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IMPORTANT PLEASE READ: The Federal Law, Protecting Tenants at Foreclosure Act, expired and is no longer valid as of December 31, 2014.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

  • My husband applied for a joint apartment and put on the application that there was a criminal record involved. He was approved given a move in date. After my information was reviewed, the application was denied because of a criminal record. Is that legal?
  • If you are not the landlord of some one who lives in the same home as you in the garage again I am not third landlord and this person doest pay the power bill it gets shut off I am forced to turn it on in my name and I told him he can pre pay me the 121st bill what his part would be or I would not turn on the power to the garage because I wasn't going to pay for him to use the power and not pay do I have that right?
  • My landlord just have us 2 months notice to move by text message. Can my landlord due that during a time of state emergency?
  • HOA is trying to garnish rent from tenants for back HOA dues. Is this legal since there is no relationship between the HOA and the tenants?
  • years ago i signed over my home to my sister because I was told that if I owned a home I wasn't able to receive AHCCCS. I want to retrieve my home and have mortgage back in my name. Can this be done if my sister won't agree to changing the mortgage
  • Hello... I live in an apartment, last week my car was stolen and so were my license plates. The following day, the manager called and had my vehicle towed, I called the office and explained my situation and asked if there was any way they could help me as I am a single mother and live on ssd, they said there is nothing we can do, you are going to have to pay to get your car out, also adding it is in my lease that vehicles cannot be parked with no tags and I should have called them and told them my tags were stolen. Can I force them to pay the fees if I have police report?
  • Just moved out to AZ, my girlfriend and I have a house with a pool and a walled in back yard. She asked if it is legal to sunbathe without a swimsuit or any clothes on. I know there are public exposure laws, but does it make a difference that is in my own property and with an enclosed yard? Or if a neighbor looks over my wall and sees her and reports it, are we in the wrong?
  • 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.
  • Is it legal in Arizona to break a lease because I am buying a home? If so what forms do I need to submit to the property management company?
  • If a person lives in my house rental free and has moved out her belongs of her own free will. Can I change the locks with no waiting period?

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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

Low Income Home Energy Assistance Program (LIHEAP)

https://www.lawforseniors.org/
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