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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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

  • There is a lady that I was doing a roof for and she came out side her house and blew up on me about getting things done and I have been getting them done. And I left to carry a trailer back to a metal shop and all my tools are at her house now she will not give me my tools back is this against the law?
  • Hello, my husband & I purchased an older home in Aug. The Sellers listed on the disclosure statement that they treated for roof rats. However, they didn't solve the issue. It has taken us 6 months to resolve the problem not to mention a lot of money. Since it was listed on the disclosure statement, do we have any recourse?
  • I recently rented a room for my wife and I from a couple in Phoenix. I paid a deposit and three months rent in advance totaling $1625. I received signed receipts. Before moving in the landlord changed our original agreement and asked for a separate fee for utilities. We had agreed on a monthly rent charge that would include utilities.I informed the landlord that if he could not adhere to our agreement I would remove my property and wanted a refund. After considerable difficulty I was allowed to do so but a refund has been refused. A lease was also refused. I never stayed in the home even once.
  • If the house I purchased at Maricopa County auction was stripped of air conditioning, cabinets, fixtures and wiring and I know there are excess proceeds, how do I place a lien against the excess proceeds to recover the costs of replacing the items? What type of filing is necessary to recover the loss of these items?
  • We have a roommate on our lease and he is 24 and sleeps in a girls room(22) and she doesn't want him in there. What can be done. She is saying she doesn't feel safe with him around because he has become an alcoholic. Thanks for any advice.
  • We have 2 homes 3 mortgages all mortgages were with Bank (Proper name removed). Our residential home is on trial modification. Bank sold the loan in July with our investment property to a loan servicing company (Proper name removed) before I could finish with it's modification, I want to modify our HELOC loan that Bank holds on the investment property also. If I can't modify these 2 loans the house may go into foreclosure. My question: If Loan Servicer suggests fore closer whats going to happen with our HELOC loan with Bank.? Loan is around $101,000 HELOC at 83,000 and house is worth about 145,000.We really don't know whats best for us
  • I was convicted of a felony in 1994. This conviction was set aside in 1996. Can an apartment still refuse me because they say I have a felony conviction? I try to explain that the conviction was set aside, but they still will not rent to me. Is that legal, and do I have any recourse?
  • I've been renting from this lady for about two years and she's been telling me she wants to self. but when she sells that she would put me on a lease. so I would not lose my place to live. an then all the sudden yesterday she brings me a letter of termination. Then told me I need to move out in 2 months. I'm a single father I barely making the bills. an we're in the middle of a pandemic right now? I'm afraid that I may not be able to find a place that I can afford and will accommodate my needs. and does she have to pay a relocation fee to have me move in the middle of a pandemic.
  • I am considering buying a house in Mesa, and looked on the Maricopa County Recorder website fnd see that the owner is listed as a conservator with ownership with minor children as conservatorship. What does this mean? Does this mean minors can own property in AZ?
  • My husband quit claimed house to his brother before we were married but never had it recorded. Now he has quit claimed to me. Is this going to make me legally the owner with my husband or does it belong to his brother legally?

STORIES

LegalLEARN

FIND LEGAL HELP

  • Please select your county of residence below.

    County:
     

OTHER LEGAL RESOURCES

  • State Bar of Arizona
    www.azbar.org
  • Maricopa County Bar
    www.maricopabar.org
    Referral number 602-257-4434
  • Pima County Bar
    www.pimacountybar.org
    Referral number 520-623-4625
  • National Domestic Violence Hotline
    800-799-7233
  • Bankruptcy Court Self Help Center
    866-553-0893
  • Certified Legal Document Preparer Program
    Link

ORGANIZATIONS