I purchased a property at trustee auction recently. After doing an occupancy check the following day and speaking with the two occupants of the property, I found out that the former owner executed a one-year lease with these current occupants, approx. 1 1/2 weeks before the scheduled trustee sale (which I purchased at that date). These occupants told me that I have to honor their 1-year lease and that their tenant rights are protected under Obama’s Protecting Tenants at Foreclosure Act (PTFA). Given that their lease was executed only 1 1/2 weeks before the auction sale date, makes me suspect to their intentions and abuse of the PTFA. At face value, the lease looks bonafide (i.e. market value rent, non-family lessor/lessee, arms-length not sure about). But the timing of the lease is suspect, therefore the issue of tying up the property with intent to extort money from me (new purchaser) or keeping leverage on the property is frustrating.
The NOD was filed in early April 2011, the NTS followed in early July 2011, with a scheduled sale date in late July 2011. The lease executed between the former owner and the current occupants was beginning of September 2011. I purchased the property about 1 1/2 weeks later around mid-September 2011 (several postponements since July 2011 initial sale date).
What is your and FR’s interpretation of the PTFA regarding honoring leases after foreclosure. I read on some blogs that any lease executed before recording of the Notice of Default must be honored, and any lease thereafter needs 90-days notice to vacate. Other blogs say any lease executed before the actual auction sale date must be honored. I believe there is alot of room for abuse of the PFTA depending on the interpretation.
The time periods here are important since it can change the whole situation. What are your thoughts and if you can point me to any supporting documentation that I can obtain, or legal experts of the PFTA that I can consult with regarding this matter. Thanks in advance Michelle.