What Happens to Tenants When a Rental Property Is Sold or Foreclosed

The federal 90-day foreclosure notice, when a lease survives a foreclosure, and how California, New York and Texas move a security deposit to a new owner.

By Seayora Editorial Team · Published October 23, 2026 · Facts checked October 23, 2026 · 4 min read

Key takeaways

• Foreclosure: a bona fide tenant gets at least 90 days’ notice to vacate (Protecting Tenants at Foreclosure Act § 702).
• A lease signed before the foreclosure notice runs to its end unless the unit is sold to someone who will live in it.
• The federal law sets a floor; a state or city law with more protection still applies.
• California: the selling landlord must transfer the deposit with notice to the tenant, or refund it with an accounting (Civ. Code § 1950.5(i)).
• New York and Texas: the deposit moves to the new owner, who becomes responsible for returning it.

Does a sale or foreclosure end a lease?

Not by itself. A buyer generally takes the property subject to the leases already in place, and federal law protects tenants specifically in a foreclosure. What changes is who the landlord is, who holds the deposit, and, after a foreclosure, how much notice the new owner must give before asking a tenant to leave.

What does the Protecting Tenants at Foreclosure Act require?

In a foreclosure on a federally related mortgage loan or on any residential property, the “immediate successor in interest” takes the property subject to “the provision … of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice,” and to the tenant’s right to stay “until the end of the remaining term of the lease,” except that the successor may end the lease on the date of sale to “a purchaser who will occupy the unit as a primary residence,” still subject to the 90-day notice. A tenant without a lease, or with one terminable at will, is likewise entitled to the 90-day notice (Public Law 111-22, § 702).

A tenancy is bona fide when the tenant is not the borrower or the borrower’s parent, spouse or child, the lease came from an arm’s-length transaction, and the rent is not substantially below fair market rent unless it is reduced or subsidized by a government program. The act expired at the end of 2014 and was restored permanently, effective June 23, 2018, and it “does not affect any state or local law that provides longer time periods or other additional protections for tenants” (Federal Reserve, CA 18-4; Public Law 115-174, § 304).

What happens to the security deposit in a sale?

In California, when a landlord’s interest ends “by sale, assignment, death, appointment of receiver, or otherwise,” the landlord must, within a reasonable time, either transfer what remains of the deposit to the successor and notify the tenant of the transfer, any claims against it, the amount, and the successor’s names, addresses and telephone numbers, or return it to the tenant with an accounting. Before a voluntary sale the landlord must also give the buyer a written statement of the deposit and deductions. If the landlord does neither, the successor is “jointly and severally liable with the landlord” for the deposit (Cal. Civ. Code § 1950.5).

In New York, the owner must turn the deposit over to the grantee at the delivery of the deed or within five days, and notify the tenant by registered or certified mail of the transfer and the grantee’s name and address; the grantee is then “responsible for the return thereof” (N.Y. Gen. Oblig. Law § 7-105). In Texas, the new owner “is liable for the return of security deposits … from the date title to the premises is acquired” and must give the tenant a signed statement acknowledging the deposit and its exact amount; the seller stays liable until the buyer has received the deposit or assumed it (Tex. Prop. Code § 92.105).

What should a buyer or seller of a rental do?

• Seller: list every deposit, its deductions and any interest owed, and give the buyer that statement before closing.
• Both: put the deposit transfer in the purchase contract and credit it at closing.
• Buyer: send each tenant written notice of the new owner, where to pay rent, and the deposit you now hold.
• After a foreclosure: give a bona fide tenant at least 90 days’ written notice, and honor any remaining lease term unless a buyer will live in the unit.

Frequently asked questions

Can a new owner evict me after a foreclosure?

Not immediately. Under federal law a bona fide tenant gets at least 90 days’ notice to vacate, and a tenant with a lease signed before the foreclosure notice may stay until the lease ends unless the unit is sold to someone who will live in it.

Who returns my deposit if the building is sold?

Usually the new owner. California, New York and Texas each require the deposit to follow the property, and make the new owner answerable for it once it has been transferred or title has passed.

Does a sale cancel my lease?

No. A buyer generally takes the property subject to existing leases; the landlord changes, the lease does not.

State-by-state rules

• How long does a landlord have to return a security deposit? — compared across 48 states and the District of Columbia
• How much notice must a landlord give to end a tenancy? — compared across 47 states and the District of Columbia

Sources

1. Public Law 111-22, Title VII, Protecting Tenants at Foreclosure Act of 2009 (12 U.S.C. 5220 note), U.S. Government Publishing Office
2. CA 18-4, Restoration of the Protecting Tenants at Foreclosure Act, Board of Governors of the Federal Reserve System
3. Public Law 115-174 (Economic Growth, Regulatory Relief, and Consumer Protection Act), § 304, U.S. Government Publishing Office
4. California Civil Code § 1950.5, California Legislative Information
5. N.Y. General Obligations Law § 7-105, New York State Senate
6. Texas Property Code Chapter 92 (§ 92.105, Cessation of owner’s interest), Texas Legislature

How Seayora helps

Security deposit management: Each deposit, its deductions and its return are kept as a dated record, so the amount to transfer at a sale is already written down.

This article is general information, not legal advice. Landlord-tenant law varies by state and city and changes often, so check the current rule for your property and talk to an attorney before acting on a dispute.

How we write and check these guides: editorial standards.

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