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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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

  • 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?
  • My dog (a lab) in a harness and leased was approached by a small dog on our front porch. The small dog nipped at out dogs back leg. Our dog turned and attacked the small dog killing it. Am I liable in Arizona?
  • What is the youngest age a person can move out of there parents home, with the permission of their parents?
  • I am a homeowner, temporarily living and working out of state and have allowed a family member to live there rent free. She is taking over the utilities, I continue to pay the mortgage, taxes and insurance. She also will take care of maintenance and her own personal desired improvements, with permission, at her expense. My question is, does this relationship put me in a position of being a landlord, which I do not want to be, or am I a non-resident homeowner? Can you point me to state law and statutes on this subject?
  • I rented a housefrom aperson that was not the real owner.He pretended. I paid for security deposit and 1st months rent. Well yesterday a man came over and asked me what i was doing in his house. So i explained to him what happened. So now i have 3 days to get out with my family. Can he do that even if i recieve mail there electricity is in my name. What can i do. I got scammed 1700
  • If i rent weekly and lived in the residents for 3 months.how much notice dose the landlord have to give me to raise the rent? This is a extended stay. They r are raising the rent to 3 times for January cuz tucson jem show. I must pay the month of January in advance or get out i was notified on 12 15
  • we are getting conflicting answers we need to know specifically : Is the ladlord responsible for paying trash service? we know they have to provide cans
  • Me and my boyfriend have been living in an RV for the past year-and-a-half or so it's in his name and his ex-wife's name well everything is okay until he gets mad at me and wants me to leave and tries to kick me out when I'm here all the time and he's a truck driver it's only when he gets mad he tries to kick me out is there any type of law here in Texas that can prevent him from kicking me out
  • We sold a home in Hereford AZ that is in an HOA. At closing we were charged $800 for a disclosure fee. The state statute allows a maximun of $400. We told the HOA this and they refused to let us close unless this was paid. The statute also states that the HOA could be fined up to a $1200 for this. Who can we complain to to get get this investigated?
  • My boyfriend & I moved in together. Well he left 10 days ago & yesterday he came & got some stuff, I messaged him to see if he was coming back for anything else well I got no response then This morning he semt a text to the landlord & told him he had moved out & actually he had been gone for awhile!! So if he comes back can I tell him to go & the stuff is mine since he told the landlord he moved out?

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Documents

.pdf  AzMortgageResource.gov ReadSpeaker

.pdf  AZ Renters Guide ReadSpeaker

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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

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