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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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

  • Can the property management group force me to pay my rent only on their website and charge me to do it?
  • I recently leased my home to a family. The house is 4300 sqft has a shelved/ closeted garage, an attic and a shed. The tenants have storage space within the house and a small amount of space in the garage. I left some of my belongings in the attic, the garage and household items in the shed. Am I allowed to store my belongings in my garage and attic as it is still my house.
  • I am renting to own my house, I have lived here for 20 years. I have a problem with my air conditioning unit and other problems with the house. Is it the Landlord's duty to fix the problems or is it mine. I do not own the property yet.
  • I have rented a room in a house for the last 2 years. I have never had a lease or rules & regulations given to me either. Can my landlord tell me I can't have company over? Company is my kids, 41, 36 and 35
  • my fiance lives with his mother in there home they have been renting for a little over 8 years now. he was currently incarcerated, given 3 months in jail. while in custody his mother unexpectedly passed away in the home.I am the only one given by the two sons next of kin a power of attorney to have access to the home. the property manager has gone in and let the aunt take things then changed the locks so i had no access to the home.I spoke to him about paying rent in which he agreed to take payments for a months rent he has taken partial payment and now will not allow me access inside.help me!
  • My daughter and I leased an apartment 2 weeks ago. The police served an arrest warrant on my daughter's friend who was visiting our apartment yesterday by forcing entry into the apartment and also conducting a search of the entire apartment. The police told me this was in reference to an ongoing criminal case against this person. I am concerned that we will be evicted even though we had no idea that her friend had a warrant for his arrest and do not have any idea why it was served at our place of residence. Should I speak with the management to proactively avoid any type of repercussions?
  • I am the owner of a rental property and am under contract with a tenant through 2/29/16. Circumstances have arisen which are going to require me to sell the home within the next few months. It appears as though there is no early termination agreement in the lease. Can I terminate with ample notice to the tenant?
  • I am SMI and severely physically and mentally disabled. I have trouble communicating. An employee that works in the office always treats me poorly and treats my non disabled friend and tenant normally. She recently called cops on me and tried to force me to leave office w/o info while discriminating against me talking about if I would “stop running [my] mouth” + more abuse. I still don’t have info. Makes it hard for me. Do I have recourse?
  • the apt complex provides heating and cooling. my avg apt temp is over 80 degrees they refuse to turn the hon until the weather changes what are my rights I cannot cook and its becoming unbearable the temps outside are 70/80 highs and high 40/ 50
  • We've been living with my boyfriends parents and we're paying rent every month. This month we paid rent, then 2 days later we were given the rent money back and told us we have 30 days to find somewhere else to go. Then 2 weeks later they decided to let us stay and are now asking for rent money again for this month. (and we are going into an apartment next month "July") Any advice on what to do would be great!

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