Expert: Lori Frankfort - 1/5/2010

Question
QUESTION: We are in the middle of a two-year lease and have been informed by our landlord that he is in default of his loan and has decided to short sale the home.

Even though we pay $3,500 monthly our landlord has not been able to maintain the Mortgage, Gardner or the HOA fees, how likely will he have our $4,000 deposit at the end of our lease or when the house sales or is foreclosed on.

Can we hold rent until he puts our deposit in an escrow account?  Since he has breached the contract by putting the house up for sale before our lease is up, can we legally consider the contract null and void and now able to leave before said lease is up without jeopardizing our deposit.  With 7 months left on our lease do we have to allow him to show the property?  If so do we have the right to say when?

Thank you in advance for your assistance.


ANSWER: HI NANETTE, I HOPE THIS HELPS.

We are in the middle of a two-year lease and have been informed by our landlord that he is in default of his loan and has decided to short sale the home.

Even though we pay $3,500 monthly our landlord has not been able to maintain the Mortgage, Gardner or the HOA fees, how likely will he have our $4,000 deposit at the end of our lease or when the house sales or is foreclosed on.

NOT LIKELY.  HOWEVER, IF THE HOUSE IS FORECLOSED YOU WILL HAVE A PERIOD OF TIME AT THE END OF THE FORECLOSURE BEFORE YOU HAVE TO MOVE.  DEPENDING ON YOUR STATE, THE BANK WILL BE OBLIGATED TO GIVE YOU NOTICE THAT YOU NEED TO VACATE BY A CERTAIN DATE.  IN CALIFORNIA IT IS 60 DAYS.  DURING THAT TIME YOU WILL NOT BE PAYING RENT, AND THEREFORE, GETTING YOUR DEPOSIT BACK VIA FREE RENT.  IF THE HOUSE IS SOLD IN A SHORT SALE THE LANDLORD WOULD EITHER TRANSFER THE LEASE TO THE NEW OWNER OR YOU WOULD BE PAID RELOCATION FEES TO CUT YOUR LEASE SHORT.  AGAIN, THIS DEPENDS ON THE LAWS IN YOUR STATE.

Can we hold rent until he puts our deposit in an escrow account?  
NO, UNLESS IT IS REQUIRED BY YOUR LEASE.  

Since he has breached the contract by putting the house up for sale before our lease is up, can we legally consider the contract null and void and now able to leave before said lease is up without jeopardizing our deposit.  

HE HAS NOT BREACHED THE CONTRACT BY PUTTING THE HOUSE FOR SALE, THIS IS USUALLY ALLOWED IN MOST LEASES AS LONG AS THE NEW OWNER AGREES TO CONTINUE YOUR LEASE.  IF THE HOUSE SOLD YOUR DEPOSIT WOULD BE TRANSFERRED TO THE NEW OWNER, WHO WOULD CARRY OUT THE REMAINDER OF YOUR LEASE OR BE REQUIRED TO PAY RELOCATION FEES FOR YOU TO VACATE.  IF THE LEASE REQUIRES THE GARDENER BE PAID, THEN HE MAY HAVE BREACHED THE LEASE IN THAT WAY.  IF YOU WANT TO MOVE, I WOULD TELL HIM HE HAS BREACHED AND YOU WANT YOUR DEPOSIT IN FULL OR FREE RENT FOR THE NEXT MONTH.  

With 7 months left on our lease do we have to allow him to show the property?  If so do we have the right to say when?  

YOU DO HAVE TO ALLOW HIM TO SHOW THE PROPERTY, BUT WITHIN REASON.  YOU ARE NOT THE REALTOR, AND ARE NOT REQUIRED TO ALLOW ACCESS OR HOLD OPEN HOUSES.  I WOULD TELL HIM YOU WILL ALLOW SUNDAY SHOWINGS WITH HIS LISTING AGENT PRESENT, BUT NO OTHER SHOWINGS AND NO LOCKBOX.  MAKE SURE YOU TAKE YOUR VALUABLES WITH YOU, DON'T HIDE THEM.  I WAS ROBBED DURING AN OPEN HOUSE (WHEN IT WAS MY PERSONAL HOME) AND EVEN THOUGH THE VALUABLES WERE HIDDEN, THE THIEVES FOUND THEM.

Thank you in advance for your assistance.
IF I CAN HELP IN ANY OTHER WAY PLEASE WRITE BACK.

BEST,
LORI FRANKFORT

---------- FOLLOW-UP ----------

QUESTION: Hello Lori and thank you so much for your response it is very helpful.

You stated that our landlord was in breach of our contract when he stopped paying the gardner.  WOuld this also include not paying the mortgage and the HOA fees? If he is in breach can we leave the property before the end of our lease and will he have to return our deposit.  If the answer is yes could you please provide guidlines in which we should take to inform him of our intent.

Again thank you in advance for your assistance.

Nanette  

Answer
Hi Nanette,

He must still be paying the mortgage if it's a short sale and not a foreclosure.  He's probably close to foreclosure, but no, that's not a breach.  The HOA fees are also not a breach, that's between him and the HOA.  However, if in your lease it states he will be paying for the gardener, then that's a breach.  You will need to send him a formal letter that states if the gardener service isn't reinstated that he is in breach and you will be moving out.  You'll have to go from there and see what happens.  You may need to contact the local Rent Control office and discuss your issues with them, they can be very helpful.

Best,
Lori