ABA Family Legal Guide

Renting Residential Property

Renting Basics

Lease Clauses to Consider

If the landlord loses the building to the bank by foreclosure for failure to pay the mortgage, is the tenant's lease still valid?

Most leases provide that the lease is subordinate to any mortgage. This means that if the landlord fails to make payments to the mortgage holder, the landlord can lose the property through a lawsuit, called a foreclosure. Since the lease is subordinate to the mortgage, the bank can disregard it and evict the tenant. However, the bank must usually go to court and get permission to evict the tenant.

Some leases do provide subordination, nondisturbance, or attornment language, which explicitly provides that the lease remains in effect upon a foreclosure, provided that both the tenant and the landlord are honoring the lease terms.