Special offer

Tenants Have Protections If House They Are Renting Is Foreclosed

By
Property Manager with HomePointe Property Management, CRMC 00691121

Effective May 20, 2009, tenants with a “bona fide” lease that was entered into before notice of foreclosure can remain in a foreclosed home until the end of their lease, unless the bank sells the property to someone who intends to make it his/her primary residence.

If the new owner intends to occupy the home, they are still required to give 90-days notice to the tenant prior to eviction. If the tenant does not have a lease (month-to-month) or current state law allows the lease to be terminated at will, there is still a 90-day notice requirement prior to eviction.

Notice must be provided by the “immediate successor in interest” which, in most cases, would be the bank or the new owner. A “bona fide” lease is defined in the law as one that:

(1) the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant;

(2) the lease or tenancy was the result of an arms-length transaction; and

(3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit's rent is reduced or subsidized due to a Federal, State, or local subsidy.

Posted by

Robert A. Machado, CPM, MPM

HomePointe Property Management

Sacramento, Yolo, El Dorado, and Placer Counties

We manage residential and commercial property.

916-429-1205 x 105

rmachado@HomePointe.com

Comments (3)

Bryan Watkins
LRA Real Estate Group - Mesa, AZ

Robert, glad tenants have protections. Pretty hard on a family to be kicked out.

Apr 20, 2010 05:17 PM
Tom Priester
Paradise Sharks - Jupiter, FL
Paradise Sharks

With most foreclosures taking so long tenants usually have time to make alternate plans unless they have a very, very long term lease. 

Apr 20, 2010 07:40 PM
Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

Robert - This is excellent information, which provides some protection for tenants!  I think many of us know of instances where tenants were paying rent, on houses that weren't having payments made by the landlord! 

However, any buyer of a foreclosure, really needs to determine the status of any occupants, if they plan on occupying the home themselves.  Fortunately, most foreclosed property is vacant property - unless it's multi-unit!

Apr 27, 2010 09:40 AM