Tenants Residing In Foreclosed Homes Afforded Greater Protections From Eviction

Written by: Alan Nochumson

Did you purchase a residential property through foreclosure? Worse yet, are you living in a rented property that is going through foreclosure?

Under the Protecting Tenants at Foreclosure Act, which has been in effect since only 2009, a tenant may remain in possession of the residential property for some time even after it is transferred by way of foreclosure.

Prior to the enactment of this law, foreclosure automatically extinguished the lease between the tenant and the foreclosed landlord and the successful bidder of the residential property could immediately evict the tenant, regardless of the tenant’s compliance with the terms and conditions of the lease.

Under the new law, a “bona fide” lease now survives foreclosure.  In other words, tenants who signed their lease before the foreclosure took place can stay in the residential property until the term of the lease expires.

A “bona fide” lease is defined under the law as being one in which: (1) the child, spouse, or parent of the foreclosed landlord is not the tenant under the lease; (2) the lease is the result of an arms-length transaction; and (3) the lease requires the receipt of fair market rent. All three of these conditions must be met for a tenant’s lease to qualify as a “bona fide” lease.

Even if a “bona fide” lease exists, if the successful bidder of the foreclosed property intends to use it as his residence, he may terminate the lease early with 90 days’ written notice.

The law also protects a tenant who is renting a recently foreclosed residential property on a month-to-month basis. Under the law, such a tenant must receive 90 days’ written notice before having to vacate from the residential property.

The law only precludes an eviction simply due to the residential property being foreclosed upon. A tenant can still be evicted from the residential property prior to the expiration of the term of a “bona fide” lease or the 90-day period of time if the tenant fails to comply with the terms and conditions of the lease arrangement.