On May 20, President Obama signed the “Protecting Tenants at Foreclosure Act.” Under the new law, if a federally-related mortgage loan (as defined in 12 U.S.C. 2602) is foreclosed or if the property being foreclosed is a dwelling or residential property, then the purchaser at the foreclosure sale takes the property subject to the pre-existing tenancy of a bona fide tenant.
- Is this a foreclosure of a federally-related mortgage?
- If yes, law applies;
- If no, then:
- Is this a foreclosure of a residential property or dwelling unit?
- If no, then law does not apply;
- If yes, then:
- Is there a tenant in the property?
- If no, then law does not apply.
- If yes, then:
- Is this a “bona fide” tenant (non-related to borrower, arm-length, fair market rent)?
- If no, then law does not apply.
- If yes, then:
- Is this a month-to-month rental?
- If yes, then provide 90-day notice to vacate.
- If no, then:
- Was the current lease dated effective prior to the date of the lis pendens?
- If no, then provide 90-day notice to vacate.
- If yes, then:
- Does the lease expire in less than 90 days?
- If yes, then provide 90-day notice to vacate
- If no, then wait out term of lease and provide notice of non-renewal/termination at least 90 days prior to lease expiration date (if desired).
If lease expires in over 90 days:
- Has the property been sold to a new purchaser who will occupy it as a primary residence?
- If yes, then lease terminates at sale, but still must give 90-day notice to vacate;
- If no, then new owner takes subject to current lease and must give 90 day notice prior to lease expiration date.
The Tenants Protection Act of 2009 was amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act by adding a definition for the date of a notice of foreclosure and by extending the sunset or expiration date of the statute from 2012 to December 31, 2014.
Also, H.R. 3619 has been introduced by Rep. Keith Ellison (D-MN5). This bill, if it becomes law, would permanently extend the Protecting Tenants at Foreclosure Act of 2009 and also establish a private right of action to enforce compliance with the act. Track the progress of this bill.