The Protecting Tenants at Foreclosure Act (PFTA), enacted in 2009, continues to be relevant as foreclosure filings remain high. Under the PFTA, the new property owner following a foreclosure cannot evict a month-to-month tenant for 90 days or, when a lease is in effect, until the tenant’s lease ends except when the new property owner is going to use the rental property as his or her primary residence. If that is the case, then the new owner only has to give the tenant 90 days notice even if the tenant has a written lease that would otherwise have allowed them to rent the property for a longer period of time.
The PFTA is specific as to the types of tenants who qualify for its protection and the situations when the Act’s protections are available. For example, the tenant or lease must be “bonafide.” A tenant or lease is considered “bonafide” under the PFTA if all of the following three conditions are met: (1) the tenant is not the person who defaulted on the mortgage loan, or the child, spouse or parent of the person who defaulted; (2) the lease or tenancy came about through an arms-length transaction; and (3) the rent is not substantially less than the fair market rent for the property, unless the rent is subsidized or reduced under a federal, state or local program.
In addition, the PFTA generally only applies to a new owner that is the “immediate successor in interest,” which would include, for example, a third party or the bank that purchased the property at the judicial foreclosure sale. Thus, the PFTA would not apply to an individual or entity that is not the “immediate successor in interest.” However, there may be other protections for tenants under federal or state laws in those situations.
Buyers of foreclosure properties should be aware of the PFTA and consult legal counsel to determine if the Act applies to any occupants of a property they intend to purchase.« Back to news