Effects of Foreclosure
It used to be the case that the landlord worried that the tenant wouldn't pay the rent. When drafting and reviewing leases we discussed default and eviction proceedings and what to do in the event the tenant packed up in the middle of the night or even worse - wouldn't leave and wouldn't pay.
In this market there is a new set of concerns, and those affect the tenant. What happens if the landlord collects the tenant's rent and doesn't pay the mortgage or taxes? Landlords want to see the prospective tenant's financials, but the tenant never thinks to ask about the landlord's solvency. In fact most tenants would assume that if they are paying the full rent on time, then the landlord is paying his mortgage. That is not always the case. Landlords can take rent income and apply it to other expenses. While that may not be ethical or even legal; it happens.
It is important for the landlord and tenant to have subordination and attornment language in their lease or for all parties to sign a Subordination, Non-Disturbance and Attornment Agreement at the time the lease is executed. When worded properly this added language can stop the new landlord (Lender) from having the ability to evict the paying tenant and can protect the landlord from losing a tenant, who wants to vacate after a foreclosure.
Lisa Glauber Shippel