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What happens to renters when a property is foreclosed?

Unfortunately, many California residents are in a high foreclosure demographic. To illustrate, a new report by an agency that tracks real estate transactions and foreclosure rates has shown that one in every 200 homes up in Merced, California, has been unable to stop foreclosure. Compared to the national average of one in every 563 homes facing foreclosure, this statistic puts Merced at a foreclosure rate that is almost twice the national average.

But what many people don't think about when it comes to foreclosures is how renters are affected. Both renters and those facing foreclosure in San Diego may be interested in how the city of Merced is taking measures to ensure that renters are not going to be left homeless as a result of foreclosure.

To help prevent homelessness, the city council has recently approved an ordinance to ensure that banks will not be able to use a change of ownership as a reason for evicting a renter. Renters that will be eligible for this ordinance protection will be those who have fulfilled all of their rental obligations and have consistently paid their rent on time.

If the new owner wants to live in the foreclosed home, renters will still be required to move, but will at least have more notice to do so, even if the landlord hadn't informed the renters of foreclosure. Even though the ordinance sounds like a good plan for renters, it is an issue that is being contested by realtors in the area. One realtor says the ordinance is not necessary and an unwise use of city resources, given that renters already have legal protections in case of foreclosure.

A council member disagrees, saying minimal resources would be used for this "self-executing" ordinance, which would require tenants to assume the responsibility of executing it for themselves. The ordinance must pass a second reading before it could take effect, and realtors in the area intend to fight it once a new mayor and new council members are sworn in. If passed, the ordinance would take effect by the end of the year.

Source:, "Merced seeks to protect renters from foreclosures," Sara Sandrik, Nov. 11, 2011

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