is No Contact from the New Property Owner

It’s possible that new property owner may not communicate with you at all about your tenancy after the foreclosure sale. If they don’t communicate with you, it may be difficult to even figure out who the new property owner is. Even though RCW 59.18.060 requires that the tenant shall be immediately notified in writing of any changes to the landlord either by personal service, or conspicuously posted and sent first class mail, landlords don’t always do this. If you receive no contact from the new property owner, and cannot locate them, it is important that you consider saving your rent money. The new owner has the right to collect that money from you, even if they do not immediately contact you to tell you where to send the rent.

5. Seattle Tenants

Tenants living in Seattle may still be protected under the Just Cause Eviction Ordinance. If you pay rent to the new property owner and they accept it, it could be considered that you established a month-to-month tenancy, and are protected under JCEO. The purchase of property at foreclosure sale is not explicitly listed as one of the Just Cause reasons in the ordinance. However, it is unclear how these laws will be interpreted in court. The state laws still apply in Seattle, but the new property owner may also have to comply with JCEO as well. Seek immediate legal advice at our Legal Assistance Guide if you are a Seattle tenant living in a property facing foreclosure.