Businesses that lease space don't have the same legal protections as residential tenants do when their leases are terminated due to a foreclosure.
Unlike most residential tenants who have at least 90 days to move after notification of a foreclosure, the new owner of a foreclosed commercial building can terminate a lease with 30 days notice, said Benjamin F. Lawrence, an attorney in the Law Offices of Campbell & Popkin, LLC, in Seaside.
While foreclosure laws do not provide businesses with the same protection as residential tenants, Lawrence said commercial tenants have one advantage over residential renters.
"If you're a good tenant, it's unlikely the new owner will want to terminate your lease," Lawrence said. "Having a paying tenant is as good as it gets."
One sticking point for commercial tenants is if the tenant made improvements to the building in exchange for reduced rent. Lawrence said the new owner is not bound by any agreements the tenant had with the previous owner.
"A foreclosure wipes out all previous holdings, including leases," he said. "The new owner couldn't be forced to compensate the tenant. It wasn't their responsibility."
However, Lawrence noted that if the written agreement with the previous owner had been in effect for a lengthy period, under the law the tenant may have some secured interest against the original owner.