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TENANT EVICTION LAW AND FORECLOSURE PROBLEMS

In March I wrote about the problems tenants faced when the landlord was in foreclosure. See TENANT RIGHTS AND FORECLOSURE - A DISCUSSION OF SAFEGUARDS. Some, but not all, issues have been addressed in new legislation that went into effect May 20, 2009 called the Protecting Tenants at Foreclosure Act of 2009 (note: it is Title VII in this link). There is still the advance rent and security deposit issue as the ACT does not address how the tenant can protect itself from the loss of those monies.

New new Act is very broad and effectively covers every residential mortgage in every state. It does NOT apply to tenancies that are not "bona fide" - and that definition is also very broad. For example, if you are in foreclosure and the tenant is your child, the Act will NOT apply.

The key is when was the lease entered into - was it before or was it after the foreclosure was filed? If it was before the lease was signed, then it takes precedence over the mortgage foreclosure and the tenant cannot be evicted because fo the foreclosure - provided the tenant does not breach the lease. The ONLY exception is if the buyer is purchasing the property as its PRIMARY RESIDENCE, in which event the 90 days.

If the lease was after the foreclosure, then the tenant can be evicted 90 days after notice to vacate is given by the NEW owner after the foreclosure sale. In essence, any lender must give any bona fide tenant 90 days to vacate the premises AFTER the lender or any other buyer at a foreclosure sale acquires title to the property. Of course some state tenant laws still apply, for example, if the prior Landlord (the foreclosed owner) had given a notice to vacate prior to the foreclosure sale occuring (because of a tenant breach) in which event that notice start date would remain applicable.

The HUD explanation is simple regarding the notice to vacate:

(1) The advance notice applies to tenants in any foreclosed dwelling or residential real property, regardless of the type of loan or other security interest on the property.

(2) An advance notice of 90 days is the minimum period of notification. A longer period may be provided, for example, if greater protections are provided by state or local law.

(3) Responsibility for providing the advance notice to tenants falls on the immediate successor in interest of the property, which will generally be the purchaser.

(4) The notice must be given to anyone who, as of the date of the notice of foreclosure, is a bona fide tenant, whether or not there is a lease.

A detailed analysis of the Act is found at: PROTECTING TENANTS AT FORECLOSURE: NOTICE OF RESPONSIBILITIES PLACED ON IMMEDIATE SUCCESSORS IN INTEREST PURSUANT TO FORECLOSURE OF RESIDENTIAL PROPERTY.

Remember that during the remaining term of the lease or the 90 days notice period, the terms of the lease still apply - the tenant obligations to maintain the premises, pay rent, etc. must still be adhered to by the tenant or they can be sued and evicted by the new owner! This new law is NOT a free ticket for tenants!!!!

It is important to recognize that the new law is only a starting point - STATE LAWS that provide greater protections are still in place and will override the new federal law. I would also note that if the lease term was finished before or during the 90 day period, the lease term is NOT extended by this law and normal state remedies for holdover tenancy would be in effect.

MISSING SECURITY AND ADVANCE RENT PROTECTION FOR TENANTS -

The ACT does not provide any monetary protections that I spoke about in my previous article and therefore the game plan in that article still applies. The problem is that most tenants gave to the original landlord last month's rent and a security deposit. The new owner has no responsibility to the tenant for those monies!! So what to do - see my suggestions in TENANT RIGHTS AND FORECLOSURE - A DISCUSSION OF SAFEGUARDS.

There can be other more imaginative ways to proceed - but remember that because the old landlord that lost the house isn't the owner anymore does not mean that you get a free 90 day pass to live in the house (althought that is how it is likely to pan out for new owners). The new owner can sue the tenant for unpaid rent for the 90 days. That leaves the tenant in a conumdrum of how to recover the deposit and advance rent and that is why participation in the foreclosure suit with a request to the court to deposit monies to the court registry is going to be the best legal route a tenant can take to demand and get fair treatment regarding its financial obligations. My suggestion is to get involved as a tenant in the foreclosure suit when served with the foreclosure summons and complaint. You may want to seek the advice of an attorney in your State when doing so.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com. See our easy to find articles at TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES.

Posted by Richard Zaretsky, Florida Real Estate Attorney on 08/07/2009 05:44 AM

Comments (19)

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19 Comments on TENANT EVICTION LAW AND FORECLOSURE PROBLEMS

AUG

90 days seems to be a reasonable time . . most of them already are aware when the stickers of intent to foreclose are pasted on their front door.

Thanks for sharing. I was helping a couple find a rental and made sure that the owners were not in foreclosure.

I guess we are going to be seeing a whole lot of these situations and more than likely they will be around for a while.

Thanks Richard for another terrific informative post. I will be re-blogging this one also.

Thank you for sharing this information, 90 days seems to be reasonable for tenants to vacate. We have had experiences here in Pasco County with Tenants and Foreclosures. Our Foreclosure market is quite strong here.

Hi Richard, Good post. Thanks for sharing.

Best - Sash

Hi,, Richard. I just subscribed to your blog. I live in Jamestown, Tennessee near the Big South Fork national park, listing and selling mainly horse properties in and around the Spruce Creek equestrian community. Prices hold fairly steady here as it is a destination for trail riders, highly desirable, so there aren't alot of foreclosures. Still, foreclosures seem to be part of the present landscape in this country so I would like to be much more knowledgeable and appreciate the opportunity to read your posts! Thanks.

AUG

Richard - Thanks for the interesting analysis and opinion in your discussion.

AUG

Hi Richard,

I wish I could find you in year 2001 when my real estate horror started.If you are interested and will find a minute of your time check my blog it basically describes my situation I went through.I don't know if after all this time I still can do anything about it but I was not only forced from my house but from USA.I couldn't find any attorneys at the time to help me.I'm in Europe now but planning to go back to USA after some time.I read a lot about the real estate market in USA,found your post very interesting.

Zijuzijazijana

Eva

You can email the story to me or give me your blog address to view.

Richard

AUG

Hi Richard,

Thanks a lot for the information, very useful! I have a couple of questions for you. I am a tenant with a written lease agreement that started on March 17, 2009. On August 14, 2009, I received a copy of the "Motion for Summary Final Judgment of Foreclosure including award of attorneys' fess and costs" from the lender. With the new law, I think that I have a bona fide lease so I can stay in the apt until the end of the lease. My monthly rent is $1,400 compared to approx. $2,300 that other units in the same building are rented for. I got it cheaper than the other units because I was told that the owner was desperated for renting it as she was having problems with the bank but that she didn't intend to foreclosure. My question for you is if my lease will qualify as a "bona fide" lease provided that I am paying less than the other renters in the same buidlling. I read in the new law that a bona fide lease will be the one where the rent is not substantially lower than fair market rent for the property. Do you think that $1,400 is substantially lower than the fair market rent? I am not a relative of the owner and we signed a regular lease agreement in Miami-Dade.

Thanks for your help in advance!!!

AUG

Vanessa -

Good question. The big issue is WHEN did you enter into the lease relative to the foreclosure suit - before or after?

If before, and you got served with the lawsuit, you should have (or your attorney) answered the complaint and stated that you have a written lease, that you are not related to the owner and the lease was obtained in an arms length transaction. This can also be done later on.

Since the lawsuit is quite a ways down the road already it may be that you entered into the lease AFTER the lawsuit was filed. If that is the case the new law may not apply to you. You need to seek the advice of an attorney in your area that can see the case filing information and your lease and discuss the applicability of the federal law.

The answer is yet to come, however. When (and if) the lender decides to challenge your lease (through serving you with a writ of possession) you will go to court to argue that your lease is valid and enforceable against the lender.

Hi Richard,

Thanks again for your answer. I found the case file information online and it shows the "Summons issued" docket dated on 2/19/08, which is before the date of my lease (3/17/09). I wish I had looked at this website before signing the lease. I think it's better for me to start looking for a new place. One more question for you, is that legal if I decided to break the lease agreement and move before the foreclosure is complete? Assuming that the new law doesn't apply to my case, and continuing with the old law that the foreclosure extinguish the lease, is that safe for me to move before the foreclosure is complete and also before my lease expires (which is on 3/17/2010)? The other thing is that I gave the security deposit to the condo association instead of the owner, will the association have any right not to return my deposit?

Thank you a lot for your advice!

AUG

Vanessa -

While in court yesterday I visited the judge's (for this area) memo on this new law and I would not assume that the judge would interpret the new law as only applying to leases in place before the foreclosure (although that is my opinion - untested as of yet). It may be that the landlord was served after signing your lease, which could make a difference.

I don't think you can walk out on the lease - unless the judge first tells you that your lease will not be considered as coming under the new federal law. So be proactive, answer the complaint and ask the judge to tell you in advance if your lease is protected under the federal law so you know now where you stand.

It may pay, with your somewhat bargain lease, to use some of that savings for an attorney to answer and go to court on what I suggest - and give you some peace of mind.

Thanks for your advice!

SEP

Nice post. What about when the tenant is month to month, would the 90 days still be required (assuming the tenant is still paying)? This seems to give the tenant extra time than they would normally be expected to have, since in a month to month you really only would be entitled to a month's notice at most. Thanks.

SEP

I agree that this is a significant issue. Under Florida law, a month to month tenancy can be terminated at will at least 15 days prior to the next due date for the payment of rent. There are plenty of questions.

First you need to understand that the law only effects leases in existance before the "notice of foreclosure". Does that mean "service" of the notice or mere existance (the filing date)? And what about a lease that has a tenant option to extend or renew?

Second (or third), is a month to month lease that is unwritten "in existance"? It seems it is unless the lease is voided timely.

Thus my opinion, although against my better judgment, is that even a month to month has a 90 day termination feature.

OCT

A friend of mine is renting a duplex and on Friday there was a notice to vacate the property within 24 hours by the Sheriffs Office. It was address to the owner of the property and any and all occupants residing in the property. The tenant became aware of there being a foreclosure in process on the property but thought she would be given some time to vacate. 24 hours does not seem reasonable to ask a couple with 2 minor children to leave.

Someone said that because the writs of possession does not state her name specifically that she may be able to ask for more time? Shouldnt the courts have given her some type of notice? The lender originally offered her "cash for keys" if she vacated by the 16th but on the 15th the lender changed their mind and retracted the offer, although a contract was already executed.

Is there anything she can do?

Kathy -

Tenants need to wake up and get involved in the foreclosure process!

Under the federal law, the tenant should have at least 90 days to vacate - providing the rent was being paid (to whom?). This tenant needs bring the Sherriff and the court up to speed on the tenant's rights under this federal law - assuming the tenant is protected by it. A lawyer should immediatlely be consulted to preserve the tenant's rights.

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