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)?

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    Welcome John. What are you wanting to accomplish? Do you want to stay in the house or do you want to move? I don't know that email is legally binding (we aren't lawyers here) but your goals are important. Also, please include your location in the tags. – MrChrister Nov 25 '12 at 23:44
  • This sounds more like a consumer protection or legal question than personal finance, and I think it should be closed. – Dilip Sarwate Nov 26 '12 at 3:33
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    @DilipSarwate - Good point. But I like the question because rent is probably the largest expense in his life. I think the question could be rewritten to deal with what is happening and how to save the most money. – MrChrister Nov 26 '12 at 3:38
  • Did the current contract automatically convert to month-to-month? Or must a new contract be signed? – mhoran_psprep Nov 26 '12 at 10:45

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

  1. Make very sure you get payment receipts for the rent you pay.
  2. If you learn a bank now owns the house, MAKE YOUR PAYMENTS CONSISTENTLY.

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.

  1. If the bank doesn't approach you, then approach them and say you will leave for money. Get enough cash to cover moving expenses and rental deposit for your new place.

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.

  • +1. That new bank doesn't want a tenant, but the law is clear they must obey the current lease. – MrChrister Nov 27 '12 at 21:46

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.

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    Re: "Verbal agreements are not legally binding" .. could you support this statement? I'm under the impression that, in general, an oral contract is enforceable, except where the Statute of Frauds says it is a kind of contract that must be made in writing. Refer to Wikipedia - Statute of Frauds and Statute of Frauds legal definition – Chris W. Rea Dec 18 '12 at 22:50
  • @ChrisW.Rea - while legally binding, the problem is proving there was a contract. Without a witness, it is pretty hard. – MrChrister Dec 19 '12 at 2:43
  • I checked with a Virginia attorney's blog. In part it says: "Even an exchange of e-mails or written proposals without a signature does not necessarily create a binding contract. While some oral agreements are enforceable, it can be extremely difficult to prove the existence of an oral contract and its terms. In addition, under the Statute of Frauds in Virginia, some oral contracts are never enforceable. These include, but are not limited to: ...Agreements to lease real estate for more than 1 year" link – Simon Campbell Dec 20 '12 at 4:10

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