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Late last month my tenant informed me that he might be vacating the property in ten days, a little over 6 months into a one year lease. He has not paid this months rent and I am starting the process of the 5 day and abandonment notices.
My intention is to sell the property rather than renting it again. If I do so, will I be losing my right to pursue damages and rent from the tenant? I have considered listing it for rent and for sale if needed but would prefer to sell if at all possible.
Any information would be greatly appreciated.

Response by Carlton C. Casler: Serve the 5-Day Notice to Pay or Quit immediately. Do not proceed with the abandonment procedure unless the tenant is absent from the property for 7 or 10 days (see ARS Section 33-1370 for details). Because the tenant breached the lease, the tenant is responsible for all rent that accrues until the earlier of: (1) the end of his/her lease or (2) until you re-rent the unit to another tenant. The tenant is also responsible for any/all expenses you incurred to try to re-rent the property (i.e., advertising, commissions, etc.). List the property for sale or rent. If you do not list it for rent, the tenant can argue that you failed to mitigate your damages by looking for a new tenant. If you get a new tenant applicant, you can decide at that time whether or not you want to proceed with re-renting the property to a new tenant. If you don't get any suitable tenant applicants, then you have satisfied your obligation to mitigate your damages and the tenant is responsible for rent until the end of the lease term. Good luck.

There's definately a lot to know about this topic. I like all of the points you have made.

If the house I rent was in foreclosure and bought by a lender and I decide to stay under the Obama tenants rights law for the 90 days. Do I pay the new lender the old amount on my month to month or thier new amount of rent for the 90 days?

Response by Carlton C. Casler:
Presuming your lease is a "bona fide lease," then it survives the foreclosure and both you and the new owner (in your case, the bank) must abide by the terms of the lease, include the amount of rent.

Our landlord is in the foreclosure process and the auction date was April 19th. He claims to have extended the auction date until June 19th. we were notified only by a letter posted on the garage door.We continued paying rent at his insistence until this month (we are month to month)so he has given us a 5 day pay or quit notice. I noticed on an earlier post that you said federal law requires that we have 90 days to terminate...should we have received that notice as well. Also as far as the clause in our lease that says "landlord shall not allow the property to become the subject of a trustee sale"..why isnt that considered a breach of the lease, especially if we were not notified at all. We are trying to sue now for our rent that we paid from the date it was recorded till the current month..and we are month to month.
Response by Carlton C. Casler: As long as the owner owns the property, you must pay rent to the owner. If someone shows up claiming to be the new owner, you should insist on seeing a copy of the trustee's deed (or whatever deed he received at the foreclosure sale). Even though you are month to month, the May 2009 federal law prohibits the new owner from terminating your lease. Even when tenancy is month to month (as in your case), the new owner must give you a minimum of 90 days notice of termination. Failing to pay the rent, however, enables the owner (current owner or new owner) to issue a 5-Day Notice to Pay or Quit. If you don't pay the rent, you WILL (not may) be evicted. As for your lease that states it is a breach of the lease for the owner to allow the rental property to be foreclosed, you must send the owner a 10-Day Notice of Material Noncompliance. If the owner fails to remedy, then you may terminate and vacate. If you had a long term lease, you could sue for moving expenses, etc., but since you are month to month, your damages are $0 because a month to month tenancy can be terminated by either party with 30 days advance notice. Moving may be your best choice because there is no guaranty that the current owner will get a loan modification and let you stay or that the new owner (after foreclosure) will allow you to stay.

I am a tenant and the house I rent is in foreclosure. the trustee sale is May 21. Who do I pay rent to after the sale? My lease ends at the end of july. From what I understand my current property manager will no longer be responsible.

Response by Carlton C. Casler. After the sale, you must pay rent (in the amount stated in your lease) to the new owner. You may (and should) ask to see some type of ownership document (i.e., a copy of the trustee's deed).

The house we are renting is foreclosing, and the landlord just advised us that they are trying to short sale the property. They stated there is an offer, and the paper work has been submitted to the bank for approval. My question is...Do I have to stay in my lease if a new owner comes in? My lease is with the previous owner not the new one. What if I do want out if it goes to a new owner?? I'd appreciate any help out there! I was reading my lease and it does not state anything about a sale or transfer to a new owner, but it did state this... . "UNDERSTANDING. It is understood that this written agreement between Lessee and Lessor constitutes the full understanding of the parties hereto, and that there have been no verbal promises made outside this Agreement. Any changes to this Agreement must be in writing and signed by both parties. Should any provisions of this Agreement be determined to be unenforceable or illegal, the remaining terms shall remain in full force and effect." I'm still not sure what to make of it. Do I have to stay and pay a new owner???... Can I negotiate a new rental amount if it was purchase for a lot less???...Can I move and get out of my lease if I chose???

Response by Carlton C. Casler: The lease is binding on the current owner and any future purchaser; it also binding on you. Whether the seller sells the property to a buyer via a regular sale or a short sale, the result is the same -- the lease is binding upon the new owner. Having said that, you and the current owner or the new owner can agree to mutually cancel or modify the lease, but if neither will agree to cancel or modify (i.e., lower the rent) the lease, then you are bound by the lease until the end of the lease term. If you vacate before the end of the lease, you have breached the contract and will/may be responsible for money damages. There is an exception: if the lease provides that either party may cancel the lease in the event the property is sold, then you could terminate without penalty. I have not seen your lease, so I cannot say whether this exception applies to you, but this type of provision is very rare.

I am a property manager and I hold the tenant security deposit. The foreclosure took place today and the tenant did not pay March rent. They owe the owner 15 days of rent for March, a late fee and a 5-eviction notice that was delivered last week. The bank was trying to modify the loan so we did not know for sure if the sale would take place, thus the reason for sending the 5 day non-pay. I have done enough research to know that I can deduct from the tenant security deposit the amount owed to owner, plus late fee, etc. This is correct, right? Also, what am I suppose to do with their security deposit? The house did go back to the bank. Do I hold it until I know what to do with it or should I send a security deposit return letter; with the itemized deductions?

Response by Carlton C. Casler. The property management statutes are ARS 32-2171 thru 32-2176. The foreclosure terminated your right/obligation to manage the rental property. ARS 32-2173(B) sets forth the broker's duties and very specific time limits upon termination of the property management agreement. I don't know if you manage other rentals for this owner, so I don't know whether foreclosure of this one property also terminated your property management agreement. Assuming that the foreclosure DID terminate your property management agreement, then you should refer to that section to ensure you do all that is necessary under the law.
Here is a link to that statute:
Turning to your specific questions, yes, you may deduct from the tenant's deposits all rent, late charges and any other amounts due to the landlord that the tenant has not paid AND that are specifically permitted in the written rental agreement. Your client is the seller, not the tenant (unless this was a dual agency transaction). After deducting all amounts due to your client from the deposit(s), your client has no further claim on the deposit(s) and, therefore, you have no legitimate reason to keep holding the remainder of the tenant's deposit(s) (if any). The bank may want you to send the deposit(s) and/or the remaining deposit(s) to the bank, but the bank is not your client. The balance of the deposit(s) should be returned to the tenant along with an itemized statement of all deductions made from the tenant's deposit(s), as required by ARS 33-1321.

Excellent article. Question(s)
I aquired a land parcel via a trustee's sale. I was the note holder. The original owner leased the property and the renter is still there, in his mobile home. He was on a month to month lease (with the original owner). His last rent payment to the original owner was Oct 2009. I received title early this month (Jan 2010).

He refuses to pay any rent and also refuses to leave. I have tried to:
1. Write a new lease
2. Honor the old lease.

He refuses to produce the old lease, or proof of payment.

None of these are acceptable to him. My understanding is that to get him off the property, I have to file an FD in Superior Court (much harder and higher cost), not Justice court. Any opinion on that and how could I pull it off in JC?

Response by Carlton C. Casler. Federal law requires that even a month-to-month tenant be given not less than 90 days notice of termination. Your "tenant" refuses to pay rent. Assuming you know what the monthly rental amount was before the foreclosure, then serve the tenant with: (1) a 90 Day Notice of Termination and (2) a 5-Day Notice to Pay or Quit. If you don't know the monthly rent, then take an educated guess (but guess high) at the monthly rent and complete the 5-Day Notice with that guess. Add, however, that he need only pay the amount stated in the prior written lease, provided he sends you a copy of the lease tenders the amount due under the lease including rent and late fees (if any). Good luck.

Well, I'm on month to month, and I've recieved the notice of a trustee sale. I have just made an rental application with a different prop mgr for a house. What can I do if the current landlord gives a lousy reference because he's tiffed that I'm moving out? I've been a good renter for 3 years. Also, what's the chances I'll get my deposit ( $1900) back? The deposit isn't in the brokers trust account, according to the previous lease agreement , the landord holds it and the landlord is also Lic. realtor. Do I have to go thru small claims to get any of the deposit back, and just how many photos should I take when moving out?

Response by Carlton C. Casler: Very important -- give a written 30 day notice of termination and make sure the notice is (1) timely and (2) properly served. Take twice as many photos as you think you need of the rental after you have completely moved out and cleaned the property. Ideally, the photos should be taken at the time you do the move-out inspection with the owner or property manager present. If the owner gives false information to someone (i.e., a bad tenant reference, if there is no basis for the bad reference), then you have a claim against him/her for defamation. If there is no damage and the property is clean when you leave, you should get your deposit back. If not, you can go to small claims (up to $2,500) or to civil justice court (up to $10,000), both of which are located in the same courthouse. You can sue the landlord for the amount "wrongfully withheld," which may be all or only a part of your $1,900, and you are also entitled to an additional amount equal to twice the amount wrongfully withheld, plus your attorney's fees and court costs. If the owner, who is also a real estate agent, does not pay the judgment you receive, you can file a claim with the real estate recovery fund (contact the Arizona Department of Real Estate to file the claim).

I am renting a home that is now in foreclosure. I moved in June 2009 and have recently found out the owner put the house up for short sale in May 2009. The owner promises the short sale will go through to investers. Am I obligated to stay in this property if it sells by short sale before the forclosure date? Do I have to finish out the term of the lease with the new owner? Has the contract been broken by the landlord?

Response by Carlton C. Casler: Yes, yes and no. Forget the "short sale" concept for a minute. The owner of rental property (residential or commercial) can sell the rental property anytime. The lease remains valid after the sale and is binding upon the tenant and the new owner. A "short sale" is an agreement by the lender to allow sale of the subject property for less than the amount owed; it is an agreement between the lender and the owner/borrower and does not impact the tenant in any way. Consequently, a "short sale" is merely a sale of the rental property and the lease remains binding on the tenant and the new owner. The only exception would be language in the rental agreement that allowed the landlord or tenant to terminate the lease upon sale, which is rare. Selling the property via a regular sale or a "short sale" is not a breach by the landlord and, therefore, on the facts you presented, the landlord has not breached the lease agreement. If the property is foreclosed and the tenant is forced to vacate the rental unit before the end of the lease term, then the landlord is probably in breach of the lease, but the final determination will depend on the specific terms of the lease.

Do I have to show the home to buyers while my landlord is foreclosing and we are still living here? We had a realtor come by and said he was taking over the home and was selling it now. No one notified us he was coming or who he was, he won't give us a card, he said he will have us out in 2 weeks, and he has more than one buyer lined up to look at home in the day. He also said we were served a 5 day notice to vacate but the landlord gave him the 5 day notice instead of us. I can't handle showing to this many people and trying to work and have a family and keep the home is show ready condition. Thanks

Response by Carlton C. Casler: Do I have to show the home to buyers while my landlord is foreclosing and we are still living here? We had a realtor come by and said he was taking over the home and was selling it now. No one notified us he was coming or who he was, he won't give us a card, he said he will have us out in 2 weeks, and he has more than one buyer lined up to look at home in the day. He also said we were served a 5 day notice to vacate but the landlord gave him the 5 day notice instead of us. I can't handle showing to this many people and trying to work and have a family and keep the home is show ready condition. Thanks

Yes, you must allow the owner/landlord to show the home to prospective buyers and that is true whether or not the home is currently in foreclosure. To show or inspect, however, the owner/landlord must give you two days advance notice and may only show or inspect at "reasonable" times. (See ARS 33-1343).

You did not give me enough information to comment on the 5-Day Notice you received. If you did not pay the rent, then the 5-Day Notice was appropriate. If you committed a non-monetary default, then a 5-Day Notice is only appropriate if the violation affects health & safety. To avoid being evicted for the latter, simply cure the default stated in the notice. (See ARS 33-1368).

You should contact the landlord/owner directly to determine if the real estate agent is acting on behalf of the owner. You should also find out if the agent's authority relates only to selling the property or whether the agent is also authorized to receive payment of the rent and/or notices from you regarding any problems with the property.

So basically what you are saying is that even after we have received a notarized document stating a "Notice of Trustee's Sale" with the date of sale being 3 months from the date written we still have to make make our monthly payments. Does this mean that we should wait until the date of sale to confirm the foreclosure (as stated above the lendee has the opportunity to become current with what they owe before their date of sale)? If so, does this mean we should wait until the eviction notice or should we stop renal payments sooner?

Response by Carlton C. Casler: The AAR February 2008 Residential Lease Agreement includes a provision (starting on Line 206):

"Trustee's Sales Notice: Landlord shall not allow the premises to become the subject of a trustee's sale. Tenant shall notify Landlord immediately upon receipt of any notice of trustee's sale. Tenant acknowledges that pursuant to law, Tenant's rights under this Agreement may be terminated in the event of a trustee's sale."

If your lease has this provision, then you can give your landlord a "10 Day Notice of Materal Noncompliance" for allowing a trustee's sale to commence. If he does not cure the default within ten days, then you may terminate and vacate, but you cannot remain and simply stop paying rent.

If your lease does not have this provision, then you must pay rent until the trustee's sale occurs. The landlord's position will likely be that s/he is using the rent to try to catch up with the payments and nonpayment of rent has only compounded his/her financial problems. Although the landlord may be in breach of contract with the landlord's lender (i.e., failure to make the monthly payment), absent the foregoing language, the landlord is not in breach of the lease until the foreclosure sale actually occurs. Most judges will not even hear evidence about the rental property going into foreclosure because it (normally) does not relate to the issue of nonpayment of rent. Bottom Line: Absent the foregoing provision, you should pay the rent; failure to do so will almost certainly result in eviction.

Lastly, is the new Trustee (which is the lawyer representing the lender as stated in the "Substitution of Trustee" notice that we received) required and/or allowed to give us the status of our landlord's defaulted loan?

I am in a rental and the house is being foreclosed on. But since January of this year, the landlord has said that he is trying to get a loan modification. Is it possible for a rental or investment property to get a loan modification? My husband works as a collector that does mortgages.He knows how the loan modification works, but he thinks you can't get a modification on a rental property. Are we safe to stay in the house and keep paying rent? Our lease is up at the end of June.

Answer by Carlton Casler: Yes, it is possible for a rental or investment property to get a loan modification. Your lease ends in June 2009. Check the public records (county recorder's office) to see if a "Notice of Trustee's Sale" has been recorded. Then check the public records (superior court for your county) to see if a judicial foreclosure has been filed by the lender against the owner of the rental property. If a notice has not been recorded or a judicial foreclosure has not been filed, then it is IMPOSSIBLE for a trustee's sale to be completed and VERY UNLIKELY that a judicial foreclosure can be completed before the end of June 2009. If, however, you stop paying rent, the owner can have you evicted within three weeks. It is safer for you to pay rent (i.e., unlikely any type of foreclosure will be completed before June 2009) than it is to not pay rent (which WILL likely result in eviction).

Thanks for sharing your views between tenant and landlord. I've learned a lot. As we all know, each one of us has a right. We need to know our positions so we would be able to fight for them, if need arises.


I am a renter occupant of a foreclosed property. Auction sale was the 18th of September and the property did not sell and it went back to the lender. I talked to the trustee office before sale and the gentleman told me there was a new law that prohibited an eviction for 60 days. Have you heard of this. I need info because I am having a hard time finding a new place to live. I am on section 8. Help!!! How much time do I have. I am afraid to call the lender.

Thanks Susan

Answer by Carlton Casler: There is no "law" that prohibits eviction for sixty days. Because of the current economic crisis, however, many lenders are slow to begin eviction after a trustee's sale. Also, for a while, Fannie Mae (FNMA), Ginnie Mae (GNMA) and Freddie Mac (FHLMC) were postponing foreclosures and also postponing evictions after a foreclosure. Generally, the process is as follows: the lender begins foreclosure; the property is sold at the foreclosure auction or, if no bids exceed the lender's credit bid, then the lender becomes the owner of the property; the owner of the property must then give the occupants (who may the prior owner or a tenant) a five day demand for possession; if the occupants do not vacate within the five days, then the owner must file a forcible detainer action (i.e., an eviction action) to remove the occupants. The process from service of the five day demand for possession to the date the owner receives a Writ of Restitution (which authorizes the constable or sheriff to forcibly remove all occupants) will take about three weeks.

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