Implications of the fed law protecting the existing rental lease post foreclosure

I understand that according to the new fed law, rental lease agreements survive the foreclosure and must be honored by the new owner. i have some questions:

  1. dose the date of the lease matter? meaning if it was signed before NOD to the previous owner or after?
  2. when new owner takes over the lease, do they have to keep the same rent even if it is below market?
  3. if the previous owner has taken off with the security deposit & two month’s rent paid by the tenant, is the new owner liable for those?
  4. if the new owner can increase the rent to market rate, what type of notice is legally required?

I have read many opinions online and was wondering if anyone has actually followed a case in court which would shed some light on this. thank you


I’m not an attorney, but here is my take:

  1. No
  2. If it is substantially below fair market value you can terminate with 90 days notice.
  3. I don’t believe so. Note the lease was wiped out by the foreclosure (assuming it either wasn’t recorded, or was recorded after the foreclosing DOT, which is almost always the case). The only right the new federal law grants the leaseholder is the right to occupy until the end of the lease - and then only in certain circumstances, be sure to read the amendment in the above link.
  4. There is no provision to increase the rent.

Not aware of any court cases that have led to significant decisions. That said the amendment appears to me to be pretty clear on most of your questions, so I’m not sure there will be any.

thx sean. good info…some clarifications pls. 1) the language in the amendment seems to emphasize the timing of the signing of the lease: " the rights of any bona fide tenant, AS OF THE DATE of such notice of foreclosure? (A) under any bona fide lease entered into BEFORE the notice of foreclosure to occupy…" so doesn’t that change your answer to #1 above? to yes? 2) what constitues “substantially below mkt rate”…what % below mkt has been interpreted as “substantial” in other lease litigations in the past? 3)assuming the lease was signed before the NOD was issues, i was reading the amendment to say that it does not get wiped out… otherwise, what terms would be followed for the remainder of the lease? what rent? deposit? etc 4) if the current rent in the lease is below market, AND the landlord wants to continue the lease at market rate, is there a need for a notice to increase rent or is that considered a new lease all together? 5) what type of notice is appropriate as the first notice to let the tenant know you are the new owner and the amount of rent they are to pay you? thx much :slight_smile:

  1. The NOD puts the owner on notice, not the occupant, and it only puts them on notice that a foreclosure may occur, not that it did. My read on this is that the lease had to be entered into before the lessee had notice that the house was foreclosed on (likely the day you knocked on the door). 2. Good question. I’d think that would be open to some interpretation by a judge. Keep in mind that the “bona fide” and “fair market” language is intended to keep folks from abusing the law by signing long term leases just before foreclosure for substantially less than market rates. So an easy test is to ask yourself whether it appears to be a legitimate lease or something concocted to try to screw you. If it is the later and you think a judge will agree, then move forward with a 90 day notice. 3. I disagree. To me it clearly states “any immediate successor in interest” (you)… “shall assume such interest subject to” … " the rights of any bona fide tenant" (them)… “to occupy the premises until the end of the remaining term of the lease”. As such the only thing you are subject to under the lease is the tenants right to remain until the end of the lease. Otherwise this section would have to say that you are subject to all terms of the lease, or that said lease shall be reinstated, or something to that effect, which is does not. 4. Given that the old lease was wiped out, I’d require a new lease as the landlord. 5. 90 day notice to quit or pay rent. Again, please keep in mind I’m not an attorney. This is my take, but please do not rely on it without consulting with an attorney.