do i need to inform my tenants if I have received a notice of default?

Asked by Crash Davis, Ontario, CA Mon Apr 21, 2008

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Diane Wheatl…, Agent, Upland, CA
Wed Apr 30, 2008
Dear Tman - I think you are absolutely correct in the fact that the seller must notify the tenant at least 30-60 days prior to the trustee sale date. The lease agreement is a document strictly between the owner and the tenant however, not the tenant and the lender. It would depend upon the verbiage in the lease agreement how and when constructive notice is to be provided to the tenant in the event of pending foreclosure procedings.

Both the landlord and the tenant are bound by the lease until the term of the lease expires also known as an "estate for years". The trustee has one month after the notice of default is recorded to provide certified or registered copies to the lessee that holds a lower priority leasehold than the trust deed holder. The title conveyed to a purchaser at a trustee's sale relates back to the date when the trust deed was recorded. A lease is subordinate to the trust deed if it was executed after the trust deed was recorded. Therefore, the lease is terminated by the foreclosure sale. But if the lease was established prior to the recordation of the trust deed then the tenancy may have grounds to be "grandfathered" in. In that case the purchaser of the property at the trustee's sale would assume this existing lien or tenancy until it expires or is breached.

Quite a lot of variables that "could" come into play when dealing with a tenant occupying a defaulted property. Notice is mandated by law, eviction is another matter. Much of this can be avoided by a properly written lease agreement addressing this exact type of scenario.

Thank you for your input! You really got me thinking about this. Interesting topic in today's market. One that we will be hearing more about in the coming months, years. Have a great day !
1 vote
Diane Wheatl…, Agent, Upland, CA
Mon Apr 28, 2008
There is not law that states you must inform a tenant that you have received a notice of default. It would be a much appreciated courtesy to do so though. If you are planning on curing the default then I would not bother the tenant. If you know you are eventually going to lose the home to foreclosure then the appropriate timeframe to inform the tenant would be at least 30 days prior to the trustee's sale date. That way they will have time to find a new rental. Good luck and I'm sorry to hear about your situation for all involved.
1 vote
Tman, , 30642
Tue Apr 22, 2008
I guess the question would be:

-- why wouldn't you tell them .. what would be your point..?

Besides, most cities and counties have tenant protection programs ... most can take you to small claims court and gather $2,500/$5,000 in damages ...

Again, I have to ask .... why wouldn't you inform them.?

1 vote
Ron Thomas, Agent, Fresno, CA
Mon Aug 5, 2013
I started to answer this:
Com' on!
0 votes
E. Dan Ferre…, Agent, CA,
Mon Aug 5, 2013
Do you want to keep the property ? are you working with someone?

If you are under a workout solutions then you are ok.
0 votes
Mia Sophia M…, Agent, Claremont, CA
Thu Nov 5, 2009
Hey there Crash,

Love the name by the way!! Very Rock N Roll....ok, anyway to answer your question....NO, you are not legally responsible to notify your tenants in the event a notice of default is filed on your property and technically, being that a NOD is public record they have already been notified.

My company, manages thousands of single family homes throughout Southern California. Unfortunately, these days we have many homes in our portfolio that have or will have an NOD. This doesn't always mean that foreclosure is imminent and in many situations, the owner is working with the lender on some type of loan mod or work out program and the account is cured. There is no reason to contact the tenant in these situations as it does not effect them the slightest.

Even in the event foreclosure is imminent, laws have been put into place to protect the tenant so they are not displaced in the event the property changes hands. Before the new laws, a lease was voided after a foreclosure but the new owner still had to issue the tenants a 60 day notice to vacate. Now, that has been done away with and a lease now supercedes a foreclosure and as long as the tenant did not enter into the lease after the NOD was filed, and the tenant can provide a valid lease, and they are paying market rent....they can fulfill the terms of the lease as normal. Therefore, being that the lease contract will not be compromised and the tenants will not be inconvenienced in any way by having to move early, etc. I see no reason to unnecessarily freak them out or give them any reason to decide to take advantage of the situation and stop paying (which happens alot).

If the tenant doesn't have a lease or they are on a month to month, they now get a whole three months to relocate and most of the time that is rent free. On a normal month to month, they would only get a 30 or 60 day notice and would still have to pay rent. In this situation, they are actually in a better spot than if the home did not go to foreclosure! Obviously, if they were planning on renewing the lease this could change thier plans but lease contracts are for a specified time regardless of the intentions of the tenant.

The bottom line is that an owners personal financial situation and their relationship between them and the lender is really irrelevant to the tenant and the lease. The tenant is paying to live in the home, and regardless of the loan status....they are getting what they paid for and the contract is not comprised regardless of the foreclosure.

An owner is not legally bound to disclose any of this information to a tenant. Obviously, if it actually goes to sale a friendly heads up would be courteous. As a management company, at Renttoday we alwasy inform our tenants of their rights in these events and we assure them that this will not effect their lease, etc., etc. and exactly how they should proceed after a trustee sale. We have had many situations where the bank decides to keep the tenants in the home for good or the new onwer is an investor who also would like them to stay put....and those are all good things for tenants.

I hope this has been a bit helpful to you, Crash! If you have questions please do not hesitate to give our offices a call as we deal with this type of situation each and every day!


Mia Melle, Broker
West Coast Property Specialists, Inc. /

About West Coast Property Specialists, Inc. (WCPS):
West Coast Property Specialists, Inc. (WCPS) is a residential asset management firm managing an expanding portfolio of single family residences, multi-family units, apartment buildings and condominium communities located throughout Southern California (Riverside, San Bernardino, Orange, San Diego and L.A. Counties). WCPS operates as an umbrella of companies consisting of - a premier on-line rental database and property management portal; Fix’D Construction, a full-service general contractor servicing the firm’s entire real estate portfolio performing services ranging from minor rent ready to complete property rehabilitation; and Bale Investments Inc., which is the newest addition to the WCPS family of companies. Bale Investments is a real estate brokerage firm catering to large portfolio investors specializing in facilitating bulk sales of residential portfolios from one investor to another. Additional information is available at
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0 votes
Hannah Flieg…, Agent, Larkspur, CA
Sun Jul 19, 2009
Hi Crash,
It would be the best thing to do, give them some warning so that they can save their money so they will be in a position to move. It's better Karma for you, who know's I might even offer you a discount to help you remove the foreclosure off your credit reports!
0 votes
Sharon Koziel, Agent, Corona, CA
Sun Jul 19, 2009
Not only do you need to tell the tenants but you need to tell the bank you have tenants.

Protecting Tenants at Foreclosure Act of 2009:President Obama recently signed into law the `Protecting Tenants at Foreclosure Act of 2009'. Effective May 20, 2009, the Act extends a range of protections to tenants in foreclosed properties

In brief, under the new legislation, all tenants must get a 90 day notice prior to eviction due to foreclosure. In addition (with some exceptions) tenants that have leases can continue to live in their homes until the end of the term of their lease. The rights of Section 8 tenants are also protected because the new owner at foreclosure must accept both the tenant's lease and the housing assistance payment (HAP) contract.
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Lee, , Just Us, Atlanta, GA
Thu Feb 19, 2009
This is the thing.. if a landlord takes 3 months of payment from a renter less then a month before the house is forclosed on, and the renter comes home to find themselves locked out and without their posessions, who is responsible for the expenses this renter has just found themselves dishing out. finding a place to stay, new lodging, food, clothing etc.

Is it the landlord who knew what was happening, took the money and already had THEIR things out, or is it the bank who did not inform the tennant it was happening and just locked them out.

What happenes in a case where the forclosers claim they dont know the person actually lived there, and refuse to take the landlords word for it at this point. Now the person is still without their belongings, and has to fight the "bank" to get their things, being strong armed into saying they are a former tennant, when in actuality, they are paid up another 2 months.

What happens in a case like this.. both in the US and Canada.... Im really curious to know what the differences are and how one would seek action and with who.
0 votes
Tman, , 30642
Tue Apr 29, 2008

If the owner of the property defaults the lender, then defaults the lease contract to the renters without the proper notification stated in the lease ... then the owner becomes liable for some, or all of the damages to the renter...

The courts are filling up with these cases and depending on the area, the renters are winning about 90% of the time.

So yes, I think it would be a good idea to properly notify the renters...

: ^)
0 votes
Cami Pinsak, , Camarillo, CA
Wed Apr 23, 2008
I'm not sure if you NEED to, but you SHOULD! Put yourselves in their shoes...if you've received a notice of default you haven't paid the mortgage and may be on the way to foreclosure. The decent thing to do is to give them time to find a new rental. If you decide to sell your house in a short sale, it will be easier to sell it without worrying about tenants rights, etc.
0 votes
T.E. & Naima…, Agent, Dallas, TX
Tue Apr 22, 2008
If you are not planning to do anything about it, I think it would be fair to notify them so they can make arrangements to find a new place. If you are taking care of it, then I don't think it's any of their business.

If you think they can buy it, now would be a good time to make them the offer...
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Gene Yakubov…, Agent, Burlingame, CA
Mon Apr 21, 2008
In my opinion the tenants must to know, especialy if you have leases. You need to read the Contract provision in yo leases and see what it say. More over lately Lender insisitng that all rent collected must be forwarded to the Bank. There are special forms that the Lender will mail to your tenants. In the time when you bought this property did you buy it as an owner occupied or income producing property. If your loan was secure by the income property you have to be very cereful with the rent paymnent that you getting. I suggest you to tead your loan documents before you listed to the advises.
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Leanne Smith, , 95247
Mon Apr 21, 2008
Hi crash, this is a great question, many people are faced with this same situation. On the one hand you hate to loose the income you have coming in on the property on the other you owe it to your tennants to be honest with them. I just had 7 homes foreclosed on in my area, all with tennants in them, some didn't know there was a problem at all until the bank came by and told them they were going to be evicted! It was not a very cool scene!!! I do not know the legal situation in your area, you may want to contact a real estate attroney in your area to be sure. The best suggestion I can give you is to let them know so that they can start looking for a new place to live asap. good luck..
0 votes
Tisza Major-…, Agent, Upland, CA
Mon Apr 21, 2008
Hi Crash,

You should since this will impact them as well. Are you planning to sell the home? Do you have it listed? Are any of the mortgage assistance programs available to help? Is a Short Sale an option for you? Has anyone looked into this to see what your possibilities are?

If not I would be happy to offer my assistance. I am something of a Short Sale and Foreclosure specialist and my office is just a hop, skip and a jump away in Upland.

Please feel free to give me a call so that I can try to help.

Take care and have a wonderful day!

Tisza Major-Posner, Realtor, IVPG (909) 837-8922
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