Landlord and Tenant Rights and Responsibilities Article


WHAT IF I RENT A HOUSE THAT'S IN FORECLOSURE - The Protecting Tenants at Foreclosure Act

 The Protecting Tenants at Foreclosure Act

This law expired on December 31, 2014

 

IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014. While there were some attempts in the House to revive this law in 2015 none have been successful. Arizona State Law, A.R.S § 33-1331, gives tenants of foreclosed properties some limited protections; information about these protections can be found in this article. This article remains on AZLawHelp.org purely for historical value for those interested in how the Protecting Tenants at Foreclosure Act operated from 2009 through 2014.

There are legal protections for tenants renting a house that is in or goes into foreclosure. The Protecting Tenants at Foreclosure Act (PTFA) was passed by Congress signed into law by the President Obama in 2009; subsequently the law was extended in 2010. The PTFA expired on December 31, 2014. The PTFA, depending on the facts in a particular situation, requires that renters in foreclosed homes be allowed to stay or given sufficient notice under the law.

  

Who qualifies for protection under the PTFA?

The tenant protection provisions apply in the case of any foreclosure on a “federally related mortgage loan” or on any dwelling or residential real property. The tenant must also be “bona fide.” A lease or tenancy is “bona fide” only if:

  1. The mortgagor or a child, spouse, or parent of the mortgagor under the contract is not the tenant;

  2. The lease or tenancy was the product of an arm’s-length transaction; and

  3. The lease or tenancy requires the receipt of rent that is not substantially less than fair market rent or the rent is reduced or subsidized due to a federal, state, or local subsidy.

In other words the lease must be made with another person and not with oneself and the rent payments must be a fair amount for the property that is not supplemented by the government.

  

When do renters in foreclosed homes get to stay and when do they have to leave?

Renters Get to Stay IF:

Renters get to stay for the duration of the lease, if all of the following requirements are met:

  1. There is a valid lease (not the end of the lease term),

  2. The lease was signed before receiving notice of foreclosure (whether judicial foreclosure or trustee sale), and

  3. The new owner does not intend to occupy the property as a primary residence.

Renters Cannot Stay But Must Be Given Notice IF:

In most other situations, the renters will have to leave, once the foreclosure is complete, and upon receiving 90 days notice from the new owner. The common situations where a renter will have to vacate after the foreclosure upon receiving notice are:

  • Renters must vacate if there is a valid lease and they had notice of foreclosure before signing the lease; or

  • Renters must vacate if there is a valid lease, and even if there was no notice of foreclosure but the new owner intends to occupy the property as a primary residence; or

  • Renters must vacate if there is no valid lease, including where a lease expires and the renter is paying month-to-month. 

Why does the law end December 31, 2014?

The law has what is called a sunset provision, meaning it has an expiration date. The original date was extended in the “Dodd-Frank Wall Street Reform and Consumer Protection Act”, so that the law will be repealed on December 31. 2014. When laws are written, the legislative body writing the law may set a date of when that law will end, referred to as a “sunset” clause or provision (Note: Not all laws have sunset provisions, it is not required). The PTFA is a federal law, Congress would have to authorize and extension or make the law permanent and the President would have to sign it into law.

 

 

Source:  See 12 U.S.C. 5220 or search the US Code online with the US House of Representatives website. For additional information see the Consumer Financial Protection Bureau website.


Comments:

QUESTIONS

  • I have serious doubts that the house I am renting is up to code. Whom can I contact to evaluate the house for safety and to verify that it meets all applicable standards the landlord is required to meet?
  • I paid a holding deposit and got a receipt for a particular apartment that apparently is now no longer going to be mine and I'm just curious if the landlord can legally keep my holding deposit when he is not giving you the unit that I put the holding deposit on?
  • landlord requested for us to look for another home to move in because they were going to move back into home and we still had 9 months left on lease, so can the landlord hold any of our security deposit or do they need to refund all of it?
  • My lease specifically states landlord can do an annual inspection. She has requested an inspection every month for the past 3months. She also wants to come in the middle of the day when I work. She is just looking for a way to get her house back. I've given in to her inspections the past months. Now I'm done with it. I can't keep leaving work because she wants to abuse her landlord rights. Can I refuse her this time since she's abusing and my lease states annual inspection? I need help fast! I told her I couldn't be home and she insists she's coming anyway. Thank you!
  • I was told I had to pay a "holding deposit" of $600 & sign a lease for a property that I needed to rent but was unable to do a walk thru in because the existing tenants were still occupying the property. I was told I could cancel at any time prior to my move in date 8/5/13; I cancelled on 7/20/13 & am being told I will not get any of my deposit back. What can I do?
  • If our garage broke, we could close it, and our property manager stated "their repair guy" could not come for 2 days and we had to secure the premises; we had to pay $350 for a repair man to JUST shut the door. 2 days later "their repairman" came and replaced the door. Now my landlord, per the property manager, is saying he will only give us $65 back since we didnt use "their repairman"! I have all of the emails as that is the ONLY way to speak with our property manager.
  • Does AZ Landlord Tenant Act apply to senior living facilities, specifically independent living facilities where residents contract with the facility includes some meals, use of facilities' transportation services, etc? (To be clear, I am not asking about assisted living facilities.)
  • How is my landlord notified I want to take then to court
  • Is the landlord responsible forsupplying blinds?
  • The home we are renting is set to go to Trustee Auction at the end of this month. The "Protecting Tenants at Foreclosure Act" expired 12/31/2014. What are my rights as a tenant now that this has expired. Can I be evicted without notice..do I still have to receive ample notice if the new owner wishes to occupy the home?

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ORGANIZATIONS

Documents

.pdf  Return Security Deposit Request ReadSpeaker

.pdf  Move-Out Inspection Request ReadSpeaker

.pdf  Request for Repairs ReadSpeaker

.pdf  Request for Repairs - Health and Safety ReadSpeaker

RELATED ARTICLES

Arizona Residential Landlord and Tenant Act

Security Deposits

Small Claims Court Process

The Landlord Tenant Relationship

Where to Find an Attorney for Specific Legal Advice

Frequently Asked Questions about Mediation

Tenant Self-Help Repairs

LINKS

The Arizona Residential Landlord and Tenant Act

HUD in Arizona

Public Access Case Lookup - Arizona Supreme Court

Maricopa County Judicial Branch

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