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, Renttoday.us 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. / Renttoday.us
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 Renttoday.us - a premier on-line rental database and property management portal; Fixâ€™D Construction, a full-service general contractor servicing the firmâ€™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 http://www.wcpsinc.com