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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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

  • My friend and her boyfriend are renting a 2 apartment, and both signed the lease. The can afford it alone. If move in, can I pay them or do have to sign the lease as well?
  • Can an apartment complex mandate you sign up for their preferred ISP internet provider? Or does the FCC ruling in 2008 against such monopolies apply to Arizona?
  • So i moved in a duplex and only been here a week can the landlord throw me out from one day to the nexts with no eviction notice just came and said he wants me out tomorrow can he do that?
  • I have a renter who gave verbal notice 30 days ago. They do not have a written lease. They promptly disappeared and left all of their possessions in the premises. They are hoarders! What process/action do I have to take before I can clean up the property and remove their possessions (i.e. trash/donations).
  • Does the following remedy mean that you are required to terminate lease and move out within five days if safety hasn't been restored?: "If there is a noncompliance by the landlord with section 33-1324 materially affecting health and safety, the tenant may deliver a written notice to the landlord specifying the acts and omissions constituting the breach and that the rental agreement will terminate upon a date not less than five days after receipt of the notice if the breach is not remedied in five days." Is there any other remedy? Can you withhold rent? Can you get alternate housing? Thanks.
  • This property is advertised as a gated community. Little did I know, the front has NOT been locked since I moved last Jan 2018. This is caused many young homeless to walk of the street onto the property, steal, climb our fenced in pool--with their clothes on and break in to use our laundry room to sleep. (Several of the residents have complained several times!) All because the front entry foot gates are not locked.
  • If I am filing a small claim for wrongly withholding deposit, do I bring my claim against the landlord or the property management company, or both? The property management company is who made the decision to withhold the deposit.
  • I co-signed for my son on his lease in May of 2016. The lease expired without a new lease being written, do he is now month-to-month. Is it possible to remove myself from liability (terminate my part of the agreement) without taking my son off the rental agreement. He had lived there almost 2 years and has established his own credibility. Am I obligated to stay on the rental agreement as long as he stays at the rental?
  • What happens if damage to the property is greater than 1/2 months rent or greater than $300 and the landlord wont fix the issue caused by weather?
  • We are renting an apartment unit in Flagstaff for my daughter who attends NAU. The tenant above has flooded our unit 3 times in the last year because of connecting an illegal bidet. A couple weeks ago the unit flooded for the 4th time because of the sprinkler system. With the most current flood we asked for some diminution since one of the rooms and the laundry was unusable and asked for utility compensation because of the electricity the fans were using. The company gave $25 towards water but will not give any credit towards the rent. What can we d?

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Arizona Residential Landlord and Tenant Act

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Frequently Asked Questions about Mediation

Tenant Self-Help Repairs

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