With all of the foreclosures across the Valley there are many families that are now renting. A common scenario facing tenants is after they enter into a lease agreement they find out that the landlord has not been paying the mortgage and the property is in the foreclosure process. This leads to the question, what rights do tenants have the entered into the lease agreement in good faith? Until recently, the answer was simple — they had to move out.
On May 20, 2009, President Obama signed into law the Protecting Tenants at Foreclosure Act of 2009. With the passage of the new law, after a house is foreclosed upon, the bank must now honor the lease that was in place prior to the foreclosure. Specifically, if a tenant had a lease agreement in place that was within 90 days of terminating, the bank must now provide 90 days notice to the tenant prior to eviction. This applies to those tenants who are on a month-to-month lease as well.
If the tenant’s lease has longer than 90 days remaining, the bank must honor the remainder of the lease. There are two exceptions: (1) if the bank has a buyer who will occupy the property then the tenant must move out within 90 days, and (2) the tenant must be paying the rent as agreed. Further, the underlying lease must have been transacted at arms-length – meaning the lease cannot have been between family members.
While these new provisions may not be perfect, they go a long way to protect innocent tenants and provide additional time to locate a new place to live.