If your only association with the state of Indiana is from watching Notre Dame football or remembering a smiling 6-year-old Ron Howard singing the praises of Gary, Indiana, in "The Music Man," you may not be aware that Indiana suffered one of the highest rates of foreclosures in the nation at the outset of the foreclosure crisis in 2006, according to a 2007 study, "My Old Indiana Home: A Study of Rising Foreclosure Rates" out of the University of Southern Indiana. Both the foreclosure process and associated tenants' rights in the Hoosier State are spelled out in federal and state law.
Foreclosures in the United States are either judicial (in court) or nonjudicial (administrative). In Indiana, foreclosures are judicial. Since 2011, foreclosing lenders have had to send a notice to delinquent borrowers at least 30 days before filing a foreclosure action in court. They initiate the foreclosure action by filing a lawsuit and recording what is known as a "lis pendens," or notice of pending lawsuit. The named parties have the right to request a settlement conference to pursue an alternative to foreclosure, such as a loan modification. The court ultimately issues a judgment for or against the foreclosure, and, if the former, orders the property's sale.
Tenant Involvement in Lawsuit
Foreclosing lenders in Indiana can include both the property owner and tenants in the foreclosure because a tenancy agreement is in fact an interest in the property. The purpose of a lender including a tenant in the action is to end that tenant's rights associated with the property -- that is, to end her lease. However, most lenders file only against the borrower, especially since a 2009 federal law prohibiting lenders from terminating leases after foreclosure went into effect.
Protecting Tenants at Foreclosure
The federal Protecting Tenants at Foreclosure Act of 2009 requires lenders and foreclosure buyers to honor existing residential leases after foreclosure. The sole exception to this requirement is when a foreclosure property is bought by an individual who intends to occupy the rental unit himself. At the termination of a lease or for tenants without a lease, foreclosing lenders and all other new owners, including those who intend to occupy the unit, must provide tenants with a notice 90 days before initiating an eviction lawsuit.
A foreclosing lender or other foreclosure buyer has the right in Indiana to terminate a tenancy after foreclosure without just cause -- that is, without a lease-related reason such as failure to pay rent. After the 90-day notice required by federal law, an owner pursues an eviction in Indiana by filing an eviction lawsuit, called an unlawful detainer, in court. The tenant is afforded a hearing. If approved, the eviction is carried out by the county sheriff who first posts the property and then forcibly removes any remaining occupants.