Foreclosure Quick Q & A
 

 

The following are some of the most common questions we deal with on a day to day basis regarding foreclosures in the single family home setting and some short answers. The answer to a particular question you may have depends on the factual circumstances, so do not rely upon this information as a final answer, but a starting point in your journey through the foreclosure maze.  

Q. My tenant just got a copy of a “lis pendens” in the mail. Does this mean the property is in foreclosure?

A. No. A “lis pendens” is a document which must be filed before a foreclosure action is filed. A foreclosure may or may not be filed, but probably will be soon.

Q. My tenant received a letter on their door from a bank stating that they have to move out in 10 days. Is this legal? Must they move?

A. This is not legal, and the tenant does not have to move. Only the Sheriff’s Department can make the tenant move out upon order of the Court, and at a minimum, the foreclosure would have to be finalized, with a Writ of Possession at some later time being issued and executed. Under a new federal law, the bank or third party purchaser will acquire the property subject to the existing tenancy.

Q. My owner told me that he is not really in foreclosure but trying to make a loan modification. Is this true?

A. That one is too funny. If the owner received foreclosure paperwork, the owner is in foreclosure. While they may end up modifying the loan and getting out of foreclosure, the truth is that they are IN FORECLOSURE. Some owners do not like to admit the truth.

Q. Does my tenant have to respond to the court within 20 days like the foreclosure summons states?

A. The tenant does not need to respond but can if they wish. Do not give them any advice.

Q. What should my tenants put in their response to the court?

A. That is up to the tenant, You should give them no advice at all. Their response will not make much difference in the foreclosure action other than to delay it a bit more.

Q. Do my tenants still have to pay rent?

A. Yes. Nothing has changed. The rent obligation to the owner continues.

Q. My tenant is claiming that they are not going to pay the rent but instead put it into “escrow”. What are they talking about?

A. There is no recognized mechanism for putting the rent into “escrow” prior to litigation. The tenant may decide to hire an attorney who may place the rent his or her “Trust Account”, but this would probably not be a good thing for the tenant to do and has no basis in law.

Q. Does the bank have a right to the rent money?

A. Yes, but the banks needs to exercise the Assignment of Rent clause in the lease and notify you, most likely through court documents. The bank usually does not do this in the residential setting.

Q. What should I tell the tenant when they say they are refusing to pay rent?

A. Tell them that if they do not pay rent they will be served a Three Day Notice and be evicted if they fail to comply.

Q. Can I file an eviction if they fail to pay?

A. Yes. If the owner instructs you to file, you should proceed as normal. Make sure you tell your attorney that the owner is in foreclosure.

Q. My owner is broke and does not have the money for the eviction. Should I advance the money to pay for the eviction?

A. Do so at your own risk. We highly recommend against this.

Q. I feel sorry for the tenant and have so many vacant homes. Can I find the tenant another home to move into?

A. Absolutely NOT, UNLESS you get permission from the owner in writing. Make sure all parties agree on any money you are holding so there is no misunderstanding.

Q. Can the tenant win the eviction if the owner is in foreclosure?

A. The tenant can bring up the owner’s foreclosure as a defense, but most judges will evict the tenant anyway if the tenant fails to place the rent into the court registry. The owner does have a greater risk the eviction will be contested, and a judge may feel that the tenant can stay.

Q. The owner does not want to pay for an eviction and has told me not to file one. What should I do?

A. Get this in writing from the owner so that later, the owner does not try to say that you should have filed an eviction and did not do so.

Q. The tenants just up and skipped on me. What do I do with the security deposit?

A. Process it as normal, deducting the rent that is owed and any damages and send your Notice of Intention to Impose Claim on Security Deposit out by certified mail.

Q. Can I let the tenant out of the lease?

A. If the owner instructs you in writing to let the tenant out of the lease, you certainly may, BUT it is crucial that you use a proper form, a Mutual General Release Agreement (which we can provide), to settle all monetary and other issues, and have each party release the other in that form.

Q. Does the tenant receive back their security deposit/last month’s rent or any other sums we are holding if we let them out of the lease?

A. This must all be decided between you, the owner and the tenant and memorialized in writing on the Mutual General Release Agreement.

Q. If the owner is agreeing that we return the escrow money we are holding to the tenant, when can the tenant get the money?

A. At any time the money can be disbursed to the tenant, but we would not recommend doing so unless the tenant has given you the keys, turned over possession to you, the property was inspected for damages, and the tenant signed a Confirmation of Vacating Premises.

Q. We don’t want to work for the owner anymore as he has no money for repairs, and this is causing us a major headache. Can we fire the owner?

A. Most property management agreements state you can terminate the management agreement within 30 days, and the good agreement states that you can terminate immediately. Look at your agreement and call your attorney.

Q. What do we do with the tenant’s security deposit and other escrowed funds if we terminate management?

A. You need to hold it in your escrow account until the tenant agrees it can be put in the owners’ Florida account. Most tenants will not agree to this.

Q. The owner told me that the property is being sold in a short sale. What does this mean?

A. A short sale is nothing more than a sale where the payoff the bank takes is less money than what is actually owed. It is simply a sale just like any other sale as far as the tenant is concerned.

Q. Is the lease still in force after a short sale?

A. Yes. It is just like any other sale and the lease survives unless there is a termination on sale or contract clause in the lease agreement.