The Protecting Tenants at Foreclosure Act was adopted in 2009 to address the problem of the eviction of tenants on short notice following the sale of their home in a foreclosure action.
The Act requires that a tenant under a “bona fide” lease be able to remain in the leased property for the full duration of the lease, or if the tenant is a month-to-month tenant that the tenant be given no less than 90 days notice to vacate the premises. In the case of a bona fide lease for a specified term, this preserves the tenant’s right to stay in the home for the term of the lease, for the month-to-month tenant the Act increases the notice required to be given from 30 days to 90 days.
The only exception to the above is if the bank buys the property at sale and then sells the property to a person who intends to occupy the premises as a primary residence. In that case the Tenant must be given 90 days notice to vacate the residence. The Act requires that the 90 day notice be effective the date of the sale, which means the purchaser from the bank must decide if it intends to occupy the premises as a primary residence no less than 90 days before the effective date of the sale, or the Tenant retains its rights under the Act to stay for the full lease term.
The Protecting Tenants at Foreclosure Act defines a bona fide lease as one where 1) the mortgagor, or a close relation of the mortgagor is not the tenant, 2) the lease or tenancy was the result of an “arms-length” transaction, and 3) the rent due under the lease is not substantially less than market value.
Any tenant who leases the premises prior to receiving notice of the foreclosure is provided the protections of the Protecting Tenants at Foreclosure Act. “Notice of Foreclosure” has been clarified by Congress to mean prior to transfer of title pursuant to the foreclosure process.
A part of the dispute that resulted in the recent $26 billion settlement with five major banks was the fact that the banks have not been complying with the requirements of the Protecting Tenants at Foreclosure Act. If you are a tenant in a property in some stage of the foreclosure process, you have rights to remain in the home pursuant to the Protecting Tenants at Foreclosure Act, but you need to be vigilant in protecting those rights. The banks have shown the willingness to ignore the requirements of the Act.