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Category: Bankruptcy Law
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Experience:  Bankruptcy professor.
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Good evening. My wife and I signed a lease last December with

Customer Question

Good evening. My wife and I signed a lease last December with a fellow who built a large custom home as a spec in 2007. With the recession, the home sat and he decided to rent it. I failed to perform proper due diligence at the time and we received an auction notice to "John Doe" in April. I called the "owner" and complained and he assured me no auction was imminent and not to worry. I decided to perform my DD at this time and learned that the owner filed for Ch. 13 bankruptcy with the typical 90 day window on NY State. He later delayed his process by converting to Chapter 7 BK and I called the court to learn his case is about to be heard. My interest is to know what will become of the house we are in with a valid lease. We have interest in purchasing it. I mad offer to the owner but he turned it down as it would qualify as a short sale (he has 1 million outstanding and I offered 700K). He has also turned down similar low offers from others seeing the place. I did write the mortgage company offering them to buy the house but they will not talk at this time (during the process). I know the owner is trying everything to hold this property (not his primary residence of course) by selling it to his brother and moving his family into a basement apartment. Assuming that fails, who will ultimately get this property? Will it be the mortgage company or will the court order it sold at auction? Who should I go to upon the final ruling in the owner's case to get first shot at it? Also, what becomes of the validity of my lease once the court rules on the case? Is it still enforceable should I not be able to acquire the home? IF someone can advise me what to do at this time I would appreciate it. Also, I will ultimately need to hire an expert in short sales, auctions etc to get this deal done. Any takers?

Finally, I told him I am withholding 6K in security for our final days here. He is broke and already spent it and is asking for rent> I told him no unless he produces an interest bearing statement for the security that would have to be held by a third party due to his financial condition.

Thanks.


John XXX@XXXXXX.XXX
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 4 years ago.

Hi jboth,

If the mortgage is not paid, the house will eventually be offered for sale at an auction, which will be open to the general public. You will not be able to get "first shot", even though you are currently a tenant, but you will be able to bid on the house, along with anyone else interested in doing so.

Once the house is sold, the new owner must honor your lease, unless he will be moving into the home, in which case, you have to be allowed at least 90 days to find a new place. The 90 days also applies if you have no lease when the house is sold.

The experts at JustAnswer.com can only provide legal information, not legal representation.

If you have reason to believe your landlord no longer has your security deposit available, it does make sense to apply that deposit to the last few months you are there before the house is sold.

 

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