Are Leases Broken When a Landlord Files for Bankruptcy?

Discovering your landlord has filed for bankruptcy is alarming. Fortunately, his filing bankruptcy doesn't dissolve your lease. It may work out well for you, as bankruptcy can delay foreclosure. That lets the landlord keep the property a while longer. Even if the landlord loses the rental, you can usually stay until your lease expires.

Landlord Bankruptcy

If your landlord files Chapter 7 bankruptcy, the court can take most of his assets and distributes them to creditors to pay his debts. This may only take a few weeks or months. In Chapter 13, he'll spend three or five years paying all his disposable income to his creditors before his debts are wiped out. Both chapters stop foreclosure. If he doesn't keep up the mortgage in bankruptcy, however, the bank can ask the court to end the foreclosure stay.

Staying Put

Bankruptcy by itself won't leave you out on the street. If the landlord loses the property, federal and state law still protects you. If you have a lease, you can stay until it expires. With a month-to-month tenancy, you have 90 days before the bank or the new owner can evict you. The new owner can break the lease if she intends to move in herself, or move a family member in. In that case, you get 90 days before you have to go.

San Franciso Evictions

If you're in a rent-controlled apartment, San Francisco law only allows evictions for "just cause." Not paying rent is a just cause; changing ownership isn't. The bank or the new owner has to honor your right to stay put just as the former owner did. Even if you don't live under rent control, the bank can't evict you. After the bank sells the property to a new owner, however, he can tell you to leave.

Power Failure

Foreclosure and bankruptcy can bring on other problems. The landlord may have no money for maintenance. The bank may have no interest in maintenance even if it's now collecting the rent. Neither the landlord nor the bank may bother to keep the power and water running. California law helps with utilities at least: you have the right to get the utilities turned on in your own name, though it may take time working with the utility.

About the Author

Fraser Sherman


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