Bar News - May 21, 2014
Real Property Law: A Comparison of Property Rights: Tenant v. Homeowner Post-Foreclosure
By: Tim Chevalier and Mary Stewart
A comparison of the rights of a homeowner still living on his property after foreclosure with the rights of a rental tenant shows that a homeowner facing foreclosure must be proactive to protect his interests.
Once a home is sold at a foreclosure auction, the homeowner becomes a “tenant at sufferance.” The purchaser at the foreclosure cannot use self-help eviction, according to the NH Supreme Court’s decision in Greelish v. Wood, but many former homeowners are surprised to discover that they do not receive the same legal protections available to tenants who have not been through a foreclosure.
A tenant in New Hampshire who rents from a landlord enjoys many legal protections. Eviction proceedings begin with serving the tenant with a written eviction notice. The landlord must provide a demand for rent and notice of eviction. The demand itemizes the total amount due and must be served on the tenant, in hand, or left at the tenant’s address. The tenant must have at least seven days’ notice to vacate the premises, not including the date the notice is served.
The tenant can immediately stop the eviction by paying of all rent owed plus $15 in liquidated damages before the expiration date of the demand. If the tenant pays all or part of the arrearage after the expiration date of the demand, and the landlord accepts the payments, the landlord may not proceed with the eviction, unless the tenant is specifically informed that acceptance of payment does not stop the eviction action.
If the tenant fails to vacate the premises, the burden is on the landlord to demonstrate ownership of premises and the right to evict. A tenant does not automatically lose his rights by waiting to present his case to the judge.
A tenant who has been wronged by a landlord can use RSA 540-A to collect damages and attorney’s fees. Some actions are also considered a violation of the Consumer Protection Act.
Homeowners do not have a statute that provides them with specific protections like those found in RSA 540-A. Instead, New Hampshire allows non-judicial foreclosure under RSA 479:25. Pursuant to the statute, the mortgage holder need only give the homeowner 25 days’ notice of the auction. The notice informs the homeowner that she has the right to petition the court for an injunction to stop the foreclosure, but does not inform her that she will lose the right to go to court for legitimate claims, if she does not request an injunction before the auction.
An injunction is considered an extraordinary remedy. To win, the homeowner must prepare a winning case in just days, and without discovery. If the homeowner demonstrates to the court that she is entitled to an injunction, it is likely that she will need to post a bond. The amount of the bond is set by the judge at the injunction hearing and must be paid to stop the foreclosure.
If the lender holds the auction, that lender is not required to send notice to the homeowner that the auction was completed, or that the property was sold. The statute also does not contain a requirement that the homeowner be given notice if the auction is later voided because the buyer fails to pay the purchase price. Also, if the lender is holding escrow monies at the time of foreclosure, there is no statutory obligation to provide an account for how the money was applied.
After the foreclosure, the homeowner is entitled to an eviction notice. At the eviction hearing, the purchaser will provide evidence of property ownership. If the mortgagee purchased the property at the auction, the homeowner will not be allowed to raise any defenses based on unlawful conduct of the mortgagee prior to the auction. The homeowner lost this right by failing to request an injunction prior to the foreclosure.
The homeowner will not be protected by RSA 540-A because this statute does not protect tenants in foreclosed properties, unless the former homeowner established a landlord/tenant relationship with the purchaser after the sale.
In Melissa Weeks v. Five Brothers Mortgage Services & Securing, Inc., et al, 2013 DNH 068 (April 9, 2014), US Bank NA purchased a property at a foreclosure auction. The bank’s agent removed many of the homeowner’s belongings without properly obtaining a writ of possession. The court held that RSA 540-A does not protect this homeowner. This can significantly limit a homeowner’s ability to be compensated for damages.
An even more complicated situation arises when a tenant lives on a foreclosed property. Mary Evans found herself in this situation on Aug. 3, 2008, when law enforcement officers told her that she must leave her home by the end of the day. Evans had paid rent each month to her landlord and was unaware that her apartment had been auctioned. She vacated the property as instructed and then sued for damages. The court held that she had been a tenant-at-will prior to the foreclosure. After the foreclosure, this changed to a tenancy-at-sufferance.
Because the buyer at the foreclosure sale had not rented or leased the apartment to her, it was not subject to RSA 540-A, which is a statute enacted to “deter unacceptable landlord conduct.” Evans v. J. Four Realty, LLC., 164 NH 570 (2013).
Homeowners facing financial difficulty must act carefully to protect their interests. They must carefully watch for legal notices and educate themselves on the legal process.
Because there is no direct court oversight of the foreclosure process, homeowners must be aware of the limitations on their protections.
Anyone in this situation would do well to consult with an experienced foreclosure attorney and a Homeownership Counselor. New Hampshire residents can contact a Homeownship Counselors by calling 2-1-1 or visit www.homehelpnh.org. The New Hampshire Foreclosure Relief Project provides referrals to a network of attorneys who have training and support to protect homeowners in this situation. For more information on the project, visit www.nhfrp.net.
Timothy Chevalier represents homeowners through the NH Foreclosure Relief Project. His practice also includes bankruptcy and real estate.
Mary Stewart is a private practitioner in Concord and an independent contract attorney with the NH Foreclosure Relief Project.