New Federal Law Protects Tenants in Foreclosed Properties

Robert W. Doggett

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Posted about 5 years ago. 3 helpful votes

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Private Landlord Tenant -- New Owner Must Honor Lease

The Protecting Tenants at Foreclosure Act, became effective May 20, 2009. It applies to foreclosures through December 2014 when the law sunsets. The new federal law enables a bona fide tenant (defined in the Act) who is leasing premises that are foreclosed upon to continue occupancy through the FULL TERM of the lease unless the new owner intends to use the property as his primary residence (in which case the new owner still must give the tenant 90 days notice to vacate). If the lease has expired or is month-to-month, the tenant is still entitled to a 90 day notice to vacate. The tenant still has to abide by the terms of the lease and pay rent, and the new owner (the buyer at the foreclosure sale often a lender) has to abide by the lease and other applicable law. The Act applies to foreclosures of all residential property not just federally related mortgage loans. It applies to multifamily property, and even mobile homes (that are legally attached to foreclosed land

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Applies Also To Section 8 Voucher Housing

The Act also applies to Section 8 voucher housing and states that a foreclosure does not constitute "other good cause" for termination of an existing Section 8 lease (except if the new owner intends to occupy the property as his primary residence). The Act states that the new owner assumes both the lease and the housing assistance payments contract. Although more guidance may be coming from HUD, the Act is self-implementing. Per a letter from one HUD Director dated June 15, 2009 (New England PIH Advisory Letter #09 02), the change in the law affects all Section 8 tenants, even those living in units that have been foreclosed upon prior to the effective date of the Act.

Additional Resources

New Tenant Rights After Foreclosure

National Low Income Housing Coalition - Renters In Foreclosure Tool Kit

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