The financial reform bill passed by Congress last week will extend for two full years the legislation passed in 2009 that provided tenants in foreclosed properties the opportunity to stay through the duration of their lease. The Protecting Tenants At Foreclosure Act (PFTA) allows all tenants to stay in the home for 90 days after foreclosure or for the duration of their verified lease. This law was one of the most significant changes to how foreclosures are processed of all laws enacted over the last couple of years. Many homes that are occupied and foreclosed happen to have tenant occupants. The former practice was to give the tenant a very short window to move after foreclosure. This is no longer the case. I have also posted here the surprize benefits some banks have found in having certain foreclosed homes occupied.
The two biggest challenges we have seen in following this law has been obtaining the lease that a tenant claims exists and subsequently having the bank’s law firm provide us confirmation as to its terms or a decision it is invalid. This time frame seems to be manipulated by advised tenants realizing that the actual start date to the 90 day mandatory period to vacate the property seemed to be interpreted in different ways by different lenders. This resulted in the second biggest issue as to whether the tenant’s rights under this law started at foreclosure or notice of the foreclosure and advise of their rights. Fortunately, the new law clears this matter up by stating the 90 day period begins with the completed title transfer to the foreclosing party. Specifically:
“The date of a notice of foreclosure shall be deemed to be the date on which complete title to a property is transferred to a successor entity or person as a result of an order of a court or pursuant to provisions in a mortgage, deed of trust, or security deed.’’
Additionally, further clarification is provided that states any lease or tenancy created prior to the change of title as a result of foreclosure is protected by the law. Unfortunately, there is not an obvious way to attack the well-advised tenant who is enters into a fully documented, long term lease just prior to the foreclosure date. These leases will have to be honored and will likely continue the need for banks to hire property managers to execute the lease and collect the rents.
