General Housing Information 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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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 boyfriend and I bought a house together in December 2018, we’re going through a break up now and I need help figuring out what I need to do regarding the house.
  • It is time to renew my lease and a Bed Bug Addendum was added. It has harsh provisions for tenent payment of treatment expenses, even being responsible for adjacent units, even if you did not cause the infestation. The AZ law states you can be charged only if you fail to report. Is this Addendum legal. If I refuse to sign it can I legally be denyed the right to renew my lease? If I do sign it to renew the lease, will it hold up in court? Can you point me toward a lawyer in the Phoenix area who has experience with this? Thank you!
  • I signed a contract to move into an apartment 6 weeks ago paid all fees and first months rent, I am supposed to move in on June 22, 2019. I received a phone call today telling me the apartment will no be available because the current renter has decided not to move. I have less than two weeks to find alternative housing is this legal?
  • I recently bought a home, and moved out of a rental property and they sent us an itemized list of items after we moved and I did a final walk through with them and charging us falsely what can we do to dispute these items?
  • I retired from the army this past november and decided to move. even though i have orders my property manager is saying that i have pay a partial rent and a buyout of the lease.
  • There is a lady that I was doing a roof for and she came out side her house and blew up on me about getting things done and I have been getting them done. And I left to carry a trailer back to a metal shop and all my tools are at her house now she will not give me my tools back is this against the law?
  • I have been living with this man for the last month and now we are broke up and he is withholding my mail could i get arrested for entering the home through the window? because he won't let me in .and he will not give me my mail.
  • My boyfriend and I have been together since mid 2005. He recently purchased a home in only his name. We are planning on getting married in april of next year. After marriage do I automatically become co- ownr? If we do not get married how long will it take for me to be considered co- owner without him actually havng to add my name to the title?
  • Is it illegal for in-laws to throw mine and my husbands stuff away or give it away without permission. Even tho we live in there home
  • My mother died sept 27. She had a will leaving her home to we three kids. Can we get a title change with this will so the property can be sold

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ORGANIZATIONS

Documents

.pdf  AzMortgageResource.gov ReadSpeaker

.pdf  AZ Renters Guide ReadSpeaker

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FORECLOSURE DEFICIENCIES IN ARIZONA: Will I still owe money after a foreclosure?

Where can I find legal help with a foreclosure?

Did you know the Arizona Attorney General’s Office has a wide range of statewide assistance programs funded through the national mortgage settlement that could benefit you or people you know?

Legal Tips for Tenants

LINKS

Low Income Home Energy Assistance Program (LIHEAP)

https://www.lawforseniors.org/
https://www.lawforveterans.org
https://lawforkids.org/
https://www.azcourthelp.org/