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Landlord-Tenant Issues in Purchasing a Foreclosure or Sheriff-Sale Property

Published On: October 21st, 2016Categories: Landlord-Tenant

It is extremely common for the purchaser of a sheriff-sale property to acquire the property subject to the prior tenancies in the building. This can be a very challenging situation for the new landlord. He or she never has copies of the leases, if any, nor will he or she know the names of any of the tenants. Sometimes the previous owner of the building continues to attempt to collect the rent even though the property is no longer his.

The law in New Jersey is clear that leasehold tenancies run with the the land. When you purchase any property it is subject to the tenancies in effect at that time. If the former landlord kept the tenants’ security deposits, you are on the hook for those as well as the new landlord.

The New Jersey Foreclosure Fairness Act, NJSA 2A:50-69, adds more requirements for those who buy a sheriff sale property. Assuming that the property is 10 units or less, within 10 days of acquiring title to the property you must serve the tenants with specific statutory notices in both English and Spanish. You can find a copy of these required notices at pages 5-9 of this pdf link, which is a handy Department of Community Affairs print-out regarding the issue. You must make a “good faith” effort to find out their names and address the notices to them directly. If you can’t obtain their names in time you can address the notice to “tenant”. I would recommend you mail them by ordinary mail, certified mail AND tape the notices to the tenant’s door just to make sure they get served.

The problem that landlords in this situation often run into in these situations is simply identifying the tenants. If you don’t know the names of your tenants, you will have a very difficult time filing an eviction for non-payment of rent because landlord-tenant courts won’t generally accept “John Doe” complaints. So getting the names of the tenants is very important as well as determining the amount of rent they have been paying and obtaining copies of any leases they may have entered into prior to the foreclosure sale.

It is a good idea to knock on the doors and introduce yourself politely. It may help to have a copy of the sheriff’s deed in your hands to support the fact that the property is now yours. Remember, it benefits everyone to be amicable in situations like this. Other ways landlords can get the name of the tenants may be by checking whose name is on the mail for the apartment if the setup of the property allows this. Remember NEVER open anyone else’s mail or go in their mailbox, but if the mail is delivered to a common area you can certainly take a glimpse at the name on the envelopes.

Sometimes a tenant in a foreclosed on property will not recognize their new landlord as legitimate no matter what the new landlord does. Sometimes a letter from an attorney attaching a copy of the deed is enough, but sometimes unfortunately the tenant is just trying to stay there without paying rent for as long as possible. If after reasonable efforts and notices to the tenant the new landlord still can’t obtain their name and rental amount, there are additional steps that can be taken but you will almost certainly require an attorney.

The most important advise I can give to the purchaser of a sheriff sale property which may have tenants is to assume that the units are rented and not to rely on rental income from the property for at least several months after the purchase. The vast majority of tenants in these situations are acting in good faith and just want to make sure they are paying the right person. They are often scared they will be evicted, lose their security deposits, or get “ripped off” by a stranger pretending to be their new landlord. Though in most cases the transition to a new landlord goes smoothly, it rarely takes less than several weeks to get the tenants to pay the rent to their new landlord and straighten out any other tenancy related issues such as for example repairs to the property. If a tenants is acting in bad faith however, it could take as long as 2-3 months and the hiring of a landlord-tenant attorney to evict them in a worst case scenario. Hope for the best, prepare for the worst as they say.

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