The Foreclosure Surge. How Tenants Can Stay in the Property

The housing market shift continues with a surge in foreclosures. According to the ATTOM Q1 2026 U.S. Foreclosure Market Report released this week, foreclosure filings have jumped 20% year-over-year, with a 45% surge in completed repossessions (REOs) compared to last year.

This has resulted in “Accidental Landlords,” who are property owners facing foreclosure or unable to sell their homes, who rent them out instead. The current real estate market is seeing more sellers than buyers.

If you are a tenant whose rental property is facing foreclosure, what are your options?

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Key Takeaways: Protecting Your Tenancy During the 2026 Foreclosure Surge

• The 2026 Accidental Landlord Crisis: With foreclosure filings up 20% and bank repossessions jumping 45% in Q1 2026, tenants must be proactive to protect their rights.
• The Assignment of Rents Mortgage Clause Helps Tenants: A foreclosure filing does not mean your lease is void. If you fail to make payments, the landlord or lender can seek to evict you.
• Your Lease Continues: Under the federal Protecting Tenants at Foreclosure Act (PTFA), the person or bank that buys the home at auction generally has to honor your lease until it expires.
• The Federal 90-Day “Safety Net”: Even if the new owner intends to move into the property as their primary residence, they must comply with Federal law and provide a 90-day notice to vacate.
• Compliance is Your Best Defense: By paying the lender or court-appointed receiver as directed, you fulfill your contractual obligations, protect your credit, and use federal protections that keep you in your home.

How the Assignment of Rents Clause Helps You as a Tenant

Most tenants assume that if a house is in foreclosure, the lease is “broken” and they can stop paying rent. But doing so subjects them to an eviction, forcing some tenants to file bankruptcy just to stop the eviction.

Most mortgage lenders will include a provision known as the Assignment of Rents, which allows them to collect the rent in case of a foreclosure. In addition, some states, like Florida, have codified the assignment of rents by statute (Florida Statute §697.07). This further simplifies the process when a landlord defaults on their mortgage, allowing the lender to step in and collect the rent.

The bank will often petition the court to redirect those funds. Once the court approves or the bank sends a formal written demand, you are legally required to send your rent to the lender or a court-appointed receiver rather than your landlord.

Why Paying the Bank is Your Best Protection Against Eviction

It may feel counterintuitive to pay a bank for a mortgage that isn’t yours, but doing so provides you with two critical legal protections:

Compliance with the Lease: By paying the entity the court has designated, you are fulfilling your contractual obligations. This prevents the landlord and the bank from evicting you for “non-payment.”

Invoking Federal Protection: Under the Protecting Tenants at Foreclosure Act (PTFA), tenants have the right to remain in the property until the end of their lease term, providing peace of mind that you will not be “thrown out” of the rental property from one moment to the next.

The 90-Day Rule and Honoring Your Lease

If a real estate investor buys the home at the foreclosure auction, they must honor your lease through its expiration date. The only major exception is if the new owner intends to move into the house as their primary residence. Even then, the law is on your side: they must provide you with a minimum of 90 days’ notice to vacate the property under 12 U.S.C. §5220.

The Professor’s Conclusion

The foreclosure surge is reshaping the housing market. Tenants have to be proactive and not assume their landlord’s financial problems won’t affect them. Your best protection is to stay informed, stay current on rent, and respond quickly to any notices from the court, the lender, or a court‑appointed receiver.

If you receive a demand to redirect rent, comply immediately to preserve your lease, prevent eviction, and activate federal protections under the PTFA. If a new owner takes over after the foreclosure sale, remember: your lease survives, and even in the narrow “owner‑move‑in” exception, you are still entitled to a full 90‑day notice.

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