Tenant Rights in a Rental Foreclosure

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    PTFA

    • On May 20, 2009, President Obama signed the Protecting Tenants at Foreclosure Act (PTFA). This law requires foreclosing lenders to honor existing leases, to give 90-day eviction notices when there isn't a lease and doesn't pre-empt more protective state and local laws.

    State Laws

    • New York, New Jersey and New Hampshire all have laws that prohibit eviction without cause (such as nonpayment of rent). This regulation prohibits lenders that have foreclosed upon properties to initiate evictions once the foreclosure has occurred. A similar law in Massachusetts requires a court hearing if the tenant wants to fight a foreclosure eviction.

    Rent Control

    • Rent Control is local legislation that limits rent increases and evictions without just cause. In California alone, over a dozen cities are subject to rent control. Foreclosure does not relieve a lender or any other owner from rent control regulation.

    Cash for Keys

    • Cash for keys is a program implemented by many lenders that have foreclosed upon properties. In this program, the lenders offer the occupants money to vacate the property. Occupants are not required to accept the offer and do not have to give up their rights to fight an eviction if there is legislation that would otherwise delay or stop the eviction.

    Other Considerations

    • If you are about to sign a lease, ask the owner or manager if he or she has received any pre-foreclosure or default notices. In Oregon, a property owner is required to disclose this information to prospective tenants. In other states, it may be possible to recover costs incurred in a move and in increased rent if the owner failed to disclose this information and you are later evicted because of a foreclosure. If you live in a property that has been foreclosed upon, it is probably worth your time to call the new owners and ask them to negotiate a new lease.The congressionally chartered mortgage holders Fannie Mae and Freddie Mac have adopted policies not to evict tenants. It is not inconceivable other lenders will follow suit.

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