The Protecting Tenants at Foreclosure Act ("PTFA") is a tenant-friendly law that seeks to remedy the problems many renters have faced in the recent wave of foreclosures when their landlords lost the leased property to foreclosure. In essence, many renters were simply forced out of their rented homes when the properties were sold. In some states, foreclosure automatically terminated leases, with renters receiving as little as three days' notice of eviction.
Tenants in Foreclosed Houses Must Receive 90 Days Notice to Vacate
PTFA provides that if there is a foreclosure on any dwelling or residential real estate after May 20, 2009, the person who takes legal title after foreclosure takes the property subject to the following terms:
- The new owner must give any preexisting "bona fide tenant" at least 90 days notice to vacate the premises.
- The 90-day notice requirement applies if the tenancy is for a term of years, month-to-month or terminable at-will.
- The 90-day notice requirement applies even if the renter has no formal lease but does have a verifiable history of paying rent.
- Unless the purchaser of the foreclosed property intends to occupy the premises as his or her primary residence, the new owner cannot break the lease.
What is a "Bona Fide Tenancy" Under the PTFA?
The Protecting Tenants at Foreclosure Act applies only to "bona fide" tenancies or leases. Under the law, a tenancy or lease is "bona fide" only if:
- The tenant is not the child, spouse or parent of the landlord in foreclosure.
- The lease or tenancy was the result of an arm's-length transaction.
- The rent under the lease is not substantially below fair market rent for the property.
- The rent has not been reduced by a federal, state or local subsidy. However, the PTFA does apply to rental units occupied by holders of Section 8 vouchers.
What if the New Owner Violates the PTFA?
If a renter believes he or she has been served with an eviction notice in violation of the PTFA, he or she should contact an attorney specializing in landlord tenant law. According to NeighborWorks America, violations of the PTFA may be reported to the Office of the Comptroller of the Currency, which includes PTFA compliance in its bank examinations, and to the Federal Trade Commission.
The Protections of the PTFA End in 2012
The Protecting Tenants at Foreclosure Act contains a sunset provision, which means that it is set to expire at a specified time. In this case, the protections of the PTFA are set to terminate on December 31, 2012. Until that time, renters whose homes have been the subject of foreclosure are protected against having their leases broken with little or no notice by the new landlords.
Additional Resource: How to Hire an Attorney
Disclaimer: This article is in no way intended as legal advice. For help with specific landlord tenant issues, one should contact a licensed landlord tenant or eviction attorney in one's local area.
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