First, you panic. Then you read this post and relax – a bit. This exact issue was tackled by Jay Romano on 3/1/12 in the Q & A Column in the Sunday New York Times. Here’s how he handled the question:
Q We just found out that our rental building is going into foreclosure because of our landlord’s nonpayment of his mortgage. I am concerned about what happens now. Are we going to be evicted? What are the short- and long-term consequences for the renters? To whom do we pay the next month’s rent?
A “The impact of a foreclosure by the building owner’s lender on residential tenants will depend on the status of the tenants,” said Howard Wenig, a Manhattan lawyer who represents property owners. If the tenants are rent-regulated, the lender’s foreclosure will not affect them. Their rent-regulated status insulates them from having their rights terminated.
However, if the tenants pay free-market rents, the lender has the right to name them as defendants in its foreclosure action, and their tenancies are subject to termination after a foreclosure sale. “During the foreclosure action and until a foreclosure sale is held, however, all leases remain in full force and effect,” Mr. Wenig said.
He noted that even in the case of free-market tenants, the lender may choose to let them stay in their apartments, unaffected by the foreclosure.
Tenants should continue to pay rent — to the owner, or to a court-appointed receiver if they are served with an order from the court advising that a receiver has been appointed. If a tenant is served with a complaint in the foreclosure action, or a copy of an order appointing a receiver, he or she should hire a lawyer to get advice on the best course of action.
I couldn’t have said it better myself. But really, isn’t this just another good reason to only rent a no fee rental in New York from a reputable company like RDNY.com? I think so.