Should I keep paying my rent? My Landlord is in foreclosure

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If you spend any amount of time perusing real estate question and answer forums, you will find an inordinate number of questions framed something like this:

My rental is being foreclosed on, should I keep paying my rent?

Or the slightly more hostile version:

If my landlord isn’t making his mortgage payments, why should I send him my rent check?

Let’s start by looking at what a lease is. You all know it’s that document you and your landlord sign before you take possession of a rental property. But it’s not just a form that explains how much rent, security deposit, and whatnot that you have to pay.

Here is the general definition of a lease:

A lease is a contract by which one party conveys land, property, services, etc., to another for a specified time, usually in return for a periodic payment. (My emphasis)

Yup, note that bolded and italicized word above — contract. What is a contract?

A written or spoken agreement, esp. one concerning employment, sales, or tenancy, that is intended to be enforceable by law. (My emphasis again)

So your typical lease is a contract, enforceable by law, that you enter into with your landlord.

Of course I haven’t seen YOUR lease, but I’m quite confident that it does not include language like, “If your landlord stops making his mortgage payment you no longer have to pay rent.” Nor does it likely say, “Your landlord will use your rent payment to make his mortgage payment.”

That’s an argument I see frequently — My landlord is not making his payments. He should be using my rent to pay his mortgage, shouldn’t he?

Well, no, not necessarily. Your landlord isn’t under any sort of obligation to redirect your rent payment to his mortgage company. He or she is free to do whatever they want to with the rent you pay them. If they want to take your rent payment and blow it on the craps table in Vegas, that’s their prerogative. Ditto if they want to take your rent and bury in the back yard, give it to their mistress, buy cocaine with it, whatever. You pay them rent based on the contractual terms of your lease. They pay their mortgage based on the contractual terms of their mortgage. The two contracts aren’t connected in any way.

And that is exactly why you should keep paying your rent under the terms of your lease agreement, regardless of your landlord’s position with their mortgage lender. I’ve seen real estate agents tell renters, “If your landlord has put your home up for a short sale, you should make arrangements to pay the bank directly.”

WTF?? First, if you are renting, it is not “your home”. It is your landlord’s home. Second, just because the landlord put THEIR home up for sale doesn’t mean you stop paying your rent, or pay someone else the rent. That’s ridiculous. Your lease contract is between you and your landlord. Pay the rent based on the terms of your lease. It will very clearly tell you how much to pay, when to pay it, and who to pay it to.

If some real estate agent tells you to stop paying rent, or your neighbor’s cousin’s friend says they stopped making rent payments and nothing happened, you might want to get them to sign a contract saying they’ll reimburse your expenses when you get evicted, or at least let you and the kids move into their spare bedroom when you find yourself without a roof over your head.

If you really think you have some sort of case for not paying your rent, grab a copy of your lease and find a good attorney to review your options. That lease is legally binding contract, if you plan on breaking it, you should do so under the directions of an attorney, not a real estate agent, or cousin Betty’s friend, and you certainly shouldn’t rely on advice from complete strangers typing on an internet message board…

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About the Author
Jay Thompson

I'm a real estate broker in Phoenix, Arizona and the publisher of the Phoenix Real Estate Guy blog. I tend to drive too fast and scream at the University of Texas and Denver Broncos football teams. My two kids are smarter than most adults I know and my wife is simply amazing.

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  1. Nice post Thompson, very logical thinking you have added in the post. Nice one.

  2. Hi Jay,
    We have the same problem here in Spain, and the answer is: You have a rental contract and you must pay the rent by the agreement. End of story.

  3. Dave Kinkade says:

    The other thing that may renters do not realize is that sometimes the rental home owner and bank are negotiating terms to restructure the mortgage. Regardless the landlord’s behavior, renters have a contract that spells out how they will perform. Any less than following that contract can (and often WILL) land a tenant in hot water. This isn’t a morality question that must be resolved; it is a contractual obligation.

  4. John Smith says:

    i’ve been paying my landlord $1400 for rent for the past 4 years.He
    stopped paying the mortgage about a year ago. he’s under foreclosure and he’s got my $1400 dep. most people tell me to stop paying the rent,but i haven’t. Every time i ask questions
    he never has a straight answer. i heard from someone that is illegal to collect rent if your under foreclosure…is that true?

    • Jay Thompson says:

      John – “Under foreclosure” means different things to different people in different areas. I’ve never heard that it is illegal for a landlord to collect rent if they own the home (regardless of whether or not they are making their payments). It makes zero sense to me that it would be illegal, but I’m not a lawyer.

      I would suggest contact a tentant advocacy group in your area. Or a real estate attorney.

  5. Austin says:

    Whether the landlord is paying his mortgage or not, tenant still has an obligation to pay. Once the money leaves their hands and hits the pocket of the landlord, they really don’t have any say in what’s done with it. This is why property management companies should always be involved… So at least the tenants have a record of payment.

  6. Ankan says:

    Very useful & applicable :)

  7. Judi says:

    I am not an attorney, and do not provide legal advice. That said, renters have rights! Pay your contractual payments as a renter, and whatever the outcome of a property in default, you will have options presented to you, whether it is a new owner or the lender honoring your lease, cash for keys or a number of other options, that vary from case to case.

  8. Paul Caparas says:

    Jay,

    Great valid points. I am going to share this post with other Realtors at my office.

    On a funny side note, maybe a renter should apply for a “Rent Modification”. jk.

  9. I get this question on a regular basis and most tenants assume they no longer have to pay their rent if the landlord stops paying their mortgage.

  10. Tom Aikins says:

    Good valid LEGAL points that you bring up and in this case it’s the legal points that matter. A lease IS a contract and there is no other way around it. Don’t open yourself up to legal proceedings no matter what. It isn’t worth the time, expense and annoyance.

  11. Jason Grange says:

    OK, but consider this: a renter pays in advance. If he/she makes their payment, (but the landlord is not paying their mortgage) they have no guarantee that the sheriff will not show up three days later and evict them, and they are out the money. They should not just assume that they can expect the buyer at auction or the REO agent to make them whole. If I was a renter, I would track the status of the mortgage. If I saw a Notice of Trust Deed Sale posted on the front door, I would no longer pay. Even if I didn’t have a provision in my lease contract spelling that out, I know there is a provision in the mortgage contract that says that rent money belongs to the mortgage lender. Fair is fair. Why should the renter assume the risk of eviction month after month? Let the land lord try and pursue you in court! The dead beat will likely with-hold your security deposit one way or the other anyway. 

    • Jay Thompson says:

       @Jason Grange you said, “I know there is a provision in the mortgage contract that says that rent money belongs to the mortgage lender.” I’ve never seen a mortgage that specifies where specifically the money has to come from. The lease is between the property owner and the tenant, and the mortgage is between the property owner and the lender. A home owner may use rent money to *qualify* for a mortgage, but that doesn’t mean the lender is entitled to the rent money directly. 

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  13. honkey3k says:

    My landlord is selling home I have been renting for over 4 years. Is there anything I can do for compensation since I have to deal with showing the property now that its on the market? I am a very private person and these assholes come into my house and start poking through everything. Not happy =

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