New Federal Law Gives Certain Tenants Rights To Continue Occupancy
Of Residential Properties Following Foreclosure

By Rex C. Anderson, Attorney at Law

A new federal statute, enacted in May 2009 as a part of the Helping Families Save Their Homes Act, gives certain qualified tenants the federal right to stay in their homes following a completed foreclosure sale. This new right is generally the opposite of prior law, in which tenants’ and occupants’ rights were terminated along with all other junior liens or claims to the property once the foreclosure sale was complete. The new law provides that the buyer at the foreclosure sale of residential property takes title subject to certain new rights of qualified tenants.

To qualify for protection under this new federal law, the tenant must meet three separate tests: (1) be someone who is not the mortgagor or an immediate family member of the mortgagor; (2) have a lease that was the result of an arms-length transaction; and (3) the lease requires rent that is basically fair market for the property. Exceptions exist if the new owner will occupy the foreclosed property as the new owner’s primary residence and has given the tenant 90 days advance notice that the lease will be terminated. Under the new law, protected tenants must be given 90-day notice to vacate by the new owner. In addition, existing leases must be honored to the end of the remaining term of the lease, with certain exceptions. Qualified tenants without written leases or with leases that can be terminated at will under state laws are also entitled to a 90-day notice to vacate. Readers are advised to consult the exact language of the statute or seek guidance from legal counsel for specific ways to best handle individual cases.

Disclaimer: This description is intended as a general review of the topic and not intended as specific legal advice for any specific situation. No attorney-client relationship is intended with the reader.

Read Title VII of the Helping Families Save Their Homes Act of 2009

Rex C. Anderson is an attorney licensed to practice in Arizona. He can be reached via email at rca@rcalaw-az.com or via telephone at 888-675-7809.