Protecting Tenants at Foreclosure Act - Tenants Should Know Their Rights to Stay in Their Home

It's amazing how many calls I've received in the past two years from tenants of homes that are being foreclosed. It's not necessarily a realtor's job to answer questions on this subject, but I get this question a lot because I am also an attorney.

Most people don't know that they have rights to stay in the home that they have rented, even at foreclosure, and are worried about what will happen to them upon the foreclosure of the property. The scenario usually goes that a homeowner in distress decides to rent out their property during the period prior to foreclosure. In many cases, it takes several months to a year or more to actually foreclose on a property. The homeowner figures that they might as well get some rent during this period prior to foreclosure. Or maybe it always has been a rental property. In either case, often the tenant will not have any knowledge of the pending foreclosure at the time they sign the lease and their first notice of the foreclosure date is a few weeks prior to the auction date when a notice is posted on their door.

What rights do tenants actually have? Fortunately for them, President Obama enacted the Protecting Tenants at Foreclosure Act of 2009, which has been very helpful to many tenants. This law does several things:

It allows tenants to stay in the home for the term of their lease, even with a new owner, and the tenant may be evicted during this period only for good cause. The exception to this is when the home is sold at or after foreclosure to a new owner-occupant. In that case, the new owner must still give the tenant 90 days notice to vacate and the tenant may not be able to finish out the lease.

In a situation where there is no lease, the tenant may not be evicted without at least 90 days notice. In a month to month tenancy, the tenant may not be evicted without at least 90 days notice. In all cases, tenants must continue to pay rent and uphold other terms of the lease agreement.

There are some cases where the law does not apply. For example in the case where the tenant is not a "bona fide tenant" or the lease is not a "bona fide lease," and where the lease transaction is not an arms length transaction.

Please consult your own attorney for more details or take a look at this article. This post is not intended as and should not be construed as legal advice.

These provisions expire December 31, 2012.