What Happens to a Lease After Foreclosure?
In Florida, what would happen if a tenant is leasing a premises, and the mortgagee—the bank for example—foreclosures upon the property. Is the tenant allowed to remain in the premises? As a consequence of the foreclosure, is the tenant’s lease terminated? What if the tenant was an innocent party with no knowledge of the mortgage?
Generally, there are two concerns in this area:
- (1) where the tenant entered into the lease before the mortgage was executed on the property
- (2) where the tenant entered into the lease after the mortgage was entered into.
A lease made prior to the execution of the mortgage is superior in priority to the mortgage. That is to say, a subsequent mortgage or mortgage foreclosure has no effect on the lease. The purchaser at foreclosure takes the property “subject” to the lease. Taking subject to the lease means that the purchaser at a foreclosure sale’s interest is encumbered by the tenant’s lease—even if the lease was not properly recorded. Therefore, foreclosure is not a basis for evicting a lessee so long as the lease was made prior to the execution of a mortgage on the property.
How long do I have to Vacate After Foreclosure?
This area of Florida jurisprudence becomes more complicated if the lease was entered into after the mortgage was executed. The first question is to determine whether the mortgagee—usually the bank—wants to extinguish the tenant’s lease or permit the tenant to remain in possession. If the mortgagee elects the former, the tenant’s lease and rights to occupancy can be extinguished through the foreclosure process. The mortgagee must, nevertheless, comply with notice requirements (generally 90 days). Under this situation, the tenant’s only option is to delay the eviction—which the tenant can delay for a couple of months.