What Is Foreclosure?
Many landlords have a mortgage, which is a type of loan used to buy a home or other property. In a mortgage, borrowers use the property they buy as collateral. Collateral is something of value which a lender (e.g. a bank) can take, keep, or force a borrower to sell if the borrower can’t pay their loan.
Foreclosure is what happens when a borrower fails to pay their mortgage, and their lender forces them to sell their property in order to cover their debt.
Landlords and Foreclosure
Foreclosure doesn’t just happen to families who own the homes they live in: it can happen to landlords, too.
What if My Landlord Doesn’t Pay Their Mortgage?
If the owner of a rental unit doesn’t pay their mortgage, it can be placed in foreclosure. This is the start of a process (see Foreclosure Process on this page) which can end with the sale of the building to a new owner.
As a tenant, you have rights in this situation. Read the rest of this page to learn more.
Is My Landlord Required to Tell Me When They’re in Foreclosure?
Not in Wisconsin. Landlords are not required to disclose that a property is in foreclosure to new or existing tenants, even if their lease is signed or renewed after foreclosure has started.
If a lease is in effect during a foreclosure, or is signed during a foreclosure process, the lease is likely valid and must be honored by the owner and the tenant unless there is fraud or deception on the part of the landlord regarding the property's foreclosure status. This means that landlords are not allowed to lie about whether they’re in foreclosure.
In order to best enforce your rights, you should ask potential landlords if a foreclosure has been initiated against the property, and if possible, receive a written response to that question. You can also check in CCAP by searching the landlord's or landlord's company, or LLC name.
Is My Landlord Required to Make Necessary Repairs During Foreclosure?
Yes. During foreclosure, your landlord is still the legal owner of the rental property where you live and responsible for maintaining it in safe and livable condition until the property is confirmed sold to a new owner.
Tenants may report any safety concerns or unlivable conditions at their rental property to their area Building Inspector. For more information about landlord responsibilities and how to request repairs or report issues to your Building Inspector, see our Repairs page.
After the property is sold, the new owner is required to inform you in writing of the name and address of the people who are now responsible for collecting rent and making repairs. They must do so within 10 days of becoming the property’s new owner.
Tenants and Foreclosure
The Protecting Tenants at Foreclosure Act (PTFA) is a federal law which applies to most tenants when their landlords face foreclosure. However, the PTFA doesn’t apply to a tenant if:
- Their name is on the mortgage of the property facing foreclosure (this is uncommon; a mortgage is not the same thing as a lease)
- They are the child, spouse, or parent of the person whose name is on the mortgage
- Their lease or rental agreement was not the result of an “arms-length” transaction (for example, if the tenant and their landlord had a personal or business relationship before signing the lease or rental agreement)
- Their rent is well below market rate for a rental unit of the same size in the same area
Do I Need to Leave My Apartment? My Lease Ends on a Specific Date, and Isn’t Month-To-Month
Probably not until the end of your lease. Generally, the PTFA says that if you’re a tenant and your landlord faces foreclosure, and none of the PTFA exceptions listed above apply to you, the new owner of the rental property is responsible for honoring your lease until it ends (unless you are being evicted for non-payment of rent or a violation of your lease).
This means tenants can usually stay in their apartment as long as they follow the terms of their lease. Their new landlord may even choose to renew their lease when it ends.
The main exceptions to this are:
- If the new owner wants to move into the tenant’s rental unit and make it their primary residence: in these cases, the new owner must give the tenant 90 days notice before requiring them to leave. PTFA Sec. 702(a)(2)(A)
- If the tenant is evicted for non-payment of rent or a violation of their lease (their landlord’s foreclosure is not a lease violation, and by itself is not cause for eviction).
Do I Need to Leave My Apartment? My Lease Is Month-To-Month
Possibly (after receiving 90 days notice). If a tenant’s lease is month-to-month, their new landlord can require them to leave their apartment after giving them 90 days notice in writing. They can serve this notice at any time after the date of confirmation of sale (see Foreclosure Process below for more information). PTFA Sec. 702(a)(2)
Do I Still Have to Pay Rent?
Yes. If a tenant remains in possession of their rental unit—meaning, if they still live there—they are responsible for continuing to pay rent.
The law sees a tenant’s obligation to pay rent and a property owner’s obligation to pay their mortgage as separate issues. If a tenant stops paying their rent on time or in full while their landlord is facing foreclosure, the tenant may be held responsible for non-payment of rent, which may lead their landlord to begin the eviction process.
Do I Pay Rent to My Landlord or the Bank?
Usually, your current landlord. In most cases, you should pay rent to your landlord unless your landlord or a judge informs you in writing to pay someone else.
Tenants are obligated to pay rent to the legal owner of their rental property, unless a court has said that rent should be paid to someone else (called a ‘receiver’). In addition, tenants are responsible for knowing who this is and paying rent to the right person, even though it can be difficult for a tenant to know who is the legal owner of a property at any point during their landlord’s foreclosure process.
The easiest way for a tenant to determine a property’s current owner is to ask their City Assessor or go to their website (Madison City Assessor). A City Assessor is not a bank or a landlord, does not profit from foreclosure, and is required to give you accurate information.
My Landlord’s Bank Says I Should Pay Them Rent Instead of My Landlord. What Should I Do?
Pay rent to the landlord until you hear from a judge, or until the landlord says (in writing) to pay the bank instead. Sometimes the landlord’s bank will try to collect rent from the tenant as soon as the bank starts the foreclosure process. Tenants are at risk if they rely on their landlord’s bank to accurately inform them of where to send rent, as banks are often wrong. The bank may claim they have been awarded the "assignment of leases and rents" under their mortgage contract with the landlord. This alone does not make them a court-appointed receiver, or entitle them to receive rent payments directly from tenants.
In foreclosure, the mortgage agreement (which is between the bank and the landlord) is in dispute, and this dispute will be settled by a judge. Until then, it has no impact on the tenant's agreement to pay rent to the landlord.
If the bank and the landlord disagree about who should collect the rent, write a letter to everyone (including the judge who is in charge of the foreclosure case) telling them where you'll be paying your rent and why. Include copies of any documents (such as an order for receivership) and keep a copy yourself.
As a last resort, if you still cannot decide where to pay your rent, open a separate savings (or "escrow") account and make regular deposits of the full amount on the date rent is due. Write a letter to everyone involved (including the judge who is in charge of the case) informing them that you are putting your rent in escrow. Be prepared to pay the full amount to the appropriate person(s) as soon as the issue is resolved.
After Foreclosure, How Will I Know Who My New Landlord Is?
In Wisconsin, when a rental property changes owners, the new owner has 10 days to notify all tenants in writing of the name(s) and address(es) of the people who are:
- Allowed to collect rent from tenants, and
- Responsible for repairs and maintaining the property.
Going forward, you should pay rent according to the instructions in this letter, and use this letter to know who to contact if you have problems with your unit or building (for example, repairs). ATCP 134.04(1)(b)
If your landlord is foreclosed on, you will receive this letter after the “date of confirmation sale.” This is the term for the date when the sale of a property in foreclosure is made final in court (see Foreclosure Process below for more details).
What Happens After a Sheriff’s Sale or Short Sale?
The original owner (or the bank after foreclosure) may sell the unit(s) to a new owner (see Foreclosure Process below). The new owner, who then has the duties and responsibilities of a landlord, must notify you within 10 days of the confirmation of sale hearing with the name and address to which rent payments should be addressed. Wis. Stat. 704.09(3), ATCP 134.04(1)(b), MGO 32.08(1)(c)
Can I Use My Security Deposit for Last Month’s Rent?
No. Security deposits are not normally used to pay for the last month's rent, and there is no exception in foreclosure situations. If you wish to use your security deposit as your last month's rent, the safest way to do so is to make a written agreement with the landlord agreeing to apply your security deposit to your last month's rent. If you withhold your last month's rent without a written agreement, assuming that your landlord will apply the security deposit to the last month's rent, the landlord can take eviction action against you.
What Happens to My Security Deposit?
The person who legally owns the property when you move out is required to follow all the laws about security deposits even if they didn't collect this money from the old owner.
Eviction During Foreclosure
While your landlord’s foreclosure isn’t a valid reason to evict you in most cases (see above), you can still be evicted for non-payment of rent or a violation of your lease.
Will I Have an Eviction Record?
Maybe. If you are evicted because you have not paid your rent, or otherwise haven't followed the terms of your lease, then you will have an eviction record. However, you won't have an eviction record if the only issue is that the property is in foreclosure.
Help! The Sheriff Is Forcing Me to Leave, and I Haven’t Received Any Notices
Occasionally, after a property in foreclosure is sold, the court doesn't know that tenants are living in the foreclosed property, and/or the landlord doesn't give the tenant proper notice when they require them to leave the property.
Why Is This Happening?
After foreclosure, the court may wrongly assume that the previous owner, and not their tenant, is currently occupying the property. The new owner of the property may ask the court to issue a “writ of assistance” which requires the county sheriff to remove the previous owner from the property. This is not the same thing as a “writ of restitution”, which requires the sheriff to remove a tenant as part of a lawful eviction: one order is not a valid substitute for the other.
When the sheriff arrives, they may be surprised to discover that the person they were ordered to remove (the previous owner) isn’t the person who actually lives at the property (their tenant).
Foreclosure is complicated, and sheriffs, courts, and landlords can all make mistakes. In these situations, the sheriff is just following orders from the court, and it can be difficult for tenants to prove their foreclosure rights are being violated. However, these mistakes do not erase a tenant’s rights under law.
What Are My Rights?
If you qualify for the Protecting Tenants in Foreclosure Act, you should not be forced out after the confirmation of sale hearing. The new owner is required to give you time to stay and at least some kind of notice (see above).
While tenants may be evicted under appropriate circumstances and with required notice, this cannot be done with a writ of assistance for a foreclosure issue: this order is for forcing previous owners to leave, not their tenants. A writ of restitution is required to force a tenant to leave a rental property after they are legally evicted.
What Should I Do if I’m Being Evicted Without Notice After My Landlord’s Foreclosure?
Send a letter to the court immediately and give copies to the Sheriff, the landlord, the new owners, and any other people involved (like attorneys in the case).
You should also contact Legal Action of Wisconsin or a Tenant Resource Center housing counselor to discuss your rights. Explain that you are a tenant in foreclosure who has been served a writ of assistance by the sheriff.
Legal Action of Wisconsin: 855-947-2529
Foreclosure is complicated, and it can be difficult for a tenant to understand how far along their landlord is in the foreclosure process, and what that means for the tenant themselves. Here is a step-by-step overview of how foreclosure works for landlords in Wisconsin:
- The landlord defaults on payment of a mortgage loan. Most banks do not refer a delinquent loan to foreclosure until the loan has been delinquent between 120 and 180 days.
- The bank files a foreclosure summons and complaint in court.
- The landlord has 20 days to file an answer to the foreclosure filing, or file a responsive pleading. The landlord (the mortgage holder) can offer these defenses: general denial, payment dispute, and raising an issue of material fact.
- Once the 20 days are over, the bank files a motion for a judgment of foreclosure. This motion requests a period of time for a redemption period, and will often say if the bank is waiving their right to a deficiency judgment (explained in step #11). If this motion is granted, there will likely be a hearing to decide whether to move forward with the process of foreclosure.
- The court makes a judgment about whether the foreclosure process should continue or end. The process will end if the judge thinks that the landlord’s response successfully disputes the foreclosure, but will continue with a summary judgment of foreclosure if the judge thinks that the bank is correct in saying that the landlord did default on the mortgage. In most circumstances, the process goes forward from here. A judgment of foreclosure is not at all the same as appointing a new receiver for rent, and does not in any way transfer ownership of the property.
- If a judgment of foreclosure is entered in step #5, the landlord starts a “redemption period." A redemption period is a period of time in which the landlord has the opportunity to repay the amount owed to the bank. During this time, the landlord might cure the default or might sell the property, which would end the foreclosure. The landlord continues as the owner of the property unless the property is sold during this time. A redemption period can be 2, 3, 6, or 12 months, depending on the type of property, and other factors. For land contract foreclosures, the redemption period can be much shorter.
- Before the redemption period ends, the bank will set a date for a sheriff’s sale. The bank will give at least 6 weeks’ notice prior to the sale.
- Once the redemption period ends, if the landlord hasn't paid back the amount still owed on the mortgage, there is a sheriff's sale where the property is sold to a new owner or (usually) to the bank who filed for foreclosure.
- Once a property is sold, a hearing is scheduled to confirm the sale. The landlord still collects rent and is responsible for repairs (and other landlord responsibilities) up through this step, until the hearing in step #10.
- The confirmation of sale hearing takes place and, if the sale is confirmed, results in the "date of confirmation sale." Title is transferred at this hearing. At this point, the landlord's right to rent the property ends, and the new owner collects rent and is responsible for repairs. This is the first day that the new landlord can issue a 90-day notice to not renew a month-to-month, or verbal tenancy, or to a single family home renter if the new owner is going to live there.
- Once the confirmation of sale hearing occurs, the bank can file for a deficiency judgment, which doesn’t usually impact the tenant greatly. However, this filing and hearing is the last step in the foreclosure process. A deficiency judgment is when a bank can ask the original landlord to personally be responsible for any amount still owed on the mortgage, since sometimes the property gets sold for an amount that is less than what is owed. Sometimes the bank says they won’t hold the landlord responsible for this in step #4, which allows the bank to ask for a shorter redemption period.
- Sometimes the court will appoint a "receivership" for the rent while the foreclosure is still in process. At that time, the tenant should pay the person who is named in the court order. Papers from the bank asking for rent are not the same as papers from the court.
- We are assuming that for most of our readers, the person in the position of defaulting on a mortgage will be the landlord, although the technical name is “mortgagor” and they are referred to as the defendant in court-speak. The bank is usually the one to whom money is owed, but their name in this process is the creditor or plaintiff.
- Much of this information is taken from an article in the Wisconsin Bar, which is available here. Please click through for more detailed information, especially which redemption period is selected for what kinds of properties.
What Should I Do if My Rental Unit Is in Foreclosure?
Continue to Pay Rent
You still have to pay rent or you could be at risk of eviction for non-payment of rent. Continue to pay rent to your original landlord until you receive written notice of a change in ownership, or a receivership order from the foreclosure court that tells you to pay someone else the court appoints. Whoever receives your rent is responsible for all other duties and responsibilities of the landlord (e.g., maintenance, eviction, etc.).
Keep Written Records
It's a really good idea to keep evidence of payment of rent (like rent receipts, money order stubs, checking account statements, etc.) because sometimes you will be asked to prove that you are a tenant. Receipts (and utility bills) can come in handy to show that you are indeed a tenant and qualify to receive the rights discussed in this page.
Continue to Live in Your Unit
If you have a written lease for a set term (typically a year), you do not have to move any sooner than the end of the lease, unless you live in a single family home that the new owner wishes to occupy. If you live in a single family home that the new owner intends to live in, or have a month-to-month or verbal lease, then you have at least 90 days after receiving written notice from the property's new owner after the confirmation of sale hearing.
Many new landlords keep renting to the original tenants after a foreclosure! You can always ask for a renewal past these dates if you want to stay.
Write a Letter to Your Landlord If:
You want to move before your lease is up or negotiate a mutual agreement to terminate early. See Ending Your Lease if you wish to try to leave before the lease's termination date.