What if your landlord isn’t paying the mortgage? Episode #291

Landlord isn’t paying the Mortgage

Todd: Hello. Welcome to Todd Miller TV here with Las Vegas Attorney, Ryan Alexander. Ryan, thanks for letting me come to your office and be at your office today. It’s pretty cool.

Ryan: Thanks, Todd.

Todd: OK. So, here’s the question I get all the time. We have a person, they’re renting a house.

Ryan: OK.

Todd: Now, they’re making their rent payment to their landlord but the landlord has stopped paying the mortgage. Do they have – like can they – do they have legal recourse against the landlord?

Ryan: In practice, it’s kind of difficult. They could bring a claim that the landlord is not honoring their part of mortgage or their part in the lease agreement to maintain the mortgage.  Landlord isn’t paying the mortgage.

Todd: OK.

Ryan: But in practice, it’s probably kind of difficult because the cost of bringing a lawsuit or something to enforce it, it’s probably more than the landlord is behind more than the renter is going to spend.

Todd: OK.

Ryan: If you’re spending a thousand a month, probably, it doesn’t make a lot of sense to spend $5,000 or $10,000 with an attorney to force the landlord to pay. The problems with the landlord are more likely to come from the mortgage company because if the mortgage company know it’s a rental property, then there is probably something hidden somewhere in their mortgage, mortgage paperwork, that says that they’re entitled to the cash collateral which is the income that comes in from the rental property.

Anything that’s bought as a rental property or commercial property has a clause in it, in the mortgage that would say, the bank is entitled to the rent payments. So that’s – we call it cash collateral. So the bank is owed that.

Now, the catch is when it’s a property that you buy as a primary residence, keep it for a couple of years, move out of it whether or not your mortgage would have that, I am not sure or I know that banks are certainly keen right now on getting cash collateral. Now, in practice again, with a lot of residential properties, I’m not saying that banks are actually pursuing people. I’ve seen some foot stamping from the bank, threatening people that they’re supposed to pay the rents to the mortgage company for a rental property.  Landlord isn’t paying the mortgage.

Todd: Right.

Ryan: But I haven’t seen any bank actually pursue that. Usually, there’s just going to go straight to the foreclosure process.

Todd: OK. So, probably in practice, if a person owned a place and rented it out and collected rents, they probably would just be able to keep the income and they may potentially not have anything come back against them. Not much a tenant can do really.

Ryan: No, there’s not a lot. And in fact ironically, I was renting a house and that happened to me.

Todd: OK.   Landlord isn’t paying the mortgage.

Ryan: They foreclosed. I was on time with my rent and we had just a month or two to get out. Luckily, it was coinciding with actually the end of our lease but that was – I had personal experience with that. You can’t – the hard thing is that it’s just, it’s such small numbers, when it’s $4,000, $5,000, $10,000 that the tenant thinks that the landlord should have paid to the rent or didn’t. It’s just costly to enforce that. And just as a business decision, not very practical.

Todd: OK. Good. I like that. Anyway, that was the only question I wanted to ask for this video.

Ryan: OK.

Todd: So, thank you very much.

Ryan: All right. No problem.

Todd: All right. OK. If somebody out there has legal questions or wants to get in touch with you, how do they do that?

Ryan: They can give us a call at 222-FIRM, that’s 222-3476 or you can visit us at TheFirm-LV.com.

Todd: And that’s a 702 area code if they’re calling from another area code. There we go. Awesome. Thanks.

Ryan: All right.

Todd: All right. So that’s my update for today and hope to see you on another video. Thanks.

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