PropertyRadar Community

Protecting Tenants at Foreclosure Act

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.

You are correct about leases created after NOD. You’ll want physical proof they started lease after NOD. Make sure you get a copy of the lease in your possession and go hire an experienced eviction lawyer asap.

Be careful how you approach getting a copy of the lease. You don’t want to turn the occupants hostile. They may not give you a copy of the lease in timely fashion if you turn them hostile.

After you get a copy of the lease and start the eviction process with your lawyer, you can go back and give the occupants better facts on their situation. They are currently misinformed. Make sure you get a copy of the lease before doing any major informing so they don’t make a new lease with different dates.

You may be able to get them to do a cash-for-keys after starting eviction and providing them better facts. Good luck and keep give us updates.

If you ever run into a lease created before NOD, you only have to give tenants 90 days notice if the property is going to be your primary residence. :wink:

I completely agree with Adm.

Adm/Michelle: Thank you for both of your replies. I wanted to get some clarification and your experience from other cases you are aware of, regarding the PTFA and existing leases. I did more research on the web and found a followup amendment to the PTFA where there was some confusion as to the definition of “Notice of Foreclosure” in the PTFA. The amendment was passed through the Public Law No 111-203, Sec 702 ©, which states, “…For purposes of this section, the date of a notice of foreclosure shall be deemed to be the date on which complete title to a property is transferred to a successor entity or person as a result of an order of a court or pursuant to provisions in a mortgage, deed of trust, or security deed.” So I record the trustees deed before 15 days of the sale, the “transfer of title” date would be the date of the actual trustee sale. By this definition, it would appear that any lease can be executed the day before the property sells at a trustee auction, and the lease would still be protected under this law and must be honored, irregardless of the dates of the NOD or NTS. Doesn’t seem right to me. Given the above info, have you heard of this PTFA being contested with regards to existing leases in California and what is really the definition date for “Notice of Foreclosure?” Thanks again in advance for your thoughts, they are really helpful. FYI - I am in the process of hiring an eviction attorney as well - thanks for the advice.

Hi Tomo, Every attorney I have ever talked to about this say that the PTFA was very poorly written. It is even silent on the collection of rents during the 90 day notice period. This is one of the reasons why most lenders and investors will try to negotiate a cash for keys incentive to avoid the eviction process.

@ tomo - The PTFA amendent in June 2010 CLEARLY states that the new owner must honor the lease for any lease entered before the TITLE TRANSFER occurs. BTW the “occupants” are known as PEOPLE. Given that you are merely another sleazy owner, you may not fit that description. I hope the Tenant PEOPLE hang your ass out to dry, ROACH. Maybe they will do what LOTS of good and BURNED Tenants have done, i.e. “fix” up your property a little, with maybe $10k +++ in “improvements” before they leave. Damage can be visible or quite invisible…

Hi Mots, Although we appreciate all perspectives which includes those that are passionate about the issues (angry), we do not tolerate name calling or profanity in these forums. If you have a story to tell about your specific experiences in renting properties in foreclosure we would love to hear more. Comments like this are not appropriate for this site.

I am someone who is dealing with this issue from the tenants perspective, and I also agree that the law is poorly written. However, everything I have researched says that a new owner who is intending to live in the property can take ownership after the 90-day notice period. The requirement to honor the full term of the lease only applies in the situation where the new owner does not intend to occupy the property (e.g. a bank that has repossessed). Where the tenants executed the lease only a week before the foreclosure date, I would suspect the “arm’s length” provision isn’t being met either.

For my part, I am a tenant with a bona fide lease in a property repossessed by the bank at foreclosure. The issue I am having is that although they have agreed to our tenancy through the term of our lease, they are asking us to sign a bunch of amendments that in my mind, significantly alter the terms of the lease. I can’t find any language in the law that addresses that one way or another. Does anyone have any thoughts about that?
Thank you.

Hi Stephanie, It is my understanding that the lease would have needed to be executed prior to the Notice of Default. I do not believe that they can force you to sign any amendments if you have a valid lease, especially if it alters the terms of the lease. You can certainly enter into a completely new lease agreement with the new owner if you chose. Keep in mind that the courts tend to rule in favor on tenants in cases like this. You may want to consult with a real estate attorney. The only other comment I have regarding your post is that they are required to give a 90 days notice to a tenant. If after the 90 days a tenant does not move then they can evict them. It is not as easy as just taking possession after the end of the 90 days.

Leases ratified AFTER the NOD but prior to “loss of ownership” (that is, the executed auction) are honored by PHFA.

sorry, “PTFA”

looking for advice. I am a tenant in a fFL whose home is in foreclosure. I have never not skipped out on rent ever. I just found out that house will be on Jun1. We would love to buy the house as we can afford it but have not had any luck getting a hold of bank( bank of NY) or lawyer for bank doesn’t respond. Does anyone have any suggestions? We are just a normal family and not investors. I just want to keep my home for my kids. I found out that owners have not paid rent in the 5 years we have lived here. How can they get away with that and now I am the one out on the street (esp now during Covid). I am scare and looking for some guidance please…

Hey I’m happy to help. If you need to talk you can contact me directly ron@oeipartners com.