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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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 moved out of my rental home 2 months ago, 6 months prior to my leasr end date. It was agreed upon mutually by myself and landlord that I could break the lease, as the home was in short sale and an offer had been made on the hone. Today I get an email from my landlord stating that the short sale did not get approved and they are asking for me to pay to have the carpets cleaned, both the front and backyard landscaped and the home cleaned. First off, the home was cleaned when we left and the yard was fine. Can they ask for this to be done 2 mos later because their deal fell through?
  • I am renting to own my manufactured home from my landlord who is in turn paying off loan company. The contract she wrote and we both signed but was never notarized or witnessed states that I will rent the home" as is" meaning she is not responsible for any damages. The septic tank is broken and flooding badly enough that one side of the house has sunken into the ground. The clogging from the septic has caused leaks and clogs in water pipes causing mold in walls and insulation under house ruined. A lic. Plumber informed me that the septic tank got broken when she installed it previous to my renting. It is also illegally placed too close to house. Also, my mother paid my rent in February and when I asked my landlord if she received this money she stated no. I called my mother to confirm she did go there then I called landlord back and told her I knew she was lying about it and she admitted that she had in fact lied about how much rent I actually owe her. What can I do about all of this?
  • We had a water leak in our backyard. We notified the landlord in writing three times , but it took one month for them to fix it. Our water bill has now doubled. We wrote to them that we would like them to pay the half exceeding our normal amount--they have not responded. What are our rights?
  • Is my landlord required to take action against other residents of my property who are drunken and disorderly and causing a disturbance on the premises? If so, what action are they required to take?
  • I have a question about payment of utilities. I signed rental agreement stating that I have to make a tep account to pay my electric bill. But I got a notice yesterday that I have until today to make a simple bills account to pay for electric utility. I do not want to use this service and it was not in my lease. I called another number, but the woman was unhelpful.
  • My tenants were on a month to month, following the written lease, he gave my husband a 2 1/2 day notice yesterday that they would be leaving and not paying August rent, by law is he suppose to give a 30 day notice?
  • Are coolers covered under what the landlord is to maintian. During the winter he takes out motor... with the weather getting warm we still have not cooler
  • We have lived here in an apt. type setting for 11 months. We are curious if we can break our lease based on several factors. One being that our dryer, which they supplied, has NEVER worked and shocks us (safety issue). We've complained on several occassions (including the month we moved in). Nothing has been done, and now we can't use our dryer. Or, the fact that there wasn't for at least 7 months, common area lights outside. Now there are....or the fact that my husband fell down in an area on the complex with no lights (outside apt. complex). HELP!
  • I finished my contract to my previous apartments even thought it was vacant for few months. I still paid them. And i called the electric to transfer all my bills from my previous address to the new address so they did. And i did paid it. Then few weeks i have received a letter from them that they paid the electric from my unit. So they were asking me to pay them. So i called electric company to ask if it's really my bill becuase i paid my bill the date that i left and asked for disconnection. I don't know why the apartments are charging me for the bill that wasn't mine.Pls help need an answer
  • Are landlords responsible for termites/ swarmers in apartment complex!? Lease states they cover “pest control but excluding “wood eating insects” and they are not responsible for any damage to my property because of them... !? That cant be legal. Its like living outside with all these flying termites.

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