NEW FEDERAL LAW PROTECTING TENANTS
"The Protecting Tenants at Foreclosure Act, which took effect in May, requires companies that seize properties to assume existing leases for the remainder of their terms. (Leases can be terminated with 90 days notice if the property is sold to someone who plans to occupy it as a primary residence.)"
A new law has been past that affects tenants after a home has been foreclosed on.
New Federal Law Protecting Tenants
This is the text from the newly passed federal law protecting tenants who are dealing with landlord foreclosure.
TITLE VII--PROTECTING TENANTS AT FORECLOSURE ACT
SEC. 701. SHORT TITLE.
This title may be cited as the `Protecting Tenants at Foreclosure Act of 2009'.
SEC. 702. EFFECT OF FORECLOSURE ON PREEXISTING TENANCY.
(a) In General- In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this title, any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to--
(1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice; and
(2) the rights of any bona fide tenant, as of the date of such notice of foreclosure--
(A) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90 day notice under paragraph (1); or
(B) without a lease or with a lease terminable at will under State law, subject to the receipt by the tenant of the 90 day notice under subsection (1),
except that nothing under this section shall affect the requirements for termination of any Federal- or State-subsidized tenancy or of any State or local law that provides longer time periods or other additional protections for tenants.
(b) Bona Fide Lease or Tenancy- For purposes of this section, a lease or tenancy shall be considered bona fide only if--
(1) the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant;
(2) the lease or tenancy was the result of an arms-length transaction; and
(3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit's rent is reduced or subsidized due to a Federal, State, or local subsidy.
(c) Definition- For purposes of this section, the term `federally-related mortgage loan' has the same meaning as in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).
SEC. 703. EFFECT OF FORECLOSURE ON SECTION 8 TENANCIES. Section 8(o)(7) of the United States Housing Act of 1937 (42 U.S.C. 1437f(o)(7)) is amended--
(1) by inserting before the semicolon in subparagraph (C) the following: `and in the case of an owner who is an immediate successor in interest pursuant to foreclosure during the term of the lease vacating the property prior to sale shall not constitute other good cause, except that the owner may terminate the tenancy effective on the date of transfer of the unit to the owner if the owner--
`(i) will occupy the unit as a primary residence; and
`(ii) has provided the tenant a notice to vacate at least 90 days before the effective date of such notice.'; and
(2) by inserting at the end of subparagraph (F) the following: `In the case of any foreclosure on any federally-related mortgage loan (as that term is defined in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602)) or on any residential real property in which a recipient of assistance under this subsection resides, the immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to the lease between the prior owner and the tenant and to the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit, except that this provision and the provisions related to foreclosure in subparagraph (C) shall not shall not affect any State or local law that provides longer time periods or other additional protections for tenants.'.
SEC. 704. SUNSET.
This title, and any amendments made by this title are repealed, and the requirements under this title shall terminate, on December 31, 2012.
On May 20, 2009 President Obama signed into law the passage of SB 896. (Protecting Tenants at Foreclosure Act of 2009) This law effects everyone in the United States, unless your state offers something better. This Federal law does not preempt state and local laws, if their laws are better for the tenant.
What does SB 896 mean for the tenant living in a home that has been foreclosed on?
If the lease was the result of an arms-length transaction (not a family member of the mortgagor- in other words--the owner of the home being foreclosed on) ---- and----
the amount of rent collected is not substantially less than the going rent for the area.
1. Leases will survive a foreclosure-Great news for tenants!!!
* If your lease is a one year lease-it stays in effect until the end of your lease. Unless the lease expires in less than 90 days after the foreclosure sale. In that case, you could stay till the 90 days were up.
* If you have a month to month lease-- tenants would be entitled to a 90 day notice. (Which is longer than the 1 month's notice you could of gotten on a normal sale.)
* If you're on housing or have a Section 8 voucher, the same laws apply to you. If you do get a 90-Day notice to vacate. Contact your local housing agency. That way, you'll be able to transfer your voucher to another home.
The only thing that could change this, for the tenants, is if the new owner wants the home for a primary residence. In that case, the lease is void and the tenant is given a 90 day notice to leave the home.
You don't want them to have a reason to evict, so pay your rent even during the foreclosure process.
There are two situations under the Act where it is clear a post-foreclosure owner may require a tenant to vacate upon ninety-days notice. First, if the new owner sells a tenantâ??s unit to a purchaser who will occupy it as a primary residence, the owner may require the tenant to vacate after expiration of the notice. Second, a tenant who does not have a lease or whose lease is terminable at will must also receive a ninety-day notice before being required to vacate. The Act does not displace any federal or state requirements for terminating subsidized tenancies, or any state laws that offer greater protections to tenants. If not renewed, the Act will expire on December 31, 2012.
It is especially important for lenders to be aware of this new law, as many are becoming owners of real property through foreclosure proceedings. Anyone acquiring property post-foreclosure must carefully examine existing tenancies to ensure it recognizes leases or gives appropriate notice as required by the Act. Hopefully, better guidance will be offered in the near future concerning when a landlord may terminate an existing tenancy after giving proper notice.
