The unprecedented number of residential foreclosures caused by the mortgage industry crisis has claimed an untold number of unintended victims - those who rent their dwellings.
If you rent your home, you could unexpectedly find it has been foreclosed - the property now belongs to a bank. And they want you out.
Even if you have a written lease or rental agreement, you still could find yourself looking for a new place to live.
"Under the law, a lease or rental agreement gets extinguished by a foreclosure," explained Benjamin F. Lawrence, an attorney in the law offices of Campbell & Popkin, LLC, in Seaside.
And, until recently, most tenants lost their leases upon foreclosure. But that changed for most renters as a result of federal legislation that became law in May 2009.
The new federal law, which provides additional time before tenants must move out of their homes, was meant to reduce some of the upheaval for the many renters who faced having to find another place to live within as little time as 30 days as a result of a foreclosure on the property.
Congress approved the new legislation as the number of home foreclosures was skyrocketing nationwide.
In 2009, 2.8 million U.S. households were threatened with foreclosure. And according to Realty Trac, a record 3.5 million homes are expected to enter into foreclosure in 2010.
Meanwhile, Oregon continues to have one of the highest foreclosure rates in the nation, with one in 10 homes in foreclosure, according to Realty Trac.
And while the occupants of most of the foreclosed homes are the owners themselves, there are a growing number of renters who are finding themselves out in the cold through no fault of their own.
"That's why Congress (enacted the new law) to give some protection to tenants at foreclosure," Lawrence said.
Although the trustee of a foreclosed property is required to give notice to all occupants at least 120 days before the sale of the property, Lawrence said it's not uncommon for tenants to be unaware that their dwelling is being sold.
"There's no penalty for a trustee who fails to send a notice," the attorney said. "Unfortunately, this doesn't help the tenants."
Before May 20, 2009, renters had few rights once a foreclosure was filed on the landlord. The new law, "Protecting Tenants at Foreclosure Act of 2009," provides that leases survive a foreclosure, meaning the tenant can stay at least until the end of the lease.
An exception to the law allows for the buyer who intends to live on the property to terminate a tenant's lease with 90 days' notice.
Month-to-month tenants are entitled to 90 days' notice before having to move out.
The federal law supersedes a 2009 Oregon law that provides for a 60-day notice for renters with a fixed-term lease, or 30-day notice for those without a lease.
Although the federal law gives tenants additional time to find other living accommodations, it does not provide them with any protection relating to retrieval of any security deposit or advance payments of rent they paid to the former owner.
Oregon law gives renters the right to apply their security deposit and any prepaid rent toward their current obligation if they have a written rental agreement. However, the law makes it the tenant's responsibility to notify the landlord in writing and in advance of the tenant's intentions.
Lawrence said that even with the state law, a tenant may be unable to receive credit for those earlier payments if the landlord is gone.
In fact, Lawrence said, in some cases, unscrupulous landlords have pocketed rent payments collected after the property was foreclosed, but before the tenants were notified of the change in ownership. The tenants were left having to make a second payment to the new owner and then attempt to retrieve their initial payment through Small Claims Court.
"The new owner has no legal responsibility to compensate the tenant for any payments made to the former landlord," the attorney said.
Also, once a property has changed hands through a foreclosure, Lawrence said tenants are likely to find that maintenance and repairs no longer are being performed.
The bottom line for a tenant is to insist on a written lease or rental agreement. If you receive notice that the property you live in has been foreclosed, find out who the mortgage holder is, and to whom you should pay your subsequent rent.
For more information about your rights as a tenant, contact the Legal Aid Services of Oregon Tenant Hotline at (503) 648-7723. The hotline operates Monday and Wednesday from 9 a.m. to noon.