Facing foreclosure is stressful for homeowners, but it can be just as unsettling for tenants who suddenly learn their rental property is being foreclosed upon. In New Jersey, tenants have specific rights and protections designed to prevent sudden displacement and to ensure fair treatment during and after foreclosure. If you are renting a home or apartment that has entered foreclosure, understanding your rights can help you stay protected and plan your next steps.
Do Tenants Have to Move Out Immediately?
No. Under both federal and New Jersey state law, tenants generally do not have to move out immediately upon foreclosure. The federal Protecting Tenants at Foreclosure Act (PTFA) requires that bona fide tenants receive at least 90 days’ notice before they can be required to leave. In many cases, tenants with a valid lease signed before the foreclosure are allowed to stay for the remainder of their lease term.
Who Qualifies as a Bona Fide Tenant?
A bona fide tenant is someone who:
- Is not the child, spouse, or parent of the landlord who lost the property;
- Pays rent at a fair market rate (not a nominal amount);
- Has a legitimate lease or rental agreement made before the foreclosure sale.
If you meet these criteria, you’re entitled to protections under the PTFA and New Jersey law.
New Jersey Law on Tenant Rights During Foreclosure
In addition to federal protections, New Jersey’s Anti-Eviction Act offers strong safeguards for tenants. Even after a property changes ownership through foreclosure, tenants cannot simply be evicted without cause. Acceptable reasons for eviction include nonpayment of rent, lease violations, or if the new owner intends to personally occupy the unit. Without one of these reasons, tenants can remain in their homes.
Obligations to Pay Rent
Tenants must continue paying rent during and after foreclosure. Once the foreclosure is complete, rent payments should be made to the new owner. Tenants should request proof of ownership before sending rent to someone new, as scammers sometimes pose as landlords after foreclosure sales.
Security Deposits
The new owner of a foreclosed property is responsible for existing tenants’ security deposits. Under New Jersey law (N.J.S.A. 46:8-20 and 46:8-21.1), the new owner must either return the security deposit or properly hold it until the lease ends.
Notice Requirements
The new owner must provide tenants with proper written notice of the change in ownership. Tenants should also receive any notices regarding lease changes, rent adjustments, or intended occupancy.
Right to Safe and Habitable Housing
Foreclosure does not relieve property owners—old or new—of their responsibility to maintain habitable living conditions. Tenants are entitled to necessary repairs, heat, water, and other essential services. If a new owner fails to maintain the property, tenants can contact local code enforcement or seek legal assistance.
Illegal Evictions
It is illegal for a landlord or new owner to:
- Lock tenants out of their homes;
- Shut off utilities to force tenants to leave;
- Remove belongings without a formal eviction process.
Tenants facing these tactics should immediately contact local law enforcement and seek legal help.
What Should Tenants Do?
- Get documentation: Request proof of foreclosure and new ownership before paying rent to anyone new.
- Keep records: Maintain copies of your lease, rent receipts, and any communication with the landlord or bank.
- Seek legal advice: Tenants have rights, and legal aid organizations or private attorneys can help protect them.
- Know your rights: Understanding New Jersey and federal protections can help you avoid wrongful eviction.
Final Thoughts
Tenants in New Jersey do not have to face foreclosure-related uncertainties alone. Laws at both the federal and state level are designed to protect renters from sudden displacement, illegal eviction, or mistreatment. By staying informed and proactive, tenants can secure their rights and ensure they have enough time to find stable housing if needed.