Foreclosures, and Existing Leases

As foreclosure crises come and go, a problem arises. Homeowners facing foreclosure sign a lease contract with someone they know for highly discounted rent as a favor or in exchange for some other benefit. This can create a problem on the new owner of the property. Is there a solution? Yes.

In California, we use Civil Code 1161b which is the law governing these kinds of situations. The new owner must prove that the lease contract was not “at arms length” meaning the lease was made to a family member, or that the rent was highly discounted below fair market rent. The new owner must give the tenant 90 days notice. There is a little more to this – contact your favorite broker in the world for more info.