In foreclosure sales, you need to be aware of the
protections that a 2009 federal law provides to renters.
Even with inventories down, there are plenty of foreclosed properties awaiting sale. While the problems
associated with property vacancies and blight have
gotten much attention during the housing crisis and
recovery, about 20 percent of foreclosed properties
are occupied by rental tenants whose protections
are sometimes overlooked or ignored in the sales
process. Since foreclosure listings continue to be a
significant part of the landscape, it’s essential to be
aware of the rights of tenants in these situations.
Tenants’ rights were strengthened considerably
in 2009 by the enactment of a federal law known as
the Protecting Tenants at Foreclosure Act. Before
the P TFA was enacted, tenant protections were left
to the states, though many failed to address the issue
at all. The federal law supersedes any state protections against eviction unless the state provisions are
stronger, as is the case in California, Connecticut,
the law requires that you provide a minimum of 90
days’ notice before you can legally evict.
Keep in mind that the law applies only to bona
fide tenants. Most renters fall within this definition.
However, the former owner and his or her spouse,
parents, and children don’t. Tenants who pay substantially less than market rate rent, who receive reduced rent through a federal, state, or local subsidy,
or who didn’t enter into the lease as the result of an
arm’s-length transaction are also not considered
bona fide for purposes of this act.
The PTFA is in e;ect through Dec. 31, 2014,
though e;orts are underway to make it permanent.
Tristia Bauman is a housing
attorney with the National
Law Center on Homelessness
and Poverty, a Washington,
D.C.–based advocacy group
with the Protecting
Tenants at Foreclosure
Act. She can be reached
How Long Can Tenants Stay?
The P TFA provides t wo types of protections to tenants, depending on their situation. Tenants with a
long-term lease agreement are entitled to continue
renting the home for the duration of their lease. The
ne w owner of the foreclosed home, known as the “
successor in interest”—usually a lending institution but
possibly an investor or other individual—must abide
by the terms of the existing agreement. If the lease
agreement has nine more months to run, it must be
honored. That also means no rent increases or other
changes to the terms are allowed during that time.
This provision applies even to verbal leases if proof
of the agreement, such as the testimony of a former
landlord, can be provided. And third parties acting
on behalf of owners, including real estate practitioners and attorneys, must abide by the P TFA.
There’s one exception: If the new owner intends
to live in the property as a primary residence, tenants
can be required to vacate the property before the end
of the lease term with a minimum of 90 days’ notice.
For short-term tenants and those with no lease,
Take Action Where Needed
If you become aware of possible tenant protection violations, whether by the new owner or another party acting on behalf of the owner, report
your suspicions to the federal regulatory agency
that oversees the financial institution that initiated the foreclosure and now owns the property.
To determine which agency regulates a particular
institution, visit www.; ec.gov/consumercenter/default
.aspx and enter the name of the bank. The correct
agency to contact should appear. All the agencies
have an online complaint filing system that details
what to include in the complaint and how to submit it. If the new owner is one of the five big lenders
that entered into the national mortgage settlement
last year to address irregularities in their foreclosure processes (Citi, Bank of America, Wells
Fargo, JPMorgan Chase, and Ally/GMAC), you
should also report your concerns to the monitor of
thatsettlement.Info rmation is available at https:
The foreclosure crisis has been devastating for
many tenants. And although the PTFA has been in
place for more than three years, its implementation
has been spotty. By knowing its provisions, you can
play an important role in preventing tenants from
being precipitously, or illegally, forced from their
Learn more about your role
and responsibilities under the
PTFA. NAR’s William Gilmartin
talks with Bauman in a five-minute REALTOR® Magazine
video, “Tenant Rights in