Are You Buying A Foreclosure Home? Does it have a Tenant in it?

Real Estate Agent with Metro1 Realty

If you bought a foreclosure home and intend taking immediate possession, think again.  Under the Protecting Tenants at Foreclosure Act of 2009 (S. 896), signed into law on May 20, 2009, tenants, including section 8 tenants, must receive at least 90 days notice before they have to vacate the property.

More specifically, If (1) you intend to use the foreclosed property as your primary residence, or (2) the tenancy is month to month, or even if (3) there is no lease at all, then the tenant is entitled to at least 90 days notice.  And If one of the above 3 conditions is not met, a bona fide tenant will be allowed to stay for until the end of the lease period.

Here is the full text of sections 701 and 702 and 704 of the law.




This title may be cited as the “Protecting Tenants at Foreclosure Act of 2009”.


(a) In General.—In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this title, any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to—

(1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice; and

(2) the rights of any bona fide tenant, as of the date of such notice of foreclosure—

(A) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90 day notice under paragraph (1); or

(B) without a lease or with a lease terminable at will under State law, subject to the receipt by the tenant of the 90 day notice under subsection (1),

except that nothing under this section shall affect the requirements for termination of any Federal- or State-subsidized tenancy or of any State or local law that provides longer time periods or other additional protections for tenants.

(b) Bona Fide Lease Or Tenancy.—For purposes of this section, a lease or tenancy shall be considered bona fide only if—

(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.

(c) Definition.—For purposes of this section, the term “federally-related mortgage loan” has the same meaning as in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).


This title, and any amendments made by this title are repealed, and the requirements under this title shall terminate, on December 31, 2012.

Further Information:  Ask your attorney if there have been any amendmants to this law, or if the state you're buying the propertry in offers greater protections to renters; if so the stronger protections will apply.  If you are buying a foreclosure property in the Louisville Kentucky or Southern Indiana area, you may call Metro1 at 502-254-9600 for foreclosure, short sale, distressed property and attorney contact information.

Comments (6)

Elyse Berman, PA
Best Connections Realty, Inc. - Boca Raton, FL
Boca Raton FL (561) 716-7824 CRS, ABR, GRI,ePR

Good information, Neil.  Thanks for sharing it.   I just put an offer in on a foreclosure but it was vacant.

Feb 04, 2010 10:03 PM
Elva Branson-Lee
Solid Source Realty GA - Atlanta, GA
CDPE - Atlanta Real Estate & Short Sale Agent

Great information, Neil.

Feb 04, 2010 10:04 PM
Barbara Kornegay
REMAX Essential - Wilmington, NC
Wilmington NC Real Estate, Homes

Great information....  Def. a need to know!

Feb 04, 2010 10:15 PM
Neil Blumberg

Hi Elyse:

Just to clarify: the Protecting Tenants at Foreclosure Act refers to properties bought at a judicial foreclosure; it does not apply to homes threatened by foreclosure, whether before or after lis pendens has been filed. In these cases the tenancy has precedence over the purchase, unless the contract stipulates otherwise, and the tenancy will continue to term. While the above is true at common law and may well apply to the state you live in, consult an attorney as each state has the right to enact state-specific laws to cover this situation.  Some states even require that the tenant be given a first right of refusal to purchase the home.

Feb 08, 2010 01:06 AM
Elyse Berman, PA
Best Connections Realty, Inc. - Boca Raton, FL
Boca Raton FL (561) 716-7824 CRS, ABR, GRI,ePR

Hi Neil - Thank you for clarifying that for me.  It's great information and, again, I thank you for posting it. 

Feb 09, 2010 07:39 AM

Elyse, you're welcome!

Feb 09, 2010 09:57 AM