Tenants In Foreclosure Are Protected

Renters and tenants are now being affected by foreclosures almost as often as homeowners. Sometimes these renters discover, often with no warning, that their rented house or apartment is now owned by a bank, which wants them out.

The Protecting Tenants at Foreclosure Act

Before President Obama signed the “Protecting Tenants at Foreclosure Act of 2009,” most renters lost their leases upon foreclosure. But this legislation provided that leases would survive a foreclosure. The tenant could stay at least until the end of the lease, and month-to-month tenants would be entitled to 90 days’ notice before having to move out (this notice period is longer than any state’s non-foreclosure notice period, a real boon to tenants).

An exception was carved out for the buyer who intends to live on the property – this buyer may terminate a lease with 90 days’ notice. Importantly, the law provides that any state legislation that is more generous to tenants will not be preempted by the federal law. These protections apply to Section 8 tenants, too.

Importantly, tenants who live in cities with rent control “just cause” eviction protection are also protected from terminations at the hands of an acquiring bank or new owner. These tenants can rely on their ordinance’s list of allowable, or “just causes,” for termination. Because a change of ownership, without more, does not justify a termination, the fact that the change occurred through foreclosure will not justify a termination.

Stopping the Bank from Filing an Eviction Action

Recent cases decided by the Illinois appellate court for cook county stops the bank from filing an eviction action if there is an existing and valid lease on the property. (Citibank v. Foster) A valid lease under the Federal Tenants in Foreclosure Act is a written lease that is arms length between the landlord and the tenant, and is at a justifiable market rate. The tenant and landlord cannot be siblings or have a parent child relationship. Other that that the tenant and landlord can have any other relationship between them. The lease can be month to month or years at the parties discretion. Since the bank nearly always purchases the house in the foreclosure sheriff sale the tenants rights exist because of this federal protection from Obama.

Bottom line is that the tenant gets to stay the remainder of the lease period (even if that lease is for 10 years) if:

1. The tenant has a written lease,
2. The tenant and landlord are not sibling or have a parent child relationship
3. The rent is a justifiable market range

Your rent payments will most likely have to be made once the bank notifies you they have taken control of the property. Be assured you can’t be evicted if you meet the above criteria. Notice past payments to the landlord are not counted or even an issue. Future payments to the bank will be.

Unfortunately Banks cannot be trusted and your rights will not be protected by the courts, sometimes even if you bring it to the Judges attention. Find an attorney who understands this area of law and the power you have available to help you to prevent your rights and your interests from being violated.