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Even After a Foreclosure Sale, the Defendant Still Has Rights and Options That Can Help their Situation

At the end of the foreclosure process is a foreclosure sale which is an advertised auction of the client’s home which usually takes place  at a courthouse or government building. The sale must be advertised with a legal notice published in a local newspaper and is conducted by a court appointed referee with the lender’s attorney in attendance; usually potential bidders appear.  If the foreclosure sale goes forward, and is not stayed or adjourned, the former homeowner’s legal status changes, and they are no longer considered the owner of the house, and instead are now considered to be “holdover tenants” in their former home. Their legal status drastically changes from a homeowner, who is vested with many legal rights, to a “holdover tenant” who has much fewer rights. The former homeowner is not required to immediately leave but is  subject to an eviction proceeding in landlord-tenant court which can started by the buyer of the property at the foreclosure sale who is now considered to be the owner. Often the mortgage holder itself becomes the owner of the property after the foreclosure sale, if there are insufficient bids at the foreclosure sale, which is often the case. The buyer at the foreclosure sale, as the new owner, can quickly obtain a warrant of eviction in landlord-tenant court which would force a quick eviction unless there is meritorious opposition based on technical, substantive and equitable reasons.

Issues After a Sale:
1. Deficiency
2. Surplus
3. L-T
4.Deal to Stay Longer; rent

Our firm represents clients with tenant defense and can help an individual or business tenant about to be evicted to assert their rights and oppose the eviction proceeding. By defending the client in the landlord-tenant proceeding we are often able to negotiate a temporary agreement to stay in return for rent, or to gain time where the former homeowner is not ready to move. We can respond to the petition that initiates the landlord-tenant proceeding against our client. This needs to be done shortly after service of the petition. At the end of a landlord-tenant proceeding our firm can represent the client with an Order to Show Cause to stay an eviction. Defending the landlord-tenant proceeding allows the client to assert any defenses they may have to the manner in which such proceeding was initiated. Such defense also gives the client and our firm notice as to the status of the landlord-tenant proceeding and prolongs the proceeding. In some instances a client may have a strong defense, which may cause a landlord-tenant proceeding to be dismissed.
An additional response to an eviction proceeding could be a bankruptcy case filed before a “warrant of eviction” is issued. By filing for a Chapter 7 bankruptcy case before a warrant is issued a client can delay the eviction in addition to discharging potential personal liability. However, if a client believes it can catch up on lease arrears, in a Chapter 13 bankruptcy case the client can cure their rent arrears under a Chapter 13 plan while resuming regular rent payments. In Chapter 11, a business debtor may potentially cure or reach an agreement with the landlord to substantially cure arrears. In either case a bankruptcy case should be strategically timed so that it comes as early as possible and definitely prior to the issuance of a warrant of eviction, which can happen as early as at the first court appearance in landlord-tenant court.
Please call us at (631) 271-3737, or e-mail us at weiss@ny-bankruptcy.com for a free consultation to discuss such legal options in greater detail.