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My Landlords property in CT is in foreclosure. She wants to…

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My Landlords property in CT...
My Landlords property in CT is in foreclosure. She wants to wallk away because it was refinanced for $850,00 in 2007 (now worth about $450,000) and her Bank has refused any Loan Modification. As Architect/Builder I invested aproximayely $250,000 between 2004 and now, to design and build a legal secondary 2000 sq ft "Cottage" on the lot for my own residential use for atleast ten years. I executed a ten year lease in 2006 with her for $24,000 per year with automatic renewal every two years ( with a 5% rent increase), to be "barter payments" to reduce the $250,000 she owed me. My attorney (since deceased) inserted an ATTORNMENT CLAUSE stating that to protect my investment my Lease would not be subordinate to any future financing, sale or transfer of Title to another party.The lease/contract was witnessed but not Notarized nor Recorded. Can I file a Mechanics Lien (I am still working on the project) and is my Lease enforceable if the Bank takes posession of her property ? Can I sue Bank?
Submitted: 8 years ago.Category: Real Estate Law
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Answered in 23 minutes by:
6/15/2010
Real Estate Lawyer: Barrister, Lawyer replied 8 years ago
Barrister
Barrister, Lawyer
Category: Real Estate Law
Satisfied Customers: 43,083
Experience: 17 years real estate, Realtor. Landlord 26 years
Verified

Hello,

 

The foreclosure will not affect your rights or responsibilities as a tenant. A foreclosure is simply an involuntary change of ownership. The new owner (likely the bank) will step into the shoes of the old owner and assume all responsibilities as landlord. You still have to pay rent to the old owner under your agreement up until the auction date and then must put it in escrow until a new owner shows up and then must pay it over to them. Your "barter" agreement would be invalid once a foreclosure sale happened and a new owner took over.

 

Just because an owner is being foreclosed on, the tenant doesn't get a free pass for rent. If the tenant is under a written lease 90+ days, they are able to stay until the natural termination of the lease. This is under the Federal Protecting Tenants in Foreclosure law signed by Obama in 2007.

 

You could file a mechanic's lien in this situation, but it would be wiped out in any foreclosure sale if the property didn't sell for enough to pay the mortgage. You would have to file suit for breach of contract for "unjust enrichment" against the landlord for the work you have performed in constructing the cottage. However, CT is a recourse state where the lender has the right to pursue a deficiency judgment against the debtor which normally results in the debtor filing bankruptcy and wiping out all debts.

.

In a case like this, it is likely that the new owner is not going to be willing to let you live there for 4 more years rent free. Their recourse would be to go to the court and have the court either modify the contract so you pay $2K a month rent straight out or order a reasonable rental fee based on comparable rental properties that you would have to pay to the new owner. If you didn't pay the rental payments, you would be in breach and the landlord could move to evict.

.

This is one of the many problems of investing substantial funds in property that you do not own. If the original owner goes under, so does your recourse for being compensated for your work.

.

So the long and short of it is that if you wish to stay after the foreclosure, you will likely be ordered by the court to either pay rent to the new owner or vacate.

.

.

thanks.

Matt

 

 

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