It’s more common for tenants to file New York bankruptcy than their landlords—especially with rents as high as they are now. Landlords do, however, run into financial difficulties sometimes, so anxious tenants might want to know what they should do. If this is a problem on your horizon, here are a few points:
(1) Pay your rent on time as usual. A landlord’s foreclosure has no effect on a tenant’s obligation to pay rent under the lease (or by implied agreement). The same holds during a foreclosure.
(2) The landlord’s bankruptcy protects you too. If your landlord files bankruptcy, it will benefit from the automatic stay just as a tenant or homeowner would. As a result, the foreclosure is halted and you shouldn’t worry about being kicked out of the building by the lender any time soon.
(3) Keep an eye open nonetheless. Sometimes lenders will move the bankruptcy court to take the property out of the bankruptcy estate, allowing a foreclosure to resume. In other cases, trustees will elect to sell underwater rental properties to get it without foreclosure. If that happens to you, you’ll be in the same place as if the foreclosure had gone through or the landlord hadn’t filed bankruptcy.
(4) Best case scenario: No change. Sometimes the new lender doesn’t bother evicting tenants after a foreclosure. True, a bank isn’t in the rental business, but if there’s a competent on-site super, for example, it might just let the situation keep going as it is until it can find a new owner.
(5) Worst case scenario: You get 90 days. In 2009, President Obama signed the Protecting Tenants at Foreclosure Act, which obligated foreclosing lenders to give tenants 90 days’ notice before they could require the tenants to move out due to a foreclosure. This law was renewed once and then expired in 2014. New Yorkers, though, are in luck: State law largely has the same requirements. (New Jersey has similar protections.)
Landlord foreclosures and bankruptcies can disrupt tenants’ lives, but in New York, so long as you pay attention, you will probably be okay, but don’t be afraid to move out if your lease ends before a foreclosure happens or the landlord enters bankruptcy.
My practice represents landlords as well as tenants facing foreclosure, eviction, or bankruptcy.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced landlords rights in bankruptcy Bruce Weiner for a free initial consultation.