March 13, 2009

Foreclosures: What rights do tenants have in Indiana?

What’s the problem?

In Indiana, foreclosure terminates a tenancy. If the foreclosing financial institution takes the title, it often evicts the renter households very quickly.

“Renters who have the misfortune of having landlords who lose their property to foreclosure are the blameless victims of this catastrophe,” said Andy Fraizer, executive director of the Indiana Association for Community Economic Development (IACED), who testified before the Senate panel in support of the legislation.

By the numbers: How many foreclosures are there in Indiana?

According to data collected by the Indiana Housing and Community Development Authority, there were 43,804 filings for mortgage foreclosures in Indiana in 2007.

The department gives a conservative estimate of 6,000 to 8,700 of those filings against the owners of a rental property. Twenty percent of all mortgages are rental properties. Forty percent of families impacted by foreclosure are renters.

Type of rental properties affected

Sen. Teresa Lubbers (R-Indianapolis) said that the problem is predominately affecting smaller multi-family rental units, such as single-family dwellings and duplexes, rather than the larger rental complexes because they usually go into receivership and tenants know about the foreclosures.

The solution?

Legislation to fill the notification gap between renter and landlord allowing renters to learn about a possible foreclosure so they are not forced to move in a very short time period, in some cases, now only a 24-hour notice to vacate the premises.

Two similar proposals are under consideration, Senate Bill 225 authored by Sen. Lubbers, and House Bill 1081 authored by Rep. John Day (D-Indianapolis).

The bills would give the needed notification to renters when a foreclosure is under way on the property in which they are currently living, and provide remedies for the tenants. †

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