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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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

  • We sold a home in Hereford AZ that is in an HOA. At closing we were charged $800 for a disclosure fee. The state statute allows a maximun of $400. We told the HOA this and they refused to let us close unless this was paid. The statute also states that the HOA could be fined up to a $1200 for this. Who can we complain to to get get this investigated?
  • I had a friend staying with me to help pay the rent. They left (without paying debt) and left several of their things at my house. I want the things out. How long do I have to store their belongings until I can get rid of them. I have informed them several times and they will not collect their things.
  • My daughter owns a home in Peoria and has enough land for me to sit a mobile home or motor home on to live in. Is there any law or zoning restrictions i have to obey?
  • I live in a home in which had not been occupied for about 4years. I have been here almost18months now i have done some work on the place like put locks on front door itjusthad a chain throughtthe hole, I’ve fixed resroom sink and painted, i put up a dividing fence in the back yard as well as cleaned up the entire property, I’ve finished the bedroom closet including insulation drywall and soon paint the owner of the home is telling me because i had an incident with his son locking me out of my home that now i have to move out and i have 8days. We have no wtitten agreement. What can i do?
  • I am a homeowner, temporarily living and working out of state and have allowed a family member to live there rent free. She is taking over the utilities, I continue to pay the mortgage, taxes and insurance. She also will take care of maintenance and her own personal desired improvements, with permission, at her expense. My question is, does this relationship put me in a position of being a landlord, which I do not want to be, or am I a non-resident homeowner? Can you point me to state law and statutes on this subject?
  • We have been complaining about roach problem for 6 months. We had pest control come and sprayed again and again to no avail. We pay rent but living in roach infested apartment with our kids is becoming nuisance since they are everywhere. What can we do? They are sending another pest control person in few days. Help
  • What is the definition of habitable under AZ law. If move into apt. that has new carpet that makes one sick would that be uninhabitable? Thanks
  • 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
  • My grandson lives in the back of my property. His friend leaves there drunk sometimes. If he gets into an accident am i liable
  • we are getting conflicting answers we need to know specifically : Is the ladlord responsible for paying trash service? we know they have to provide cans

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Documents

.pdf  AzMortgageResource.gov ReadSpeaker

.pdf  AZ Renters Guide ReadSpeaker

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Where can I find legal help with a foreclosure?

Did you know the Arizona Attorney General’s Office has a wide range of statewide assistance programs funded through the national mortgage settlement that could benefit you or people you know?

Legal Tips for Tenants

LINKS

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