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Ask Legalease Your Own Question
Legalease
Legalease, Attorney
Category: Landlord-Tenant
Satisfied Customers: 16288
Experience:  15 yrs residential & commercial leasing experience.
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Can you be held to a lease if you were not informed that the

Customer Question

Can you be held to a lease if you were not informed that the property was being foreclosed on before you signed the lease? The lease is dated July 15, 2015. We found out by an investor who knocked on the door that the property was up for auction Dec. 1, 2015. We in turn informed the leasing company who claimed they had no knowledge of this, but did informed this was indeed true. We were informed we had to honor the lease,unless the owner agrees to let us out of the lease. We sent a certified letter stating they had violated the Az Residential Landlord and Tenant Act, section 33-1331 and 33-1361. We stated we would be out of the house Oct 1st and we'd like our security deposit back. September's rent was paid. Now the leasing company is saying we must sign a termination agreement with the homeowner before he allows an "early lease termination". Is the original lease is null and void?
Submitted: 1 year ago.
Category: Landlord-Tenant
Expert:  Legalease replied 1 year ago.

Hello there --

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Under the Az Landlord and Tenant Act, the owner must know of the pending foreclosure at the time you entered into the lease and if he did know of the foreclosure, then it must be disclosed to you in writing before or as you are signing the lease agreement. If the Landlord fails to do this then the tenant can seek injunctive relief and the full security deposit returned. Here is a link to the statute http://www.azleg.gov/FormatDocument.asp?inDoc=/ars/33/01331.htm&Title=33&DocType=ARS

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If you have proof that the property was in foreclosure on or at the date you signed the lease, then you certainly have every right to demand termination and your security deposit returned. However, a property is not legally in foreclosure until the owner receives certified notice of such from the lender/mortgage holder and that is usually only about a month before the sale date. Simply because an owner is behind in payments does not mean that the owner is necessarily headed for foreclosure in the legal sense of the word.

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unfortunately, if you cannot show that the property was in legal foreclosure proceedings at the time you signed the lease, then you are still responsible to the owner for the full lease term including all rental payments (whether the owner is using those payments to pay the mortgage or not -- there have been many legal cases where tenants refuse to pay rent because the mortgage is not being paid and the tenant is still evicted because courts hold that it is still the responsibility of the owner to pay the mortgage and property upkeep and the owner will be on the hook for missed payments and deficiency amounts after the foreclosure and thus the owner is still entitled to the rental payments while the owner's name is ***** ***** the deed to the property). Once the property is foreclosed, you then have the right to remain through the end of your lease and the new owner has no right to remove you from the property if you wish to stay. However, with bank owned properties, you also have the right to deliver a notice to the bank and leave early on the lease if you wish to do so at that time. Banks generally do not like to continue to lease properties after foreclosure and usually prefer that you leave anyway.

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So, under these circumstances, my suggestion to you is check the public property records to determine when the notice of foreclosure was filed in the public property records (this would be the county recorder's office where deeds and mortgages are filed and you can usually get that information by contacting them either in person or on the telephone -- sometimes the documents are online for each property and you will be directed to a website, but there may be a fee for accessing the website). If it turns out that there was public notice of foreclosure already on record when the property was rented to you, then you by all means have a case here and if the owner refuses to terminate the lease and return your security deposit you can take the matter into your local small claims or magistrate's court to sue the owner for the return of the deposit and any other damages that the court may permit (you could probably ask for moving costs).

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Please let me know if you have any further questions. if not, can you please press a positive rating above before leaving the website. I am paid nothing unless you press the middle star, the fourth star or the fifth star on the right above. Doing so will not cost additional money it is simply a trigger used by just answer to pay me for my time.

THANK YOU

MARY