Imagine returning home to find an eviction notice giving you 24 hours to get out because, unbeknownst to you, your landlord’s property has gone through foreclosure and has just been sold at sheriff’s sale. Under current law, if the landlord loses rental property in a foreclosure action, the tenant may be evicted, often with little notice. The eviction goes on the tenant’s record whether or not the tenant is in compliance with the rental agreement. The tenant may not be able to get the security deposit back from the foreclosed landlord or the new owner (often a lender). The tenant must immediately find another apartment and the money for a security deposit and first month’s rent, which is very hard if the eviction occurs in the middle of the month when the tenant has already paid the rent.

Recognition that homeowners are not the only victims of foreclosure led the Wisconsin legislature to include new tenant protections as part of the economic stimulus package bill. The protections for tenants caught in a foreclose situation cover three main areas: landlord notice to new tenants if a foreclosure action has begun, lender notice to existing tenants at different stages of the foreclosure and a prohibition against reporting tenant evictions due to foreclosure on the Wisconsin Circuit Court Access website, commonly known as CCAP.

Wis. Stat. § 704.35: Residential rental property in foreclosure

The landlord must notify any prospective tenant in writing if a foreclosure action has commenced and, if judgment has been entered, the date on which the redemption period ends. The redemption period generally will be three to six months for residential rental properties unless the property is a one- to four-family property that is owner-occupied; then the redemption period may be 12 months. Any rental agreement entered into must include a separate written statement signed by the tenant indicating that the tenant has received this notice. Any rental agreement without the signed statement is voidable at the option of the tenant. This law applies if the foreclosure action was commenced on or after March 6, 2009.

Wis. Stat. § 846.35: Protection for tenants in foreclosure actions

If a foreclosure action is commenced against a residential rental property, the foreclosing party (typically a lender) must notify the tenants of the following:

• That a foreclosure action has been filed. This notice must be given no later than five days after the foreclosure action is filed.
• That the lender has been granted a foreclosure judgment and the date when the redemption period ends. This notice must be given no later than five days after the foreclosure judgment is filed with the clerk of court.
• The date and time of the judicial confirmation hearing, once it has been scheduled.

These notices may be given by personal service or by certified mail with return receipt requested. The notice is considered given when mailed unless the mail is returned unopened.

If the lender/foreclosing party fails to provide any of these notices, the court will award the tenant $250 plus reasonable attorney fees. A tenant, however, may not recover under this provision more than once.

If the landlord’s property is foreclosed upon and sold at sheriff’s sale:

• The tenant may remain in the rental unit for up to two months after the end of the month in which the sheriff’s sale is confirmed. The tenant must pay rent at the same rate that applied immediately before judicial confirmation of the sheriff’s sale.
• The tenant may withhold rent in an amount equal to the security deposit during the last period the tenant remains in possession. The tenant’s right to possession expires at the end of the month for which the tenant withholds rent.
• No writ of assistance or writ of restitution may be executed against a tenant whose tenancy is terminated by foreclosure before the additional two months have passed unless the tenant waives this right in writing.

This portion of the new law applies to rental agreements entered into on or after March 6, 2009.

Wis. Stat. § 846.35(4): CCAP reporting

Beginning July 1, 2009, the CCAP website cannot display information regarding a tenant evicted because of a foreclosure of the landlord’s property.

Learn more online at the Tenant Resource Center website at www.tenantresourcecenter.org.

Debbi Conrad is Director of Legal Affairs for the WRA.