Expert: Karyn Foley - 7/28/2010

Question
My wife and I have signed a rental agreement through May 31, 2011. The landlord has since decided to list the house for short sale. I was told by the property manager that if the house sells, our lease is null. My wife and I have decided that we would like to go ahead and find another home at our convenience. The property manager seems to think that we are bound bound by the lease even though the owner is not. Thoughts? We are in Tucson, AZ

Answer
Dear Byron:  I can only sympathize with you.  This is typical in this kind of market and has left many a person in a terrible situation.  You are bound by a lease, but unfortunately, the landlord is not.  Please keep in mind that asking the bank to consider a house be sold on a short sale can be a time aways from having the bank agree to it.  If the landlord has not already been approved by the bank for a short sale, you may have several months of time left.  The bank usually will take a few months in which to render a decision.  Then, it may take a time in which to sell the home and close the transaction.  You need to find out these facts.  Once you have them, then it is in your best interest to make an appointment with a real estate attorney in the event you are stuck in a bad position.  If you learn that the house has been approved for a short sale, the time is now to seek a legal opinion.  You might convey  your plan of seeking legal advice with the landlord and the property manager.  Perhaps then, all of you can come to a compromise of terms without anyone having to pay the costs of going to a lawyer.  Next time you lease, you should request a notification or copy of the landlord's payment history with the bank, if he is in default of his mortgage payments, if he is default with current or past taxes, and so forth.  Then, if you are still nervous, put a clause in the least that will give you an escape clause to break the lease if the landlord goes into any financial obligation default causing concern of a short sale-bankruptcy-et cetera.  Good luck in a bad problem.
KARYN FOLEY