Friday, June 29, 2018

Reauthorization of Protecting Tenants at Foreclosure Act

This is of great interest to lenders and to tenants in properties that are being foreclosed. In 2009, Congress passed the Protecting Tenants at Foreclosure Act (PTFA)which provided certain tenants in foreclosed properties with expanded rights to notice prior to eviction. Most notably, the Act required the tenants receive 90 days notice prior to eviction. The Act expired by its own terms in 2014. The May, 24 2018 passage of the Bipartisan Regulatory Relief Bill revives the law and makes it permanent. The reauthorized Act became effective on June 24, 2018.

 The PTFA requires the buyer at foreclosure to provide bona fide tenants with a notice 90 days before requiring them to  vacate the property, and allows tenants with leases to occupy the property until the end of the lease term. The law applies both to private purchasers at a foreclosure sale and banks who buy the property back at the foreclosure sale. Tenancies at will can be terminated per state law, but such tenants are still entitled to the 90 days notice.

In order to be considered a 'bona fide' tenant: not the mortgagor, nor the spouse, parent, or child of the mortgagor; the lease or tenancy is the result of an arm’s length transaction; and, the lease or tenancy requires rent that is not substantially lower than fair market rent, or is reduced or subsidized due to a federal, state or local subsidy. If the property was purchased at foreclosure by someone who will occupy the property, then that purchaser can terminate the lease on 90 days’ notice, even when the tenant has a lease that extends beyond 90 days after foreclosure.

Massachusetts has a similar law, G.L.c. 186A, but allows for evictions for cause, such as non-payment of rent, nuisance, etc., set forth in the statute. It also requires a notice period of only 30, instead of 90 days, so it probably does not pre-empt the PTFA and Massachusetts buyers at foreclosure sale, especially foreclosing lenders, would be wise to comply with both the PTFA and G.L. c. 186A. Tenants in foreclosed properties should most certainly be aware of their rights under these laws, they provide tenants with strong protections.

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