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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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 are renting an apartment unit in Flagstaff for my daughter who attends NAU. The tenant above has flooded our unit 3 times in the last year because of connecting an illegal bidet. A couple weeks ago the unit flooded for the 4th time because of the sprinkler system. With the most current flood we asked for some diminution since one of the rooms and the laundry was unusable and asked for utility compensation because of the electricity the fans were using. The company gave $25 towards water but will not give any credit towards the rent. What can we d?
  • I own a Mobil lot in Apache Junction. I do not own the trailer that is on the lot. I have been renting this lot at a very good rate. I just found out today my renter passed away. What are my legal rights to get the Mobil off of this lot? The renter has a daughter whom has not contacted me as of yet.
  • My landlord never made me sign any paper according to my understanding that wouldn’t allow me to have a motorcycle. But today when I brought one home he said he wouldn’t allow it on the property and that he would evict me. Is this legal?
  • Can management legally require a resident of a 202 Hud apartment complex to wear a face mask in the building?
  • This is our 2nd year of renting in a Phoenix apartment building. Over the past few months the smell of marijuana or some kind of drugs is consuming our apartment, through the a/c vents. On a daily basis, our family has headaches and we are concerned for our 18 month grandchild. Our lease ends in 8 months and cannot deal with this for that long. What rights do we have and is it legal for us to break our lease without action taken against us?
  • My husband and I own a home and have rented out a room to a man under a month to month lease. After 8 months we have decided that this is no longer what we want and have served him his 30 day notice to vacate. During this period he has moved his girlfriend in who never leaves our home even when he is at work and stays the night every night for the past 2 weeks. We clearly have it stated in the lease that the tenant shall not have overnight guests for more than 2 nights in a one week period. Can I call the cops and have her escorted off our property?
  • My tenants have two months left on their lease. They have moved out and my home is empty. They have made and given keys to cleaners and repair people without my knowledge or permission. Is this legal? Can I have the locks changed even though they are still paying rent?
  • I am breaking my lease with 7 months left on it. I told my landlord a week ago and they have yet to post the property on the rental market. How long do they have to do this? I know I am responsible for rent until they find a new tenant but I also know they need to make an effort to find one.
  • I am renting to own my house, I have lived here for 20 years. I have a problem with my air conditioning unit and other problems with the house. Is it the Landlord's duty to fix the problems or is it mine. I do not own the property yet.
  • Live in a 55 plus community bought MH. Main water pipe busted and has flooded the whole crawl space. Who pays for the cost? Who pays for damages to home?

STORIES

  • Age discrimination in the workplace. . .
  • He told me that I could actually get all the money I needed by using my home as collateral. . .
  • I just helped my mother, age 89, deal with her Medicare HMO. . .

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