Investors Beware When Buying Properties That Are Tenant Occupied

Investors Beware When Buying Properties That Are Tenant Occupied

In 2009 the US Congress enacted the 'Protecting Tenants at Foreclosure Act. Basically the PTFA Act offered tenants protection of not being evicted in the case of a foreclosure.  There are four qualifications that need to met in order for the tenant to keep possession of the property after a foreclosure by the landlords creditor.  

1. The defaulting borrower can not be the same person as the tenant
2. The lease must be an 'arms length' agreement
3. The lease must require 'fair market rent'
4. The lease must have been executed prior to the notice of trustee sale

 

Until recently the 'notice of trustee sale meant was understood to mean the 90 day notice the lender is required to provide the borrower before proceeding with the foreclosure. Basically that meant the tenant must have signed the lease at least 90 day before the trustee sale.
 

 

Here's where it could become a big game changer for investors... according to the The Dodd Frank Act the 90 day notice requirement has been eliminated in Section 1414(1) (B).  The tenant must only show that the lease was entered into anytime before title transfers from the original borrower to a 'a successor entity or person' at the trustee sale.
 

So what does this mean for Investors buying property?  The defaulting borrower could enter into a lease with a new tenant the morning of the trustee sale thus requiring the new owner to honor the lease following the foreclosure. This means the new owner could be stuck with with renting the property for the remainder of the lease term. 

 

Investors Beware When Buying Properties That Are Tenant Occupied
 

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Real Estate and Working with my Clients is my Passion!
  

 
I take my clients trust in me very seriously. I'm known for 'telling' it like it is, not what folks might want to hear or  think it should look like. Now that may sound kind of tough, but think about it, in the long run if you want to buy or sell a home you need to know the real facts in order to make a wise choice.

If you want the truth and the whole truth, I am the 
Phoenix Real Estate Broker for You.

When you are ready to buy or sell a Phoenix Area Home, I will be your advocate, guide, and fierce negotiator. I will work hard to make your buying or selling a home as smooth and stress-free as I possibly can - even if it's a short sale.  Guaranteed.

 

Call me and we'll create a plan of action to buy a home or sell your home! 

 

Sincerely,

 

Anna 'Banana' Kruchten

Broker/Owner

602-380-4886