Protecting Tenants

In foreclosure sales, you need to be aware of the protections that a 2009 federal law provides to renters.

May 9, 2013

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 PTFA 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, and Maryland.

How Long Can Tenants Stay?

The PTFA provides two 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 new 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 PTFA.

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, 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 effect through Dec. 31, 2014, though efforts are underway to make it permanent.

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 FFIEC's Consumer Help Center 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 that settlement. You can also find more information at the Office of Mortgage Settlement Oversight

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 homes.

Tristia Bauman is a housing attorney with the National Law Center on Homelessness and Poverty, a Washington, D.C.–based advocacy group monitoring compliance with the Protecting Tenants at Foreclosure Act. She can be reached at