Can I Rent To Someone If The Property Is Under Foreclosure?

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If you own rental property that is facing foreclosure, you may be wondering what course of action to take. While current laws do not prohibit owners from renting property that is facing or under foreclosure, it’s important to understand the process and be as ethically responsible as possible.

Notice Prior To Lease Agreement

Laws regarding foreclosure and rental properties vary by state; however, according to the National Housing Law Project, some states and a few cities are required to disclose a pending foreclosure to tenants prior to the lease being signed. Usually, this notice must be submitted in writing. Neglecting to provide adequate notice to tenants can cost landlords up to twice actual damages or monthly rent, whichever is higher. Additionally, the landlord could be held responsible for any prepaid rent or deposits.

Notice To Tenants Once Foreclosure Has Commenced

In more than a dozen states and in several cities, laws require landlords to notify tenants of a foreclosure once the process has commenced. The process of notification can vary greatly by city or state. Typically, landlords are responsible for notifying their tenants of impending and/or eminent foreclosure. In some place, however, the foreclosing lender or mortgage trustee is responsible.

Handling Deposits and Rent

All U.S. states require landlords to either return security deposits to the tenants or transfer them to the new owner. Some states allow tenants to apply their returned deposit toward rent.

Keep in mind, some mortgages may have a clause in them that allows your lender to collect the rent money generated by the property as soon as you default on the loan.

“Can I?” versus “Should I?”

The short answer to whether or not you can rent foreclosing property to someone is typically – yes. However, it may not be the ethically wise answer. Even if you live in a state that doesn’t require notifying tenants of an impending foreclosure, put yourself in your tenants shoes. Would you want to know if your home was being foreclosed on? Use your best judgment and try to be fair. If you’re struggling with the decision, speak with a mortgage professional or an attorney.

This information is intended to help homeowners make informed decisions and should not be used in place of professional, legal advice. Always check with your mortgage professional, real estate agent,  or attorney before making major real estate decisions.

Anna Platz is an Editor at, a leading mortgage rate research website, as well as the Lead Contributor to, a blog about budgeting and personal finance. Anna is immersed in the world of real estate, mortgage, and home financing and is here to provide valuable resources for homeowners and soon-to-be-homeowners on buying and selling real estate, researching a mortgage broker or lender, and securing a home loan. Check back often for news, updates, and remember that you can find today's current mortgage rates at My Google Profile+

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