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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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

  • We have been having trouble with our A/C unit for over a year now and each time the landlord "fixes" it it breaks soon after. Last summer our place was uninhabitable for 3 weeks. The landlord "fixed" our AC twice already this week. Today they showed up to let us know it's still broken. What do we do?
  • My a/c has gone out 6 times in the past 2 months. Maint. Comes and "fixes" it but the same problem keeps happening. What can I do legally to get it fixed/replaced?
  • My apartment building outside lighting doesn’t turn on until way past sunset. I have submitter in writing using the managements website form asking for the lights to be turned on earlier due to it being a safety and security issue. I received a response 2 months later saying the request was complicated. However nothing was changed. This week I tripped in the dark and broke the screen on my cell phone. Can I get the repair costs paid for by the management company either by working with them or through small claims court?
  • I have(had) a roommate who Moved out when she lost her job. She hasn't paid rent for 2 months but she left all her belongings here. We've been in contact since she left mid august about picking up her thinggs and she keeps giving me the run around. Just wondering how long do I have to wait to get rid of her belongings?
  • I'm moving at the end of my lease this month. I've asked Management for a walk-through with me on the last day to ensure I've met all the cleaning expectations in order to get my deposit back. Management says it isn't necessary since they think I keep a clean place. My concern is that after I'm gone, trumped up "repairs" will be noted on my account and they will keep my deposit. They've not been the most ethical and business-like over the past year. What are my rights?
  • C Our neighbor upstairs has caused us problems about the parking and has threatened my 70 yr old husband and myself. Last Friday his gun "went off " into the floor of our bedroom, where my granddaughter and I were. He went to jail. No one was hurt. But I do not feel safe with all that and then yesterday a person was arrested in front of our apt with a large amt of money and drugs. He went to jail also. Our lease is up but we had intended to renew. Now I'm afraid to live here. We were supposed to give a 2 months notice if we moved out. Do we still have to give that much notice?
  • Is my landlord responsible for getting rid of mice and roaches, or am I? I called and told them I had seen both, and was told to go buy traps.
  • My landlord sent me a check, for what I believed was compensation for my a/c being out for 3+ weeks with temperatures in the home exceeding 100 degrees. I contacted them to ask how the amount was calculated. They then responded that it was noted in my account that a check was sent to us, and would get more information. A few days later they stated that the check was sent in error, and to return the check. What is my legal obligation?
  • My home 8s foreclosed and sold back ti the mirgager. Iwhen the papers were served to me, the company from which i was paying on a water softener system and still paying ons name were on the papers, too. What does that mean?
  • Our leasing company who operates nation wide told me their contractors are legally obligated to tell them if they see or hear pets. (We don’t have one but our neighbors does, these houses are squished together) now they are trying to force fees with out me signing anything. It feels like an invasion, one of these dates this has been “recorded” was today while I’m at work. We haven’t requested for anything to be fixed. Is this legally allowed?

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