There are thousands of owners of rental and investment properties that are facing decrease in rental income or other financial hardships. Although they want to save the property, it may not feel like it is as pressing of an issue as their own home where they live. However, if you have tenants, this raises another potential issue for liability. If the lender forecloses on the property, they may do a trustee sale in which they will not be able to go after the owner for personal liability for any unpaid payments or a difference between the sale price and what was owed. This does not mean that the owner is free to just let the property go. Obviously there are potentially harmful credit impacts, but also the existing tenants have rights. More than likely, they have a written lease agreement with the owner. If they are suddenly served with a notice to move out or be evicted by the new owner after foreclosure, they may decide to bring a lawsuit against the former owner for damages. In fact, if they find that the former owner knew about a pending foreclosure when entering into the lease, they could have a claim for fraud, which will not go away even in bankruptcy.
Even though it is not where you live, owners of rental and income properties must still work to resolve any potential foreclosure of those properties. The federal programs do not include investment or rental properties, but many lenders will still work with you to try to reduce your payment and keep the rental. They will not do this if you don’t aggressively pursue any potential option they may have.
Call us today to evaluate your situation.
Law Office of Barsness & Cohen