Tenants: Your Rights When Your Landlord is Foreclosed On

Authored By: Legal Services Alabama


Are you renting an apartment or home that's in foreclosure? The laws that protect you have changed. Know your rights..

My landlord got a foreclosure notice. What happens to me?

  • Nothing right away.
  • Even if you get a copy of the notice, it is not like an eviction notice.
  • The notice means that your landlord has to pay off the debt on the house, or the house will be put up for auction.

How does a foreclosure happen?

  • If your landlord doesn't work something out with the lender (the bank), the house may be sold at an auction, usually on the courthouse steps.
  • Usually the bank makes the only bid and buys the house. Sometimes, someone else steps in and buys.

If my rental home is up for foreclosure sale, do I still owe rent?

  • Yes. Your lease is still a binding contract. You should keep making your rent payments to your landlord until you learn that someone else bought the house at the foreclosure sale.
  • If you do not pay your rent, your landlord may be able to evict you.
  • The bank's lawyer will usually send you a letter letting you know that the house was sold. That letter will tell you the new owner.

What should I do when I get the letter?

  • You should get in touch with the new owner to let them know you are living in the home.
  • You may also want to give the new owner a copy of your lease.

Can the new owner make me leave right away?

  • No. The new owner needs to end your tenancy before they can evict you.
  • If your lease has not expired, you may be able to stay until the end of the lease term. You would have to pay your rent to the new owner each month.
  • If you stop paying your rent, the new owner can end your lease by sending you a seven-day notice.
  • The new owner may pursue a lawsuit against you to evict you from the property if you refuse to leave after your lease ends.

What if my lease is ending and I want to stay longer?

  • Unfortunately, a federal law that protected tenants in foreclosed properties ended at the end of 2014.
  • If your lease was signed on or after January 1, 2015:
    • The new owner will need to file an eviction lawsuit against you if you choose not to leave.
    • You will be served with the lawsuit. You will need to respond to it within seven (7) calendar days.
    • Go to court on the date the court sets for trial. Expect that trial will happen about two weeks after you file your answer.
    • You will have the chance to talk to the judge about why you want to stay in the home. Bring a copy of your lease to court with you.
    • You will also have the chance to negotiate with the new owner for a move-out date that will work for you.

What is "cash-for-keys"?

  • Often, the new owner wants to get possession of the house quickly. To get you to move, the owner is willing to pay you money if you move out by a specific date.
  • Often, new owners offer between $500 and $2,000 for moving within a set time - generally a month or less.
  • "Cash for keys" means you do not get the cash until you hand over the keys. This usually means you will need to pay for your own moving costs in advance.
  • You must weigh the costs and benefits of agreeing to such an offer.
  • If you agree on a price with the property owner, ask for an agreement in writing. Keep a copy for your own records.

Can I get my security deposit back?

  • If you paid all your rent and caused no damage, yes. The new owner must return your security deposit.
  • Request a walk-through and make sure that you leave the premises in good condition.
  • Take pictures of the home as proof.
  • If you can't get the new owner to hand you a check, mail a certified letter to the owner giving an address where they can send your security deposit.
  • If your security deposit is not returned, you can sue in Small Claims Court.

What if I am a Section 8 tenant?

  • You have additional protections.
  • Call your Section 8 worker.

If you have questions, please call Legal Services Alabama Toll-Free 1-866-456-4995 or call your local Legal Services Alabama office.


AlabamaLegalHelp.org offers legal information, not legal advice. This website provides information on your rights and options. However, the site does not apply the law to your personal facts. For legal advice, you should call a lawyer. To apply for free legal services in Alabama, call the Legal Services Alabama office that is closest to where you live OR call toll-free 1-866-456-4995. You can also apply online HERE.

Last Review and Update: Nov 21, 2019
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