I just found out that my landlord is being foreclosed on. My lease agreement runs out at the end of this month, but I had, through email, agreed to stay for another year (no new contract was signed). I don't want to go through the hassle of dealing with this and would like to find another place to live (I only have five days but I think I can do it). Should I confront him with the fact that I know he's being foreclosed on? I haven't really signed a new contract; does that mean I can break it (especially since he's being foreclosed on)?
If John signs the lease he is entitled to stay there for the duration of the lease regardless of the foreclosure status.
I would suggest that signing a year lease (even by email), with the plan to leave as early as possible is a good thing. The key will be to make sure the penalty for leaving early is nothing.
John doesn't know the status of the foreclosure, how long it will take, who might own afterwards and a lot of other unknowns. The worst case is to be unsure of where you are living.
Sign the lease, and be secure for one whole year that you know where you will be living. Spend that year finding a new place to live.
How to handle the payments during foreclosure
If the bank doesn't offer you clear and obvious ways to submit rent, open an account AT THE BANK and deposit the rent there, on time.
You are establishing credibility that you deserve to stay. You still owe the rent, so pay it.
They don't want to be your landlord, but don't let a bank bully you around.
I wouldn't confront him. It's really none of your business what he has done or not done with your money as long as you've been a faithful tenant. Whoever gets the house after the foreclosure wants you to stay. I mean, a faithful tenant paying rent is a whole lot better than no one in the house at all. The new landlord (if it's the bank) probably will leave you alone for the most part. Just take MrChrister's advice and document everything and don't let the bank bully you around. It's not your fault the owner got foreclosed on.
Remember that the foreclosure process takes months so just because papers got served today (hypothetically) doesn't mean next week the bank takes over the house.
Verbal agreements are not legally binding. Unless you have signed a new lease agreement, you are not obligated to continue renting the property - you are free to go.
On the other hand, if you really like the place and want to stay, you should sign another lease agreement. This agreement will be binding on whomever owns the home - whether it is your current landlord, a bank or a new purchaser. But, if you go this route, make sure that there is not a clause that says the lease agreement is void upon foreclosure (or something similar). This is a standard clause in lease agreements allowing the bank to cancel the lease.
Another option, if you really like the house is to offer to buy the property. If the property is being foreclosed on, you could suggest buying on a short sale. Here is a link to an article I wrote entitled "Buy Instead of Rent: A Recovering Real Estate Market" that discusses the benefits of buying rather than renting.