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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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

  • We moved into a house and the hot water heater doesn't work. We submitted a maintenance request on 4/22. 7 days later I sent an email for status. 05/01 a tech came out to do repairs. 05/02 the pilot light still won't stay lit. I submitted a second maintenance request.on 05/02. It is now 05/06 14 days in out new rental home and there is still no hot water. I emailed for status on 05/05.. Still waiting to hear back from Re/Max. What are my rights? Can I replace the water heater and deduct it off my rent payment?
  • how many people can live in a two bedroom property rental
  • Can my landlord decide to require payment online through a 3rd party that was not available at the time the lease was signed? Can I refuse to provide my personal bank information to said 3rd party?

  • Some of us want an inspction of th rntal apartmnts for landlord violations

  • Is it legal for a landlord to put into our lease a statement that says "If for any reason during the duration of this lease agreement the relationship between Lessor and Lessee is soured, Landlord reserves the right to serve a 30 day written notice to vacate." Isn't this unconscionable? And shouldn't any ability to break a contract be fair to both parties?
  • We live with and care for my father in law who told us today that he is moving into assisted living and we must move out. We rented the house we own, what sort of notice must we give our tenants?
  • does apt complex have to disclose the previous renter was a smoker?
  • I have already signed my leasing agreement. On the day of move in i was given a different move in fee without being notified before hand. I was not allowed to move in unless i paid that fee which was not apart of my leasing agreement. Is that a breach of leasing agreement? Should I haven still been able to move in that day?
  • I rent a condo. the condo has a non attached garage. I have had the garage for 2 years. Now landlord gave me three days to clear it out and can no longer have the garage. Is that leagal.
  • Is having the cable companie install cameras as part of a bundle pkg including cable t.v, & internet a form of breacing are contract if it stays in my contract that we are not aloud to make alterations

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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

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