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Finally Some Relief For Tenants On Their Foreclosed Rental Property
By Steven R. Greenberg
On May 20, 2009, President Obama signed into law the “Helping Families Save Their Homes Act of 2009″ (the “Act”), which includes the “Protecting Tenants at Foreclosure Act.” The Act provides new protections for “bonafide” tenants of residential property being foreclosed by a lender holding a federally-related mortgage loan. The Act is intended to provide protection for tenants of properties of which a lender has foreclosed who find themselves evicted overnight from their homes at the completion of that foreclosure, often losing advanced rental payments and security deposits in the process.
Generally, the Act provides that tenants of residential property being foreclosed must be given a minimum of ninety days notice before they are required to vacate. The purchaser in foreclosure must provide any bonafide tenant a written “Notice to Vacate” that cannot be for less than ninety days after the date the Notice to Vacate is provided to the tenant. If the “bonafide” lease exists prior to the foreclosure action, the tenant may continue to occupy the property until the lease is terminated, unless the new purchaser will occupy the property as a primary residence in which case the ninety day notice provision will apply. If the tenant is occupying the property either without a lease or under a lease that is terminable at will, the new purchaser must provide the ninety day notice described above. The exception to the above provisions is that, if the purchaser in foreclosure sells the leased property during the term of the lease he “inherited,” he can terminate the lease and cause the tenant to vacate so long as the tenant is given a ninety day notice to vacate.
A bonafide lease or tenancy is one where:
1. The mortgagor or the child, spouse or parent of the mortgagor 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 subsidiary.
It is imperative that REALTORS® notify the closing agent handling a closing on the first sale of a bank owned property that was acquired in a foreclosure action (an “REO”) that there are tenants in the property so that the rights of the existing tenant can be addressed. REALTORS® should also advise their buyer of an REO property as to the notice requirements for terminating existing leases so the buyer will be aware that they may be purchasing a property subject to the rights of an existing tenant.
Steven R. Greenberg has practiced Real Estate law in Sarasota since 1986 and is a shareholder in the law firm of Icard, Merrill, Cullis, Timm, Furen & Ginsburg, P.A. He is board certified by the Florida Bar in real property law and frequently lectures on matters involving real estate transactions. Steven may be reached at (941) 365-6216 or by calling Linda Witt, Director of Marketing, directly at (941) 586-4412 or by email at REinfo@icardmerrill.com [2].
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