Short answer
Not automatically. The New Jersey Judiciary says legitimate residential tenants have rights to stay on the property during a foreclosure, under the state Anti-Eviction law. A buyer or lender still needs a legal ground and a court judgment to remove a tenant. The security deposit must also be handed over to the new owner.
What the court says
The New Jersey Judiciary states that renters in a property facing foreclosure might be protected by the Anti-Eviction statute, N.J.S.A. 2A:18-61.1 to 61.12, and that legitimate residential tenants have rights to stay on the property during foreclosure. The court also publishes a notice to residential tenants about their rights during foreclosure. A tenant who receives a foreclosure notice should read it, keep paying rent as the lease requires, and ask the court or a legal services program for help.
The Anti-Eviction Act in practice
The Department of Community Affairs bulletin says no residential landlord may evict or fail to renew a lease, written or oral, without good cause, and that a judgment for possession must be entered by the court before a tenant must move. Foreclosure itself does not appear in the list of grounds in the bulletin I reviewed. Whoever owns the house after a sale generally steps into the landlord's role and must follow the same rules.
Security deposits move with the property
The Department's security deposit bulletin says that if a property is sold, foreclosed or conveyed for reasons of bankruptcy or insolvency, the former owner must within five days of the date of delivery of the deed, instrument of assignment or court order turn over to the new owner all security plus the tenant's share of interest, and notify the tenant by registered or certified mail. The new owner is responsible for the deposit either way.
What an owner facing foreclosure should do about tenants
If you are the landlord of a house in foreclosure, keep leases and rent records. Know where the deposit is held. Tell the lender's attorney about any lease. Tenants cannot be forced out by a lockout or a utility shutoff, which the Department says are illegal in New Jersey. If you sell before the foreclosure ends, give the buyer's attorney copies of the leases, so keep the documents ready.
Selling a house with tenants in place
Kaizen Home Buyers makes cash offers on New Jersey houses as-is, with no repairs and no agent commission. We can give an offer within 24 hours and close in 14 to 30 days or on the date you choose. Call 267-329-0084. Selling with an agent is another route. Tenant rights stay in place either way, so an attorney should review the leases and notices first.