Landlord and Tenant Rights and Responsibilities 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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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 landlord has a primary person that lives in the community that acts as the landlord and basically handles everything including maintenance. Meaning, he is the one making all repairs. He is creepy, hangs out and thinkers with repairs, he is not certified and shabby workmanship and shows up knocking at my door to hand out information rather than mailing. I am a single female living alone and I really don't won't him coming over whenever he wants to. Is his behavior legal, I have told him not to show up knocking and have informed him the next time I will call the police but he continues.
  • I evicted my tennants and they left a vehicle in my garage and Sheriff has told me the cars mine but what forms do I need to make this vehicle legally mine so I can turn around and sell it.
  • I signed a lease renewal in May 2019 that states (One year term), but the end date is incorrect, ending six months (November 30th) from the renewal date. My landlord is telling me that I have to renew again and pay associated fees to do so. Is my original renewal good for one year, or six months based on Arizona State law?
  • I have a Friend in Arizona that is in a 12 month lease and she has stated that they signed an addendum specifying that if they break the lease they will have to leave in 3 days period. She and her sister who doesn't live on the property are both on the lease according to her. Question, can one be on a lease if they don't live in the Apartment ? Question can the landlord set the addendum up in such a way that if the lease is broken she would have to leave in 3 days. ? As well if her sister decides to break her part of the lease but my friend wants to stay ?
  • If we have a flood as a tenant do they have to replace carpet?
  • My co-leasors are moving back to Montana at the end of this month and our lease does not expire until May. What are the ramifications of ending the lease early?
  • We rented a home 2 years ago with a 1 year lease. The landlord has not had us sign a new lease. The old lease specifically states that the agreement begins on 8/5/10 and ends 7/31/11. What rights and responsibilities do I have?
  • I was just delivered a notice that my apt building has been sold and starting 2/1/15 my rent is increasing and I must sign a 12 mos lease. I am currently on month to month can they raise the rent and expect a lease signed in 11 days or must they give notice? If notice must be given is it 30 days?
  • hi i'm a non us citizen been living in low income apartments for over 15 years with my children who are all usa citizens how ever my 2 oldest kids moved out and now only 3 of my children are with me one who has autism and 2 other young ones. my landlord now wants to kick me out because i have no papers i want to know what can i do to stop this please any help on information thank you.
  • A few days after a pest control issue, house of filled with dead animal smell coming from the AC vents. I couldn’t get in contact with my landlord. My husband gets up in the attic to try to Search. He determined it was not in a ducts, but most likely fell into the mail AC unit. My landlord has sent two different people out to 1. Cover the smell, 2.reconnect the duct. He has yet to send someone to open/check inside the unit. I have an immune compromised 2 year old, no ac, & a dead animal in air system (which is a big health hazard). How long can he drag his feet? What are our options?

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