Legal Question in Real Estate Law in New York

It's a practical certainty that your lease is "subject to" the mortgage. This means that in mortgage foreclosure, you may be evicted.

1. Stop paying rent, The commencement of the foreclosure is a breach of the "covenant of quiet enjoyment," so you no longer owe rent unless the foreclosure is dismissed.

2. The bank CAN request that a receiver be appointed. If so, pay the rent to the receiver or you can be evicted for non-payment.

3. If you are not named on the summons and complaint as a defendant, then the bank might be willing to let you stay on as long as you pay your rent and they don't have a buyer for the house. The bank CAN have the summons amended to change one of the John Doe defendants to your name, which would indicate that the bank will want you out once the foreclosure is concluded.

4. You can approach the bank and see if they would be willing to do a deal with you to buy the house out of foreclosure and give the bank a new mortgage.

In other words, you may have valuable rights. You should consult an attorney to get real, personal, legal advice. Remember, this note is not legal advice: if it were legal advice, it would come with an invoice.

Mr. Connolly writes that in a mortgage foreclosure you may be evicted. That is correct. Pursuant to the Real Property Actions and Proceedings Law, the bank would have to provide you with a foreclosure deed. It would then have the right to commence an eviction proceeding under RPAPL 713(5).

However, he writes that the commencement of the foreclosure is a breach of your covenant of quiet encjoyment. That comment is very wrong for too many reasons to list in this answer.

Bottem line. If you do not pay rent your landlord may evict you. The foreclosure is not a defense. Furthermore, despite the foreclosure, the landlord has the option to collect a money judgment against you. That judgment may be assigned to the bank, or, the bank as the judgment creditor for the landlord may seek to collect on the judgment.

If you do pay your rent you will not be evicted by the landlord. You may be evicted by the bank but only at the end of the foreclosure when the bank has the property. This may take years.

Mr. Connolly writes that the bank can have a receiver appointed. This is true. And yes, pay the receiver or you will be evicted by the bank.

Good luck.

Mike.

Hypothetically speaking, as a tenant, whether actually named in the caption of a law suit or referred to as a "John" or "Jane Doe" you are a party to the action. As a party to the action you may seek to defend against the bank. To do so however, you must first appear in the case by filing an Answer to the Complaint that you received. In any Answer submitted to the court in a foreclosure case, the answering party may, and should, raise the affirmative defense of Lack of Standing. The Lack of Standing defense challenges the bank's authority to bring the foreclosure case by asserting that the bank is not the true owner and holder of the mortgage and note being foreclosed and is not owed the debt being collected. In the last decade many banks securitized their mortgage loans meaning they sold them to other banks and then to a mortgage backed securities trust. Therefore, this affirmative defense may be particularly effective if the entity bringing the case is a bank acting as Trustee to a mortgage backed securities Trust because the biggest problem the Trusts have is actually proving that they properly acquired the mortgage and note being foreclosed upon in a timely manner before the Trust's Closing Date. The prospect of the Trust acquiring the mortgage and note may sound simple, but in reality it is often quite complicated and not easy for the bank to prove. You only have 20 days from the time you are personally served with a Complaint to answer it. Now, all of this cost money and, in my opinion, you need to hire a lawyer to do all of this and to fight the foreclosure case, but in doing so, you may delay or defeat the foreclosure case. From a cost/benefit point of view, doing nothing and riding it out until you are evicted or your lease term expires, which ever comes first, maybe the easiest and least expensive thing to do. But if the case goes unopposed by the homeowner, you may face eviction in a year or two or less. So don't fix up the apartment, and don't plan on renewing the lease. Of course, if you're in the market for a house, then maybe you can acquire the house being foreclosed by a short sale where you pay a present market value price for the home in full satisfaction of the mortgage. In other words, you buy it at a discount. This presumes, of course, that you have good credit, good income and can get financing. Maybe even try approaching the bank that is foreclosing. Hope this gives you a little greater insight to the situation and maybe even an alternative route to explore.

Regards,

R. David Marquez