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Be Careful When You Rent a House, Co-op or Condo in a Down Economy

If the property where you rent is foreclosed, you could end up being evicted even if you have a valid lease. Most unregulated leases are "subordinate" to the mortgage. This means that if the mortgage is foreclosed, your lease is cancelled. The exception to this rule would be a rent-regulated lease, because rent-stabilized or rent-controlled status stays intact. These leases, with their automatic renewals, can survive foreclosure. Needless to say, in difficult economic times, landlords who lease out smaller properties are frequently the ones who can't make their payments and end up in foreclosure. One protection you can institute that may help is to request a three-year lease, then record it in the County Clerk's Office. This can, in certain instances, have the effect of binding the lender to the lease terms. But as with many Landlord Tenant matters, it has to be handled properly, as it may raise other issues. The effectiveness of the strategy depends on the language in the lease and the mortgage, so there's no guarantee that your leasehold is sheltered from the foreclosure. If the stability of your tenancy is very important to you, it's worth having a consultation with a lawyer to help with document review and drafting. 

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