I am currently leasing a commercial building for $2000 per month for my business. I have just been informed that the landlord has not been making any payments to their bank and they have started the foreclosure process. I spoke with my landlord and he said he had left the state and was going to just let the property go back to the bank. The mortgage company, which is a local bank here in Lapeer, is requesting that I continue making my $2000 payment to them. My lease will expire in 9 months. What do you think I should do?
— S.B., Lapeer.
S.B., I would recommend that you immediately consult with a local attorney who can better assist you. However, to give you some of your options and your rights consider the follow-ing. The way the law works is that once a property is fully foreclosed and the redemption period expires then all leases for that property are immediately terminated regardless of what the lease says. It is an unfair law that forces many people who make regular monthly payments, not knowing their landlord isn't making their payments, to be immediately evicted many times without a home or place to go. There is some talk in Lansing about changing that law to allow the current renters 90 days to find suitable housing before the bank can kick them out. This is just talk in Lansing right now and with our current batch of all talk and no action legislators I doubt they will do anything. Current law allows the bank to immediately remove you from that building as soon as the redemption period expires. I did some research on your property and the redemption period does not expire until March 12, 2008. The bank will not legally own the property and could not kick you out until March 13, 2008. You have the right to continue to occupy the property until then. Even if your lease says it is valid for nine more months you have no right to occupy past March 13, 2008 unless the bank allows you to. You have no legal obligation to make your payments to the bank only the landlord with whom you signed the lease. I am sure the bank would love for you to make the payments to them directly but you have no legal obligation to do so. If you know your landlord has left the state and has given you no address to send payment to then I would consider just banking the $2000 per month and start looking for new accommodations. By banking it each month you would have it saved in case you need it should your current landlord sue you for non payment. If he does not sue you then you can use that savings towards relocating to a new building or negotiating with the local bank to allow them to sign a lease with you effective March 13, 2008. That way if you wanted to stay in that building any lease they sign with you after March 13, 2008 would have to be legally honored by whoever purchases it from the bank.
Alex Lengemann is a licensed Real Estate Broker who operates RealtyVolution.com, a local real estate company. You can Ask Alex your real estate or mortgage questions by phone 810-664-1819 or by email Alex@RealtyVolution.com.