Foreclosures on Rental Properties
Mary Irene Kinsley
During the last real estate boom, many people purchased second homes, using them as rental/investment properties. As a consequence, approximately 20% of the properties in foreclosure in Maricopa County are rental properties. In reality, the percentage is probably much higher, as many investment properties have been passed off as owner occupied. Under Arizona law, in order for a lender to foreclose on a property, the lender must provide various forms of notice (regular mail, registered mail, posting the property) to the owner of the property. Presently, there is NO requirement that the lender, the owner/landlord, or anyone else provide notice of a pending foreclosure to the tenant. A bill was introduced this year in the Arizona Legislature which would have required notice of a pending foreclosure to be provided to the tenant. As of the date of this article, the bill has not passed as law. Consequently, many tenants learn their property was foreclosed when they receive a 5 day notice demanding they vacate or be evicted. We advise members who rent to take several simple steps to protect themselves from a last minute surprise foreclosure: (1) Recording your written lease agreement puts it in the “chain of title”. Doing this ensures that if a lender institutes a foreclosure they will mail copies of the notices to the tenant. (2) If you are negotiating a new lease, ask the landlord to include a special “foreclosure provision” in the lease requiring immediate notice of a foreclosure, allowing the renter to terminate the lease and receiving a refund of all deposits (3) Similarly, when negotiating a new lease, request that your lease require the rental deposit be kept in a trust account separate from the landlord’s general accounts. Presently, there is no law requiring this in Arizona. (4) Most importantly, if you learn your rental property is in foreclosure, contact Davis Miles immediately. We can discuss your specific situation with you and explain what options you may have to terminate the lease and attempt to recover your deposits. To utilize your Pre-Paid Legal benefits, call 1-800-435-5081 or 602-285-4664.