I received a notice that the mortgage on the building in which my apartment is located is being foreclosed on.  What happens to my security deposit and last month's rent?

Your security deposit should have been deposited by the landlord in an interest-bearing account and your landlord should have provided to you the name and location of the bank and the account number.  In addition, your landlord is responsible to pay you interest on both the last month's rent and the security deposit at the rate of 5% a year or such lesser amount that is actually earned in the account in which the funds are deposited. 

Whoever buys the building at auction, whether it is a third party bidder or the bank, will be responsible to you for the last month's rent and the security deposit.  They can fulfill that obligation by giving you rent for the equivalent period of the amounts that you have given as a security deposit and last month's rent; let's say, for instance, two months' rent. 

You should seek assurance from both your landlord, and the bank that is foreclosing on the property, that you will be given credit for your last month's rent and the security deposit following any foreclosure.  If you do not get reasonable assurance from both the landlord and from the bank that you will be so protected, you may want to engage in the  so-called "Bush policy" and make a preemptive strike by not paying rent for the equivalent period of the last month's rent and the security deposit.


If you have questions about this or any other real estate matter, please contact Tom Bennett at (617) 531-6574 or tvb@barronstad.com.