We Just Found Out that the Property we Rent is a Reverse Mortgage Home, What do We do Now?

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“We have just found out that the property we rent is a reverse mortgage on the home. Is our lease still good or can we get out of the lease since they are breaking the law? We do not want to be a part of their scam.”

[NOTE: Articles and answers on DearEsq., while written and published by lawyers, do not constitute legal advice, and no attorney-client relationship is formed by your reading of this information. You should always consult with an attorney for any legal situations.]

As it sounds like you are aware, a reverse mortgage is a type of loan where the lender makes payments to the borrower (instead of the other way around), and expects to get paid off, with interest, when the borrower dies or sells the property. And as you also are aware, one of the requirements for a reverse mortgage is that the borrower (or an appropriate related party) occupies the property.

Since you are renting the property, I presume that the borrower (owner) is not also occupying it, which would be an event which allows the lender to call in the loan, and be repaid in full. However, it’s not clear whether that in itself provides you with a legal basis to terminate your lease. The existence of the reverse mortgage doesn’t prevent the owner from renting out the property, it just means that if they do, they must repay the lender.

That having been said, it is understandable that you are uncomfortable in a situation where you presume your landlord is lying to (or at least withholding information from) their lender.

On a practical level, if you only have a short time left on your lease, the easiest solution may be to just wait it out and move at the end of the term. If that’s not practical, perhaps your landlord may be willing to agree to an early termination. For all you know, they may be as concerned about the situation as you are, and eager to take back possession of the property.

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Author: House Attorney

A house attorney has answered this question.