Question:

What happen to all the tenants and their leases in a foreclosed commercial property?

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I just want to find out if the leases of a foreclosed commercial property (REO) are still valid and enforceable?

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  1. yes, the leases now belong to the new owner.  the bank in most cases and nothing will happen until a new landlord is found.  you still owe the rent.  


  2. Most professionally drawn leases will have some sort of subordination clause addressing this...usually, it will essentially say that in a foreclosure, the bank has more of a right to the property than you do.

    This doesn't always mean you will be evicted. Most times, the lease will be held valid and enforceable, you will simply pay your rent to the bank that foreclosed on the property, until it is sold...at which time, you will pay the new landlord. In most commercial properties, the tenant won't notice very much, other than some difficulty getting repairs made if the bank nixes the maintenance and other staff.

  3. They are not.

    Once the foreclosure takes place, that legal action terminates the leases.

    The legal reason behind it, is that your contract is between the individual landlord or the LLC, NOT between you and the bank.

    Banks have lobbied very heavily in all the states to have this right.


  4. unfortunately the tenants must move.  It is like they are being evicted.

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