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The new tenant protection law says that if a house is foreclosed on the new buyer has to honor the lease + 90 days.
Has anyone been in a sandwich lease then had the house foreclosed?
If so, how did the new buyer handle the lease situation?
I would think if the new owner is a bank, they would be offering $$$ to buy you out of your lease.
I can see all kinds of ways to make money with this.
Jackie-
On the face of it the new tenant protection legislation, Senate Bill 896 that was signed into law last mid-May, seems to favor the lessee. However, the bank can still sell the property to a prospective buyer who intends to live in the house then the lease is terminated and the lessee will be given 90 days max to leave. This law expires on Dec. 31, 2012 then the old rules apply(lease is terminated at foreclosure and no required 90 days to leave).HR 1728 that passed the House and is in the Senate Finance Committee requires the foreclosing party to honor the lease to its full term (I would do a 30 year lease then) without the loophole for the foreclosing party to “claim” they are selling to a purchaser who intends to live in the property. But the Senate Finance Committee has already announced its intention to put this off until 2010 or 2011, if then.
My question is to Mssrs. Miller, Fortunato, Tilney and yourself are as follows under the new legislation for tenant protection:
A. What do you do when major repairs are required and the bank/mortgage servicer does not repair or delays repairs( just as they are clueless about lending, short sales of properties, etc.)?? Simply file liens and you pay for the repairs and you to recover the monies at a later date?? Banks pay slow or not until they sell the property.
B. In the new legislation, the language in the bill says the property that was foreclosed upon cannot be leased “substantially below market rents”. What is your and their opinion as to what “substantially below market rents” mean??
C. What types of language should be used in this type of master lease when obtaining a lease on a soon to be foreclosed owner so that the bank/mortgage servicer will find it difficult to sell to a buyer that intends to live in the property that would void the lease??
D. The new law requires that the lease be entered into prior to the notice of foreclosure in order for the foreclosing party to honor the lease. Do they mean when a lis pendens is filed or when a final notice of foreclosure is filed??
E. How does the lessee know if a prospective intends to “live in the property” or an investor and/or bank collude to simply say that but it is not true?? What are the remedies for that??
Jackie, thank you and the others in advance. I find this to be an intriguing opportunity once we all have the rules of engagement defined and planned out.
I sent an email to Peter Fortunato and David Tilney to get their input on your questions.
I think it would be very hard for a bank to sell a tenant occupied house to an owner occupant. So mark that off the list.
I would probably avoid any house that needed major repairs. why spend the money when there are so many houses available in good condition.
I’ll let you know what I find out from Peter and David
Re- posted from a PM thread …
Here are my answers:
A. Write in your lease that you can make repairs in lieu of paying rent & that every $100 spent allows you to additionally extend the lease for an additional month at the same monthly rent.B. No one has a clue how this will be interpreted; however, the gov’t has typically allowed a 20% variance to arrive at fair market rent. I don’t think a 30 year fixed rent would hold water and I wouldn’t want to be the test case.
C. Unknown, but I don’t think “obtaining a lease on a soon to be foreclosed owner” would hold water. I think there are better ways to do business. This would be too high a profile for me.
D. I suspect that it will be interpreted to the benefit of the lender. Meaning I wouldn’t sign a lease on a property where I knew the mortgage was in default, but no one knows how this will be treated yet.
E. I’m sure that the buyer will have to sign an affidavit that he intends to occupy the property. If he lies, a fraud will have been committed and he could be prosecuted criminally.
I’m not sure that I’ve answered all questions since it’s a little difficult to respond to long messages from a Blackberry.
David Tilney
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