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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 (41)

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Originally posted at: Z's Legal Short Sale Blog: TENANT EVICTION LAW AND FORECLOSURE PROBLEMS

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41 Comments on TENANT EVICTION LAW AND FORECLOSURE PROBLEMS

AUG

2009

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

2009

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

AUG

2009

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

2009

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

2009

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

2009

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

2009

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

2009

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

2009

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.

MAY

2010

A week ago I signed a 1 year lease for an apartment. I paid a security deposit equal to 1 month's rent and the lease has a clause that from months 6-12 I get one month's free rent. I am paying a fair market rate. Two days ago the other tenants tell me the building is in foreclosure and that they also signed leases without knowing about it. The unit was listed with a licensed real estate agent and I dealt only with him until signing the actual lease, when the owner was present as well. The owner and agent never said anything about the foreclosure and there is nothing in the lease about it. Do the other tenants and I have any protection under the new law? The owner was aware he could not fufill the terms of the contract when he signed it and I would never have leased this apartment if I had known it was in foreclosure. This seems like fraud to me, is it?

Shelly -

You asked two questions -

The answers are, in order, NO and YES.

That was quick, thank you! Does ordinary contract law apply in this case? Would this be considered fraud in the inducement, or did I have a duty to investigate the since the foreclosure is public record? I had no idea this sort of scam existed and neither did the other tenants. The licensed agent made me feel like this was legitimate, if I had been dealing only with a private owner I would have been much more cautious. In fact, I turned down several places when the owners told me they were facing foreclosure. I am not in a position to move again after paying all the moving costs and security deposit just two weeks ago. Can we be evicted without 90 days notice?

JUL

2010

my son and his girlfriend have a 1 yr lease (signed feb 2010) in Orlando on a home where they found out is now in foreclosure, they have always paid rent to the landlord and have an $1100 deposit. Now they get an email that the house is listed with a realtor in a short sale. They do NOT want to let the house be shown and their lease does not address this situation. Do they have to let the house be shown? What are their rights beyond the PTFA? Should they continue to pay rent ($1100), and if so to whom? we know the landlord will not return their deposit, as he stopped paying the morgage in january 2010. The landlord has been a real jerk and did not even remove his belongings before they moved in, so they had to move all of his stuff into the garage before they could even move in, and they had to call code enforcement to even get smoke detectors> Do you have any advice? especially about the showing to prospective buyers? Thank you

C Kirkland -

I suggest that when your son gets served with the foreclsoure suit, he answer it and attach a copy of his lease AND in his answer, ask that the court direct that the rents be paid to the court registry - this way he has a better chance of getting the money for his deposit back.

As to showing it, we often have trouble with renters not allowing access for showings, and it is a real pain for the seller and broker. Showings should be with advanced notice and at reasonable times. If he sells the place, the buyer will be buying it subject to your lease, at least until the one year term is up.

OCT

2010

Hi Richard,

I signed a 12mth lease on 07/15/2010. In August I recieved a letter advising that there will be a hearing held on 09/13/2010 in regards to a Mortgage Foreclosure filed 03/2009. I was very shocked when I recieved the letter, i had no idea that the owner was going through forclosure on this house. Later I recieved another letter in the mail on 09/18/2010, stating the Judges final judgement. Owner must pay total sum listed above which was about $254,000 (including court cost interest, and taxes) or Property will go for sale on 10/18/2010 at 11am. What do I do? Is it possible that the owner can stop the sale from taking place, if working out something with the bank. I ask this because I did let the owner know and was worried that I will have to move. The owner told me that he worked out something with the bank and that he isnt losing his property. But of course the court papers I recieved shows different. I dont know who and what to believe at this point and what my rights are.

Do you have any advise?

OCT

2010

Unfortunately you cannot rely on anything except the federal law to allow you to stay in the home for 90 days after the foreclosure sale. You need to advise the court (by letter for example that includes the case number of the foreclosure case). Under the cited law, you should then hae 90 days to vacate after the foreclosure sale (unless you negotiate thereafter with the new owner for a longer term).

OCT

2010

HI Richard,

I see alot of you have at least 90 days to vacate a rental property if it is in foreclosure. Does the foreclosure act state anywhere that the tenant must pay rent during that time? I know 90 days is a long time, but there is alot of cost with moving a whole family.

Thanks

OCT

2010

Amanda -

No free lunch - you have to pay the rent.

FEB

We have a deposit on a condo that was bought by Freddie Mac that has tenants in it that may not want to move till they have to...They pay month to month and have no lease. There is a husband, wife, and teenage son. Which is what we have too. We already have a contract on our existing home and have put some items in storage.

Freddie Mac RE Agent says now they don't want to evict. Already closing date was changed for one extra month. Customer was aware of contract on condo since first week in January.

What would be the best way to handle such a situation, if we do want the place. Freddie Mac advise our RE Agent they would give back deposit if now didn't want to buy with tenant. It was never discussed before today that we would have to by with tenants still living there

Jeff

The tenant should be given a 90 day notice to vacate per the federal law. The seller has the obligation to deliver per the contract, but you may need to be proactive and allow the seller 90 days to deliver the possession as an objection to title. The 90 days runs from the date of the sale to the bank.

JUN

Hi,

Im in the same situation, but civil action took it to the courts and the Judge denied her? The sheriff's posted less than a thirty day notice for eviction. After court the laywer contacted me and said she could only noigate now with the bank for a lil extra time. so now I have until the 30th of this month to be out! I have four children and I am Oneida Indian and cant find any resouces to help me with this act or funding for moving in such a short time.

JUL

Richard, to you have an attorney contact in Michgan to craft laguage before a lease is sgned? http://activerain.com/blogsview/2388513/tenant-protection-language-forresidential-lease-whereby-landlord-defaluts-on-loan

JUL

I'm a bit confused regarding the foreclosure act and the langauge "if your lease was signed pre or post". I found out the Lis Pendens filed 9/2009. I signed a lease 12/2009 and signed an extention 12/2010 for month to month. Final judgment on foreclosure was July 2011 and auction set for August 2011. I'm still in the house - do I qualify for the 90 days to vacate under the the foreclosure act? To this date I have not been served any papers and my landlord still thinks he can modify the mortgage (wishful thinking). Thank you for your response, great blog

Lorrie - you come under the 90 day rule. But the way the matter usually works, assuming the lender is the "high bidder" is that they will notify you that the 90 days is starting - and they may take their time about it. Best rule of thumb advice is wait to see if the sale really occurs, and if it does, find the new place to stay and sign a lease to start anytime after you give the necessary and timely notice to the new owner that you are no longer going to be renting the unit.

JUL

Thanks Richard I thought that was the case but was told by a realtor I have to be out in 30 days. I understood the 30 days occurs when the house is bought at auction by an individual that intends to live in the house. I am going to follow the auction on line. In the meantime I will start looking for a place and will look for the notice from the bank and/or new owner. If the auction goes forward and the bank is the only bidder my landlord is no longer the owner of the property correct ? How long does the tranfser of title etc usually take? I was thinking of having the locks changed since I don't know who the landlord has given the key to.

One more ? I know the banks are not in the business of renting real estate - but I've seen many homes in my area Tampa that have been empty for years and with that the property is just loosing value. I've seen the service where they come in and mow the lawn. What are the chances of a tenant approaching the bank to stay in the home and maintain the property. Have you seen that happen? Thanks again.

JUL

Lorrie -

It happens and actually it often happens with either the lender approaching the tenant or the tenant approaching the lender (or lender's representative). We just had one in our office occur that way.

AUG

I am entirely unsure of what to do in this situation.

To some up a long story, my parents in Ky had entered into a lease with option to buy a home in October 2010. Around January 2011, the home went into foreclosure and was auctioned off at the courthouse steps in May. On August the 8th, 2011 my parents were evicted without notice to them from the agency, bank, sherriffs office nor the former landlord. The agent that represents Fannie Mae simply showed up and forcibly entered and threw their items out into the yard. To add insult to injury, rain ruined their lifetime of childhood irreplaceables.

Shouldn't the 'Protecting tenants at foreclosure act of 2009' kicked in?

SEP

Adam -

Sounds like your parents have a glorious claim against Fannie Mae. Few if any jurisditictions have self help remedies on residential tenancies, especially without notice!

Find a local real estate attorney for a free consultation. They will inform you of your parent's remedies.

NOV

Can I do a Rent to own Contract for 15 years at fix $ 750 per month ( including HOA and Property Tax): finalizing the 15 years the aprtment will belong to the tenant / buyer without paying any additional. If I do so and the buyer / tenant does nt pays me any day within the 15 years: can I evict him or I need a foreclosure. What s better for me as landlord: to fullfill one rent to own Contract, or 2 contracts: one to be a regular lease , and another to be a purchase option with fix price into the favour of tenant/ buyer ( this is bcs he stops paying me, probably I ll have more chances of an eviction presenting the lease Contract, I think). I want to sell apartments in Florida communities in this way: is legit and possible?

JAN

Hi,

I am a landlord for a condo in West palm beach, FL. My tenant is not paying the rent since January 1st, 2012. I told her orally about 2 weeks back to vacate the condo. I am trying to get in touch with her but unable to. She does'nt return my calls. She is saying that if we want we can give her eviction notice. So I am very frustrated and not sure what to do at this point. Please advise. Thanks.

you need legal advice =

Pleae call our office or your local real estate attorney on how to deal with the matter.

Our office is 561 689 6660

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Richard Zaretsky, Florida Real Estate Attorney

West Palm Beach, FL

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Richard P. Zaretsky P.A. - Board Certified Real Estate Atty

Address: 1655 Palm Beach Lakes Blvd, Suite 900, West Palm Beach, Fl, 33401

Office Phone: (561) 689-6660 x 107

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