Foreclosures affect not only the property owner, but any tenants that occupy the property being foreclosed. While Maryland state law offers some protection to property owners facing foreclosure, it provides significant rights and safeguards to renters of foreclosed property, in addition to the federal tenant protection laws.
Maryland Foreclosure Procedure
The type of security instrument used in Maryland to borrow money against real estate is a mortgage. Many states using mortgages provide the borrower-owner with the Right of Redemption, which gives the owner a certain amount of time to redeem her property back after a foreclosure sale. However, Maryland law does not provide this right. The owner does have the right to stop the foreclosure sale to the last minute if he can make satisfactory arrangements with the lender and officially get the mortgage loan reinstated.
Federal Tenants Act
Tenants in foreclosed property generally lost their lease rights after the foreclosure sale and could be evicted prior to the federal Protecting Tenants at Foreclosure Act. The Act mandates that the renters' lease survives the foreclosure and must be honored by the new post-foreclosure sale owner. In one major exception, if the new owner is going to occupy the renters' residence, the tenants can be evicted with 90 days' prior notice. However, once the existing lease expires, the new owner is free to change the lease terms in any lease renewal.
Tenants' Notice Requirements
Maryland state law supplemented the federal Act with certain tenants' rights, including a requirement for the tenant to receive three types of notices. First, the tenant must be sent a notice that a foreclosure action has been filed with the court at the same time the action is filed. Next, the tenant must receive notice of the details of the scheduled foreclosure sale between 10 and 30 days prior to the sale date. Lastly, the tenant must receive a written notice from the new owner of the property after the foreclosure sale is completed.
Tenants' Legal Rights
While the property is in a foreclosure process, the tenant is legally required to continue timely payment of the rent as per their lease. Failure to do so can result in eviction. The landlord is still obligated to maintain and repair the property, and the tenant can get relief from the court if the landlord fails in this duty. The tenant is not legally obligated to pay rent to a new owner until proper and timely notice indicating the new ownership is given to the tenant. The tenant has the right to get his security deposit back and can sue the foreclosed owner if necessary to get it.
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