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Foreclosure can leave renters homeless

Think you're exempt from the financial fallout of the downtrodden real estate market because you're a renter? Think again.

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If your landlord is facing foreclosure, you could easily end up on the street as well.

There were 223,538 foreclosure filings in September 2007, up almost 99 percent from the year before, according to figures from RealtyTrac, a company that tracks foreclosure activity. And it's not just borrowers losing their personal homes -- in many cases lenders are foreclosing on rental properties. Because lenders are not usually interested in managing rental properties, tenants are finding themselves displaced in the process.

"It's a real bad problem," says Ken Volk, founder of Arizona Tenants Advocates & Association, an organization that promotes tenants' rights. The influx of tenants contacting his organization in the last three to six months has prompted Volk to compile information on the topic at his Web site, arizonatenants.com.

Not only are tenants being forced to leave, but because they generally have no knowledge of the landlord's deteriorating financial situation, they are often taken by surprise.

"They (landlords) see foreclosure coming many, many months away. But they may not communicate this to their renters, so this can sneak up on renters," says Brian Sullivan, a spokesman for the Department of Housing and Urban Development, or HUD.

In many cases, renters find out that the home or apartment they're renting has been foreclosed on when they are informed that an eviction notice is forthcoming from the lender. Such a notice gives renters a chance to willingly vacate the premises before eviction proceedings take place.

Even if the renter's lease isn't up for another six months, renters may get only 30 to 60 days to vacate the premises once evicted, because in most states a foreclosure makes a lease obsolete. Because the lease signed by the renter is no longer in effect, the lender or new owner also isn't obligated to perform any maintenance tasks or continue any other amenities the renter may be used to, with the exception of keeping on basic utilities such as electricity and water.

While it's almost impossible to know if your landlord is having money problems, if repairs suddenly start going ignored or if your landlord becomes more unresponsive to your needs, you may want to consider this possibility before signing a new lease.

If you do find yourself in the position of having to vacate a property that's been foreclosed on, your options are likely limited.

Dealing with eviction
There are several things you can do to improve your situation and protect your interests.
 
Protect your rights as a renter:
Know your state and local laws.
See if federal rules apply.
Check public records.
Demand a refund of your deposit.
Contact the lender or new owner.
Look into "Cash-for-Keys" programs.
Protect your credit rating.
Channel your efforts and energy.

Know your state and local laws. "There are many local rent-protection ordinances that are in place that protect renters," says Sullivan. Some jurisdictions, for example, may require that renters have more time to vacate the premises, while others may have specific regulations regarding the foreclosure process. For example, in Connecticut, unless you are named as a defendant in a foreclosure suit, a lender can't evict you after the foreclosure. You can access information pertaining to your state's rental ordinances through the HUD Web site. If you don't want to sort through all of the legalese, contact a housing counseling office in your state, also accessible through HUD.

 
 
Next: If you don't want to move, contact the lender or new owner.
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