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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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

  • I informed my landlord that there were several things that needed to be fixed (the dishwasher and the toilet) She never responded to my requests. I waited several days. I then informed her that I would have these items fixed and that I would provide her with receipts of the work done and deduct it from my rent. Again, she did not respond. Now she is seeking late fees for the amount that I deducted from my rent. In addition, the roof has leaked for the last year and after numerous requests has not been fixed to my knowledge. Can she do this and can I break m y Lease?
  • If I am moving out of home that I am renting and there are damages made on my behalf, Can I repair on my own before I move out or does the landlord have the right to do repairs themselves and charge me?
  • IF a lease has not been signed on a rental property in over ten years is the original lease still in effect or does the agreement default to month to month or week to week?
  • What rights do i have as a tenant if my land lord and his wife are on bad terms and are putting us the tenants in the middle of their martial issues. Landlord is in jail for fraud and beating up his wife. Wife picks up rent money, and landlord sends people to the house to collect rent money even through we gave it to the wife without knowing the landlord was in jail. We are not trying to be in the middle of it, but who do i give the rent money to, if the landlord wants us to give it to other people? The wife wants the money too, but here's the thing we don't have a signed lease no more.
  • I rent a condo from the owner. The landlord has sent 4 serviceman to fix my 23 year old ac unit that has been non stop leaking on 7/4( now 7/28). Each saying the ac simply needs to be replaced. I have numerous bowls out bc it leaks in different areas. The hallway is a hazard and unsightly . He has come to terms it needs replaced. What time frame am I entitled to have the replacement done timely ? Also is it my responsibility to meet the repairman if the landlord cannot accommodate my work schedule?
  • I have lived as a tenant for the past 3 years and every year a major appliance breaks, first it was the microwave, then the stove/oven, and now the refrigerator. Each repair takes over 2 months. My refrigerator broke on 7/23 and it is still not fixed! Can I pro-rate my rent for the days without a working refrigerator? Our food has gone bad and it is still not repaired! So frustrated!
  • Because of the current coronavirus pandemic both my daughter and son-in-law will be laid off indefinitely. Their current lease ends 6/15/20. They notified rental office that they would like to end lease 6 weeks early (end of April) because of this financial hardship. They will live with us until things get back to normal. They have given rental company 45 day notice that they will vacate apartment at the end of April. Rental company is telling them that they will have to pay 2 month penalty for breaking a lease 6 weeks early. This does not sound right during this healthcare emergency!
  • How long does a landlord have to fix the hot water heater?
  • All of my move out discussions have been verbal, with a start date of Saturday 2/11. Are the written letters absolutely required to pursue violated law by the landlord?
  • After eviction judgement is served, how many days must the landlord keep tenants personal effects in storage? when can the landlord dispose of the said tenants belongings?

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  • He told me that I could actually get all the money I needed by using my home as collateral. . .
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