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Trey Wilson San Antonio Texas Real Estate Attorney, Trey Wilson Real Estate Lawyer in San Antonio wrote:

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Foreclosure Converts Former Owners Into Tenants At Sufferance Who Can Be Evicted

Trey Wilson San Antonio Texas Real Estate Attorney, Trey Wilson Real Estate Lawyer in San Antonio wrote:

Most home buyers attend closing and are surprised to see the large stack of documents requiring their signatures --   affidavits, verifications, disclosures, contracts, etc.  Sometimes after affixing multiple signatures, buyers go into "auto mode" and sign each document slid across the table to them without even reading or understanding the implications.  This is a mistake, and can have far-reaching implications if things do not go as planned.

Perhaps the most important documents signed by the Buyer at any closing are the Note and Deed of Trust. The Note is a promise to repay a borrowed sum on specified terms (interest rate, payment dates, maturity, etc.), while the Deed of Trust is the "Security Instrument" that contains the loan conditions and lender's remedies in the event of buyer/borrower default. 

Most Deeds of Trust provide that one of lender's remedies is the "power of sale," meaning that the mortgaged property can be sold to a high-bidder to satisfy an outstanding mortgage loan which has been declared to be in default. Such a sale is called a "Trustee's Sale," "Substitute Trustee's Sale" or "foreclosure sale," and is subject to Texas law, but does not require the lender to first file a lawsuit or obtain a judgment. This is why Texas is referred to as a "non-judicial foreclosure" or "title" state.

But what physically happens when the property is sold pursuant to a Deed of Trust, and the buyer/former owner refuses to vacate or surrender possession?  The answer to this question is usually buried deep in the Deed of Trust -- usually on one of those pages that the buyer never bothered to read at the closing table.

Most Deeds of Trust contain a "tenant at sufferance" clause  These tenant-at-sufferenace clauses operate to create a landlord-tenant relationship once a property is foreclosed, with the foreclosure purchaser (purchaser at the Trustee's Sale") acting as "Landlord" and the former owner acting as "Tenant." See Pinnacle Premier Props., Inc. v. Breton, 447 S.W.3d 558, 564-65(Tex.App.-Houston [14th Dist.] 2014, no pet. h.) (op. on reh'g). Obviously, no lease exists, and therefore, there is no demonstrable legal instrument supporting the former owner's right to occupy the property.

The existence of this constructive landlord-tenant relationship can provide grounds for the foreclosure sale purchaser to file and eviction/forcible detainer action against the former owner who has remained in possession of the property. See Chinyere v. Wells Fargo Bank, N.A., 440 S.W.3d 80, 82 (Tex. App.-Houston [1st Dist.] 2012, no pet.). Further, this alleged landlord-tenant relationship suffices as a basis for the eviction action even though the deed of trust may later be set aside for wrongful foreclosure or other reasons. See Villalon v. Bank One, 176 S.W.3d 66, 71 (Tex. App.-Houston [1st Dist.] 2004, pet. denied) (citing Dormady v. Dinero Land & Cattle Co., 61 S.W .3d 555, 559 (Tex. App.-San Antonio 2001, pet. dism'd w.o.j.)).

Under these circumstances, a  justice court will have jurisdiction to hear the forcible detainer / eviction action, even if the former owner has alleged that the lender botched the foreclosure, or that there were deficiencies in the foreclosure process ("wrongful foreclosure") that cast doubt on the sufficiency of the "new owner's" title.  Stated simply, if a deed of trust provides that in the event of foreclosure, the previous owner will become a tenant at sufferance if he does not surrender possession, the justice court (or county court on appeal) can resolve possession. Salaymeh, 264 S.W.3d at 436.Rice, 51 S.W.3d at 712.  

Under these circumstances, a purchaser at a Trustee's Sale can generally prevail in evicting the former owner by providing documentary evidence regarding (1) the existence of a deed of trust containing a tenancy-at-sufferance clause, and (2) the occurrence of a foreclosure sale, which triggered the tenancy-at-sufferance clause.