On May 20th, President Obama signed the Protecting Tenants at Foreclosure Act of 2009 (S. 896) into law. These tenant protections are effective immediately and expire on December 31, 2012.
In a nutshell, renters must now be allowed to remain in the home for the duration of their lease, even if the home is being foreclosed on. The new law gives renters a minimum of 90 days notice before they must vacate. If a new buyer plans to personally occupy the property, or the tenant's lease is month to month, or there is no lease at all the tenant is entitled to at least 90 days notice.
If there is a lease, tenants will be allowed to stay for the remainder of the lease before the foreclosing lender or new owner can proceed with eviction. If a state offers greater protections to renters, the new law allows the stronger protections to apply.
This bill is important and timely, because it specifies that tenants have rights and gives them protections they did not have previously. As a broker who provides property management services, I'm thrilled that we have some guidelines that allow us to treat the tenant fairly. Without this law, we were required to enforce the provisions of the existing lease.
If an owner was attempting to negotiate with their lender for a loan modification, refinance or a short sale, we often didn't know until the day before the scheduled foreclosure if the the lender would postpone or stop the foreclosure auction. This left the tenant in a precarious and stressful situation, not knowing whether or not they'd have to move. As the property manager, my hands were tied, as I was unable to alter the lease without the owners permission, and they frequently are working furiously to keep the property.
This new law provides a policy whereby tenants have rights, property owners have new guidelines to follow and landlords, new purchasers and lenders all know where they stand.
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