What Is the Protecting Tenants at Foreclosure Act, and How Can It Affect You?
By Michael J. Hamblin
The federal Helping Families Save Their Homes Act of 2009 was signed into law on May 20, 2009. This new law contains the Protecting Tenants at Foreclosure Act (the “Act”). The Act provides certain protections to tenants in the event their landlord’s interest in the property goes into foreclosure. The Act accomplishes this by generally providing that if there is a foreclosure on a federally related mortgage loan or on any dwelling or residential real estate, the party who takes title to the property as part of the foreclosure proceeding does so subject to the rights of any bona fide tenant.
If the new landlord wants to evict the tenant, it must give the tenant a 90-day notice to vacate the leased premises. But, if the tenant entered into a bona fide lease relative to the foreclosed property before the foreclosure date, the tenant can remain in possession of the property until the end of the lease term. The lease can be terminated earlier if the property is sold to someone who will occupy the property as their primary residence. Even in that circumstance, the 90-day notice to vacate must still be given. If a tenant is occupying the property without a lease or is a tenant-at-will, the tenant must still be given a 90-day notice to vacate.
The Act also contains a section that expressly states that State and local laws allowing for a longer notice period or other protections for tenants of foreclosed properties will not be affected by the Act.
There are a number of gray areas in this legislation. For example, it appears that it applies to all types of foreclosures and not just loan foreclosures. As such, the Act may be construed to apply to lien foreclosures, including the foreclosure of condominium and homeowner’s association liens. Also, it appears that the Act might conceivably be used to prevent a foreclosing party from terminating a lease even if a tenant defaults. Finally, there are title insurance issues that may have to be dealt with. For example, title companies that insure title arising from a foreclosure sale will probably require an exception for the rights of tenants under the Act. It is not clear whether these title companies will agree to delete such an exception even if the Act’s notice requirements are met.
It is important for anyone dealing with residential tenants to familiarize themselves with the Act and its requirements. Any questions regarding the Act should be directed to a knowledgeable real estate attorney.
Michael J. Hamblin is an attorney at Frank Haron Weiner, and focuses his practice on a wide range of litigation and transactional business law matters.
The federal Helping Families Save Their Homes Act of 2009 was signed into law on May 20, 2009. This new law contains the Protecting Tenants at Foreclosure Act (the “Act”). The Act provides certain protections to tenants in the event their landlord’s interest in the property goes into foreclosure. The Act accomplishes this by generally providing that if there is a foreclosure on a federally related mortgage loan or on any dwelling or residential real estate, the party who takes title to the property as part of the foreclosure proceeding does so subject to the rights of any bona fide tenant.
If the new landlord wants to evict the tenant, it must give the tenant a 90-day notice to vacate the leased premises. But, if the tenant entered into a bona fide lease relative to the foreclosed property before the foreclosure date, the tenant can remain in possession of the property until the end of the lease term. The lease can be terminated earlier if the property is sold to someone who will occupy the property as their primary residence. Even in that circumstance, the 90-day notice to vacate must still be given. If a tenant is occupying the property without a lease or is a tenant-at-will, the tenant must still be given a 90-day notice to vacate.
The Act also contains a section that expressly states that State and local laws allowing for a longer notice period or other protections for tenants of foreclosed properties will not be affected by the Act.
There are a number of gray areas in this legislation. For example, it appears that it applies to all types of foreclosures and not just loan foreclosures. As such, the Act may be construed to apply to lien foreclosures, including the foreclosure of condominium and homeowner’s association liens. Also, it appears that the Act might conceivably be used to prevent a foreclosing party from terminating a lease even if a tenant defaults. Finally, there are title insurance issues that may have to be dealt with. For example, title companies that insure title arising from a foreclosure sale will probably require an exception for the rights of tenants under the Act. It is not clear whether these title companies will agree to delete such an exception even if the Act’s notice requirements are met.
It is important for anyone dealing with residential tenants to familiarize themselves with the Act and its requirements. Any questions regarding the Act should be directed to a knowledgeable real estate attorney.
Michael J. Hamblin is an attorney at Frank Haron Weiner, and focuses his practice on a wide range of litigation and transactional business law matters.