Tenants paid in advance. Foreclosure is near.

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California

My husband and I have a paid in advance lease to 2011. Before you tell me how stupid/insane we are and that the foreclosure wipes out our lease and and and we have no recourse but to file a lawsuit with the owner, let me explain. It's very complicated.

Almost two years ago, we found a dream house in California. Our intent was not to buy because we travel/move frequently. The rent was extremely high for us. When we offered to pay 1 or 2 years in advance at a discounted rate with an option to extend another year, the two owners eagerly went for it. Our real estate agent handled the lease agreement and did the credit report thing on everyone. Although it was an enforceable contract, we did not take the extra step to "record" it. We did not know at the time LL2 then took out another loan on the property. Shortly after, LL1 came to us with another offer to extend the lease another year (higher rent.) We agreed because we were happy with our arrangement. We again hired our real estate agent to do the lease agreement. Problems came after that. The gardener stopped coming. The lawn, trees and plants suffered because the the sprinklers were not working and CA was suffering from a drought. The bugs came through the open cracks of the ill-fitted doors. There were major plumbing problems and broken irrigation pipes. The AC leaked causing paint damage. The water was shut off due to lack of payment. We then had to hire another gardener and put the water bill in our name. Both partners were denying responsibility. The "he said she said" syndrome then came into play. Since we could not rely on the LL's to pay for repairs, we paid all kinds of things. We did not or will charge the LL's for many of the repairs and expensive pest control. Hey, we are nice tenants. LL2 came again with another offer. Hubby asked, "What about the gardener? Are you going to pay the gardener?" LL1 promised and even gave us a small check to cover the last 2 months of service. We extended the lease again. LL's refuse to pay repairs and maintenance by ignoring the bills or denying responsibility.

LL1 is on title, has no other assets in his name and is not on the mortgage. He has nothing to lose. LL2 is probably going to go bankrupt.

What do you advise us to do? If the property forecloses, can we at least get our security deposit back from the buyer or bank?

I'm slightly confused. How could LL2 be your LL if s/he isn't on the title and doesn't own the property? Or did I misunderstand you, and you meant that LL1 is also on the title but just not on the mortgage?

Which LL did you pay the security to? (I hope you say LL1 because you can sue him to collect the deposit back from him.) LL1 may be collectable if you sue him in small claims court since his credit will be unaffected by the foreclosure. If you paid LL2 and he files BK, your deposit will most likely be wiped out since he will probabaly list you as a creditor and erase that debt.

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Our first lease and security deposit was with both LL1 and LL2. At that time, both held title. The landlords were responsible for paying the first $100 per month water in addition to the gardener. I am not positive, but they may have been equal partners. LL1 was never on the mortgage.

The last lease agreement was with LL1 only. That period covers us in 2010. We signed the new agreement only on the condition that LL2 would be taken off title. Although not in writing, LL1 provided a legal document to look at but refused to give a copy. Apparently, it was not recorded? Both LL's claim otherwise. Since LL2 is still 1/2 responsible for the current lease period, is he still our landlord? LL1 tells us that LL2 is still responsible for our un-reimbursed bills.

LL2 happens to be a broker and is listing the property for sale. The listing was misrepresented. When I insisted both by phone, twice in person and in writing that he correct it before people started coming into the house, he agreed. The listing is still inaccurate. LL2 removed 2 TV's and sold us another one before we moved in. Although the extra non/existent rooms were deleted, the listing has all the TV's included. The realtors and prospective buyers came to the open house. In our opinion, neither LL can be trusted. If those TV's come out of our security deposit (if we get it back) what do we do then?

LL1 has may have no assets in the US, but he has many lawyers. This may be the only property in his name.

We are being manipulated by both with each threatening to sue one another. We have no intention to put up any money to stop the foreclosure or take sides.

I suppose the actions of LL1 are typical practice by powerful unethical investors who work within the law and don't care who they step on along the way.

I'm confused too.

The fact that your deposit and original lease were with both LLs is good. If the deposit is not returned, or you are kicked out of the house after a foreclosure, you can sue both LLs for the money they owe you. One LL will be excused from the debt in all likelihood if he files for BK, since he will probably list you as a creditor and erase that debt. But that doesn't affect the debt owed to you by the other LL. Your lease and deposit was his responsibility too.

Check the county tax auditor's website. See who they list as the owner. Call the office and make sure. If in both names, then do this. If you continue to make out rent checks, make them out to both owners' names (Mr K AND Mr J). They can argue about who gets the rent money and that's their problem. They can sue each other if they like. The point is that you can sue them both, and probably recover some money from the investor who will not be filing BK.