Maryland Tenants’ Rights in Foreclosure

November 19, 2008

What happens to tenants in Maryland rental properties when the property goes into foreclosure?

General information

In Maryland, if a property enters foreclosure, tenants may be forced out. This is true even if there is time remaining on the lease.

During the foreclosure process, ownership of the rental property is eventually transferred from the former landlord to a new owner.

Until the foreclosure process is completed, the original landlord retains the right to collect rent from tenants.

How long does a foreclosure in Maryland take?

Foreclosure timelines are discussed in this post.

A big part of the problem is landlords’ failing to notify their tenants that the foreclosure process has begun.

Tenants may not discover that a foreclosure has taken place until the new owners attempt to take possession. Such short notice obviously limits the amount of time the tenants have to find a new place to live.

[Note: In Baltimore, effective August 11, 2008, tenants in foreclosed homes must get at least 14 days notice (by certified mail and first-class mail) before the new owner can file an eviction notice against the tenants. And, a week before the eviction action is filed, the sheriff's office must post a written notice on the door.]

[Note: In May 2008, the U.S. House of Representatives introduced H.R. 5963, which is a bill called "Protecting Tenants at Foreclosure Act of 2008. " The U.S. Senate introduced an identical bill S. 3034. These bills, if passed, would give additional rights to tenants whose dwellings are foreclosed upon. Click here to read the text and check the status of the bills.]

After the foreclosure is complete

Once the foreclosure process is complete, the new owner may be willing to execute a new lease with tenants.

But, the new owner is often the foreclosing lender. Lenders are usually reluctant to sign leases and act as landlords.

And, if it is not interested in entering into a new lease, the new lender or other new owner can then evict the tenant according to the usual eviction procedures in the jurisdiction.

Eviction procedures and tenants’ rights

In Maryland, the usual eviction procedure involves the new owner filing an eviction suit against the tenants in District Court. The tenants then receive a formal court summons and a court date. [Eviction procedures vary slightly in some Maryland counties.]

Tenants should be sure to attend this court date. At the court date, a tenant can explain his or her situation to the court.

If the tenant was given very little notice of the foreclosure and / or is having trouble finding a new place to rent, he or she can ask the court for additional time to find a new place to rent. (However, tenants should not assume that the court will grant the request for additional time.)

Alternatives to eviction aka “cash for keys”

In order to avoid filing an eviction action and going to court, the new owners may offer the tenant money or Âcash-for-keysÂ as an incentive to move out quickly.

But, tenants should get any such offers in writing and should carefully review the written proposal. These proposed agreements often require the tenants to waive claims they may have against the old or new owners.

Tenants’ claims against the original landlord

Even after the foreclosure, tenants retain claims against the original landlord for breach of the original rental agreement.

The tenant can sue the landlord for breaching the lease agreement by failing to provide the rented property for the entire lease term.

The tenant may also have claims against the former landlord for moving costs, apartment hunting costs, rental application fees, and differences in prices between the old (foreclosed) dwelling and the tenant’s replacement dwelling.

The tenant may also need to sue the former landlord in order to recover any security deposits. In some cases, the tenant may also be entitled to additional damages when the former landlord fails to return security deposits.

[The above post includes excerpts from a press release from Maryland's Office of the Attorney General. For the complete press release, click here.]