But I Paid the Rent!: Protecting Tenants at Foreclosure Act of 2009
Photo by Michael Mulligan
There is good news for any tenant facing eviction after foreclosure. The Protecting Tenants at Foreclosure Act of 2009, which became law on May 20, guarantees almost all tenants at least 90 days after receiving notice of foreclosure before they can be evicted from their homes. This applies even to month-to-month leases. And even better news for some tenants is that they may be able to remain in their homes for the remainder of their lease terms, giving them an opportunity to make alternative housing arrangements. Of course, this does not bode well for lenders, who may find themselves reluctantly managing rental properties over the next three years.
So if you’re the tenant, how do you know how long you can stay in the house if the bank forecloses?
- If the new owner plans to use the property as a personal residence, you get at least 90 days to vacate. If you’re living in the property month-to-month, you also get 90 days to vacate.
- If your lease is up next month, guess what? You still get 90 days to vacate.
- If, however, the new owner isn’t going to use the property as a personal residence, you get to stay in the home until your lease expires.
One important point: leases have to be “bona fide” in order for the tenant to qualify for this protection. If you’re living in the house for a dollar a month because your cousin really likes you (or because he lost a bet), you’re probably not protected by this Act. To be considered a bona fide lease, three requirements must all be met: “(1) the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant; (2) the lease or tenancy was the result of an arms-length transaction; and (3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit’s rent is reduced or subsidized due to a Federal, State, or local subsidy.” Consequently, new owners may have a valid defense in some circumstances.
Check out the National Low Income Housing Renters in Foreclosure Toolkit at http://www.nlihc.org/template/page.cfm?id=227
–Russ DeMott
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Comments
I completely disagree. There are far too many loopholes regarding legitimacy of an existing lease agreement. Are we really relying on tenants to provide a copy of the lease agreement. This makes things even messier, Howard. I have investors that would like to purchase at the trustee sale, but UH, not if they have to rent to the existing tenant for the remainder of the lease period. After the purchase, how would the new owner obtain a FAIR lease agreement. We’re only inviting fraudulent activity by tenants now. That’s an even bigger mess.
Doug, I respectfully disagree with you and here’s why.
Let me just say that I am not a big fan of government involvement in all facets of the economy and our lives but it is going to be a fact of life during the Obama administration.
Now, here’s the thing. First of all, many tenants are faithfully paying rent to their current landlord who may be on the path to foreclosure. And guess what, in many of those cases, the rent is going right into the landlord’s pocket rather than being used to pay the mortgage. Surprise, the home is foreclosed and the tenant is evicted by the sheriff. How fair is that.
Secondly, in most cases, we’re talking about 90 days for the tenant to stay if the landlord is foreclosed upon. For the few with a lease, they get to stay until the lease expires.
Third, it has to be rent at “fair market value”. Won’t your buyers be wanting to rent the home anyway. OK, here’s their tenant already in place. If they don’t like the terms of the particular rental on a property, there are plenty more homes for them to choose from.
As to fraud by the tenants, I would suggest that they are more likely to be victims of mortgage fraud by their landlord than committing fraud by providing their rental agreement.
What is the official, legal way of serving notice to a tenant that they have 90 days to evacuate the premises. Does a notice taped to door by an “authorized agent” suffice? There is no evidence that the notice was received, or even that this is actually the authorized agent for the lender/new owner. What should the tenant do in this case?
Thank you Russ for this information! It’s nice to know that their are still Good People in this crazy upside down world…
I am Currently going through my 3rd rental home foreclosure In a Row within the last yr and a half…. I have to say that only greedy people would Not support this Bill! I’ve been given 10days in the past and $1000 to relocate (cash for keys) and Thank God that Someone is standing up for us Average American’s that Pay their rent on time Every month just to find out guess what… your landlord wasn’t! If there was a way for the public to find out their landlord wasn’t paying their mortgage Before the DEFAULT is filed it may be another story, but that’s not the case… until You are the person that arrives home from a hard days work, like Everyday, to find some agent standing at your door telling you to,”Get Out”… you have no place to say anything… and if you do, you’re part of the greedy selfish public that Just doesn’t give a care about anyone else besides yourself and your bank account. Sorry your investor’s won’t be able to flip the property and Profit Immediately… but for me, this time around, and thanks to the government for realizing what a serious issue this is, I’m standing up for my Rights as a tenant with a “Bona Fide” Lease! Also, as Brooke had asked, “What IS the official, legal way of notifying the tenant of the 90days?” So I know what to look/ask for…
I too am so happy this law was put into effect. This is the second house that was not paid for even though I was paying the rent which was going directly into the landlords pocket. We started seeing notices in the mail and investigated ourselves online to find out the house was actually foreclosed and going to auction. He just wanted someone in the house lining his pockets with our hard earned money until the house actually sold. Well, he’s not getting a dime more from us as now we lose our security deposit and have to save what little money we make to move again. There should be a law that allows us to get the money back that we paid to the cheating homeowners who go after hard working people like us.
Anyway, if someone else wants to know more about if the house is in foreclosure you can go to your county website and put in the landlords name in the search and see all documents about your home. Good luck!!
I have been renting my house for 10 mths from my landlord. I received a letter on December 3rd saying that the house is been sold on court house square on Jan 5th. I have a lease until Feb 2010. Do I get to stay in the house until the lease is up or sooner? What can I do to get my security deposit? Is there anything that I could do to the landlord? He told me that he has been fighting with the mortgage company for about 6 mths. I just want to make sure that Im not going to come home and find my stuff on the curb..
Yes. You can stay until the end of the lease unless the person purchasing the property at foreclosure will move into the property. In that case, you have 90 days to move.
I have a lease until the end of May 2010. Property was sold at auction on Nov 30, 2009. On Dec 1st the new owner came by…they are not moving in so we have until the end of May 2010. But the new owner wants the security deposit tha was in our original lease agreement. We did get the security deposit back from the property management company we originally signed the lease agreement with. Am I required to pay the new owner the same security deposit. The new law doesn’t really cover this. I did pay the new owner the rent for December.
I am a Charleston native on Active Duty stationed in Northern VA. My landlord, lost his property in a Trustee’s Sale on Friday 1/15/10 at the Courthouse steps. I had not paid him the rent Jan 1st because due to his financial troubles and the fact he was going to auction. As we suspected he lost the house. But now, 4 days later he is coming to me saying that I am in default of the lease for non-payment and as such have forfeited my security deposit of $2400.00 and he was still demanding at least partial month’s rent up until the 15th. He says he has the deposit, but I don’t buy it. He wants to inspect the house before he returns it to me. Can he do this? I have been in contact with the Foreclosure attorney and we are working out a new lease agreement now. Rent was $2200 and I just fixed the heater ($450) last week and was told to take it out of the rent. Technically doesn’t he owe me half the security deposit back plus the $450? Then he is covered for his 15 days of January ownership.
Joe, give me a call if you have questions about this. Let’s discuss it privately. I am sorry you are going through this.
I bought a foreclosure auction property where a tenant is staying. Initially he wanted to stay for remainder of the lease (05/15/2010). I agreed for that with his current rent. Now he is saying that he will not sign a new lease and will take 2 months to move and not willing to pay rent. I am willing to accommodate his needs but seems like he is trying to take advantage of my situation.
What are my options here?
I lease in N Va. I have two months left in my lease. I just found out that my homeowner has not paid in two months and that it can be going into foreclosure next month unless they come up with three months worth of payments. What are my options for getting out of lease early or do I have to wait until forclosure is done?
Dear Russ:
I am totally confused by when the 90 days begin. In your intro, and according to the Act, it simply says “90 days notice” but doesn’t say WHEN that 90 days begins. Is it whenever you get notice from the REO agent? Or as you answer to some of the inquiries is it 90 days from some other triggering event? I am a tenant who just got a notice from the REO agent and this house is owned by Fannie Mae who does not intend to live in the house as its primary residence. My lease is not up for another year. From what I read above, can I stay until I get a 90 day notice FROM THE AGENT’S NEW BUYER? (whenever that may be????)I am a bona fide, etc. Thank you very much.
Thank you.
Lauren,
Here’s a link to the Act. http://www.nlihc.org/doc/701-704-Public-Law-111-22.pdf. The notice triggers the 90 days beginning to run.
Russ, I think this is actually one of the few good things that lawmakers and government have done regarding the housing mess. See you Tuesday