What happens after foreclosure?

So what happens after foreclosure? When the borrower gets down to the eleventh hour and he hasn't been able to cure the default or get a short sale, what are his rights of possession? The answer to this – like a lot of other legal questions – is "It depends. . ."

Under Nevada law in effect before October 1, 2009, after foreclosure the buyer at the trustee's sale could evict an occupant of a foreclosed property on 3 days' notice. See NRS 40.255. This applies whether the person in possession is the actual borrower or a tenant. It still applies to the borrower!

Important new laws regarding eviction and foreclosure procedure in Nevada become effective on October 1, 2009

AB140, which was passed by the 2009 Nevada Legislature and signed by the Governor, becomes law on October 1, 2009, and it changes what happens after foreclosure in important ways. AB140 is a product of the state of the economy and the huge number of foreclosures in recent years.

Here are some important changes contained in AB140 which you should know:

• If a residential property is in foreclosure, the lender must serve a separate notice on any tenants in possession. The language of the notice is set forth below.
• A purchaser of vacant residential property at a foreclosure sale is now required to maintain the exterior of the property after foreclosure. There may be penalties of up to $1,000 per day for failure to maintain the property.
• Existing law allowed a purchaser at foreclosure sale to evict on 3 days’ notice anyone who held over in possession of the property after foreclosure and the trustee's sale. Under AB140, a purchaser of residential property at a foreclosure sale is required to give a tenant (other than the person whose name was on the deed or mortgage) at least a 60 day notice of an intent to evict. However, if the tenant doesn’t pay the rent, the owner can evict on shorter notice for non-payment of rent.
• A landlord must disclose to a prospective tenant if the property to be leased or rented is the subject of foreclosure proceedings. Further, it is a deceptive trade practice if the landlord fails to make such a disclosure.

Here is the new statutory notice to tenants:

Foreclosure proceedings against this property have started, and a notice of sale of the property to the highest bidder has been issued.

You may either: (1) terminate your lease or rental agreement and move out; or (2) remain and possibly be subject to evictionproceedings under chapter 40 of the Nevada Revised Statutes. Anysubtenants may also be subject to eviction proceedings.

Between now and the date of the sale, you may be evicted if you fail to pay rent or live up to your other obligations to the landlord.

After the date of the sale, you may be evicted if you fail to pay rent or live up to your other obligations to the successful bidder, in accordance with chapter 118A of the Nevada Revised Statutes.

Under the Nevada Revised Statutes eviction proceedings maybegin against you after you have been given a notice to quit.

If the property is sold and you pay rent by the week or another period of time that is shorter than 1 month, you should generally receive notice after not less than the number of days in that period of time.

If the property is sold and you pay rent by the month or any other period of time that is 1 month or longer, you should generally receive notice at least 60 days in advance.

Under Nevada Revised Statutes 40.280, notice must generally beserved on you pursuant to chapter 40 of the Nevada RevisedStatutes and may be served by:

1. Delivering a copy to you personally in the presence of a witness;
2. If you are absent from your place of residence or usualplace of business, leaving a copy with a person of suitable age and discretion at either place and mailing a copy to you at your place of residence or business; or
3. If your place of residence or business cannot be scertained, or a person of suitable age or discretion cannot be found there, posting a copy in a conspicuous place on the leased property, delivering a copy to a person residing there, if a personcan be found, and mailing a copy to you at the place where theleased property is.

If the property is sold and a landlord, successful bidder orsubsequent purchaser files an eviction action against you in court, you will be served with a summons and complaint and have the opportunity to respond. Eviction actions may result in temporary evictions, permanent evictions, the awarding of damages pursuant to Nevada Revised Statutes 40.360 or some combination of those results.

Under the Justice Court Rules of Civil Procedure:

1. You will be given at least 10 days to answer a summonsand complaint;
2. If you do not file an answer, an order evicting you bydefault may be obtained against you;
3. A hearing regarding a temporary eviction may be called assoon as 11 days after you are served with the summons andcomplaint; and
4. A hearing regarding a permanent eviction may be called assoon as 20 days after you are served with the summons andcomplaint.

Remember, most of the new rules regarding eviction after foreclosure only apply to tenants!

The old 3-day rule still applies if the borrower is in possession.

Our firm is knowledgeable about foreclosures, and we would be pleased to assist you in this area. Please contact us for a no-charge 1/2 hour consultation by clicking here.