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TENANTS IN BUILDINGS IN FORECLOSURE

If you have the misfortune of being a tenant in a building in foreclosure, you should be aware that you have certain rights under a federal law known as The Protecting Tenants at Foreclosure Act of 2009.  Here is some important information about this legislation:

  • The PTFA, originally S. 896, now Public Law 111-22, has been in effect since it was signed into law by President Obama on May 20, 2009, as part of The Helping Families Save Their Homes Act of 2009.
  • The PTFA is the law of the land.  It is in effect nationwide – on the federal, state, and local levels – and operates and is enforceable in all jurisdictions and localities.  It is applicable to all residential properties sold at foreclosure after May 20, 2009.
  • The purpose of the PTFA is to provide renters with a legal mechanism with which to confront the possibility of displacement and to ward off homelessness.
  • The PTFA mandates everywhere in the nation that:
    • New owners of residential properties purchased in foreclosure who wish to evict current tenants must give them a minimum of 90 days’ notice to vacate before the effective date of such notice.
    • New owners of foreclosed properties must honor existing leases (“entered into before the notice of foreclosure”) until the end of their term.  In other words, new owners or their agents are prohibited from unilaterally breaking a lease to cut short a tenancy on the grounds of new ownership.  Consequently, tenants with a one-year or other fixed-term lease may remain in place until their lease expires.  There are two exceptions to this rule:
      • When the new owner plans to make the residential property his or her primary address.
      • Where a tenant is without a lease (for example, month to month) or has “a lease terminable at will under State law.”
        • However, in both cases, the tenant must be given a 90-day notice of the intent to evict.
  • The PFTA also mandates everywhere in the nation that:
    • The 90 days’ 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.
      • PTFA establishes several criteria for what qualifies a lease or tenancy as bona fide:
        • The tenant cannot be the mortgagor or the child, spouse, or parent of the mortgagor.
        • The lease or tenancy must be the result of an arms-length transaction. (Answer.com defines this as a transaction in which the parties involved have no personal relationship to each other and are not subject to any duress or pressure from each other.)
        • The rent required under the lease cannot be substantially less than the fair market rent for the property OR the rent is subsidized by a Federal, state, or local subsidy.  (It is uncertain whether a rent-stabilized or rent-controlled tenancy is “bona fide.”)
  • The PTFA  provides specific protections for Section 8 tenants on foreclosed properties.  It requires new owners to:
    • Honor the lease between the former owner and the Section 8 tenant, and
    • Honor the housing assistance payments contract between the previous owner and the public housing agency that administers the Section 8 voucher
  • The protections provided by the PTFA are a floor not a ceiling.  In other words, they are minimum protections and, as such, do not supersede greater protections – such as longer advance notice or additional related protections – provided by State or local law.
  • All the renter protection provisions expire at the end of 2012.
  • All the renter protection provisions are self-executing.  That is, no federal agency, including HUD, is responsible for enforcing the PFTA.  Tenants facing eviction due to a foreclosure of their building can use PFTA’s protections as a claim or defense in a court proceeding.
  • Awareness of the PFTA’s provisions is very limited among both tenants and housing court judges and elected officials.  So spread the word!
  • An excellent additional resource on the PFTA on the Web site of the National Low Income Housing Coaltion.  It provides a “Renters in Foreclosure Toolkit” at http://www.nlihc.org/template/page.cfm?id=227.