Tenant Rights when Their Metro Detroit Rental Goes into Foreclosure


Tenant Rights when Their Metro Detroit Rental Goes into Foreclosure

Tenant Foreclosure Protection ActYou’re paying your rent on time, enjoying the property you live in, when a foreclosure notice is tacked to the door.  What do you do?


Finding a foreclosure notice on the door of your Metro Detroit area rental property can be pretty unsettling.

Lot’s of questions run through your mind:

  • When do you have to move?
  • Why did the owner stop making payments?
  • Will you be thrown out with all your stuff without notice?
  • What happens to your security deposit?
  • Do you keep paying rent?


Before you panic, understand that you have rights and will be given plenty of notice about when you have to move. 

The best thing you can do to understand your rights is to familiarize yourself with the “Protecting Tenants at Foreclosure Act“, signed into law on May 20, 2009.

Here are some highlights:

  • All tenants must receive a 90-day notice before being evicted as the result of a foreclosure.
  • With some exceptions, the law requires that in the event of foreclosure, existing leases for renters are honored to the end of the term of their lease.
  • The stated exceptions are for tenants without a lease, tenants with a lease terminable at will under state law, or where the owner acquiring the property will occupy it as a primary residence. In these cases, the tenants must receive a minimum of 90 days notice to vacate the property.
  • This law does not affect the requirements of any state or local law that provides longer time periods or other additional protections for tenants.
  • The new law does not require any agency to issue implementing regulations; these protections apply to foreclosures after May 20, 2009.
  • FDIC examiners will monitor and enforce compliance with the requirements of this law in the same manner as other consumer protection laws and regulations.

When do You Have to Move?

Notice that no matter what, you must legally receive a 90 day notice before you can be evicted from your Metro Detroit area rental property.  Actually, it’s often much longer as you’ll see below.

This may not be the best news if you just signed a one-year lease, but you can rest easy at night knowing you won’t be put out on the street overnight.

What About Your Security Deposit?

There’s no guaranteed answer for this question.  The landlord of the Metro Detroit area rental property can’t legally keep it.  On the other hand, you can’t get blood from a rock – if the landlord is losing the home, than they probably don’t have the money to refund you your security deposit.  All is not totally lost though, you’ll probably recoup your security deposit money in one of two ways, or both:

  • At some point you’ll probably get to stay at least a month without paying rent.
  • The foreclosing lender often offers “cash for keys” to encourage tenants to move out early.

Do You Keep Paying Rent?

You do have to keep paying rent for at least 6 months after the foreclosure notice is put on the door.  In Michigan, a Foreclosure Notice must be put on the door 3-4 weeks before the Sheriff Sale.  After the Sheriff Sale, the owner has at least 6 months to redeem the property and is still the lawful owner of the property.  So, you have to pay the landlord/owner rent if you want to stay.  Otherwise, the owner can legally evict you and pursue you for past due rent and breaking the lease – even garnishing wages!

So, note – we’re now at about 7 months and counting that you’re still in the property after the Foreclosure Notice was placed on your door.

 Now, once the 6 month redemption period is up it get’s real unclear as to when you’ll have to move.  So far, in our experience, the courts don’t know the answer either.

The Protecting Tenants at Foreclosure Act requires the foreclosing lender to give you at least a 90 day notice.  Some lenders have tried to send out this notice prior to the 6 month redemption period being up.  This appears to be technically illegal, but if a judge let’s them get away with it…

The bigger unknown is if a judge will let you stay through the end of your lease, and longer, as the Act allows.  If it is allowed, who do you pay rent to?  It’s probably save to follow state law and demonstrate your ability to pay by escrowing your rent at this point.  Perhaps the rent will end up going to the former owner, the management company, the lender or back to you.  No one really knows at this point.

Know Your Rights!

You’ll notice that there are several unknowns about when you’ll have to move according to how the Protecting Tenants at Foreclosure Act is interpreted and enforced.

We’ve been through this previously with four properties we managed and are involved with our 5th right now.  In the previous 4 instances our tenants have been strong-armed and outright lied to by real estate agents and/or attorneys representing the lenders.  The goal of the agents and attorneys was to get the tenants out as fast as possible so they could list the properties for sale and get a commission.

We’ve told every tenant in a foreclosing Metro Detroit area rental property that we manage about their rights, referring them to the same Protecting Tenants at Foreclosure Act government website we’ve provided the link for above.  Unfortunately, they’ve all been intimidated by the agents and attorneys and have moved out before we could test the Act.

The 5th instance we’re currently involved in is going differently though.  The owner’s redemption period is up, but the tenant wasn’t intimidated by agents or attorneys of the lender.  They met our attorney at the eviction hearing last Thursday with their lease in hand.  Our attorney had a copy of the Protecting Tenants at Foreclosure Act.  The judge ordered a 30 day hold on the case while the attorneys from the foreclosure firm check with FNMA (the new owner) about what to do.  We find it pretty surprising that the largest foreclosure firm in Michigan doesn’t know how to handle this situation.  It would appear to suggest that no one’s really challenged the “foreclosure system” yet, using the Protecting Tenants at Foreclosure Act.

Stay tuned for what develops…


Disclaimer – nothing in this article should be construed as legal advice.  Please seek the advice of a competent attorney.

7 thoughts on “Tenant Rights when Their Metro Detroit Rental Goes into Foreclosure

  1. hello, I have leased a home that had already been purchased by a bank in a sheriffs sale, i literally just found this out a few days ago, I paid for a year up front because i had to repair alot of stuff in the house and got it for a great monthly rate and lease rights until 2017, with an option for 2018…chase bank owns the property and the guy i leased from, the old owner,will not return my calls…do I have any rights under the tenant act?? i dont know what to do at this point but i had a realtor/bank rep ask my neighbors if anyone was living in the home i been here 3 months and just did all this work so my family can stay here….any ideas about what i can do

  2. everyone will panic when a foreclosure notice is tacked to the door. An amazing guide i like the point that Before you panic, understand that you have rights and will be given plenty of notice about when you have to move.
    The best thing you can do to understand your rights is to familiarize yourself with the “Protecting Tenants at Foreclosure Act“

  3. hi
    i almost lost my home to foreclosure during the 4th quarter of last year due to legal and tax,late payments of the mortgage.during this period i got to know that Whites home ownership rate is 70% and the US has a 64.3% as blacks are at 41.6%. Blacks worth $5 to $100 whites are worth after the black Emancipator Obama,we wanted him back as president.i posted seeking help online which made me drop my email and [seventy7hacker [at] hot-mail com] responded analyzing how he can be of assist.so many options was given including hiring an attorney,but fast result was given which was getting the debts,tax removed and boosting my score by 200 points with a price.so many counselling was given which might be of help to you seeking credit counsel.They are very reliable.

Leave a Reply

Your email address will not be published. Required fields are marked *

Signup for regular real estate updates and tips for the Metro-Detroit area