Renaissance Realty Group’s Blog: New Federal Law Protecting Tenants updates

On May 20, 2009, President Obama signed into law the Helping Families Save Their

Homes Act of 2009, which includes Title VII, Protecting Tenants at Foreclosure Act

(the "Act"). The Act provides that in the case of any foreclosure on a federallyrelated

mortgage loan or on any dwelling or residential real property, the party

taking title to property pursuant to the foreclosure ("Foreclosing Party") assumes

the property subject to the rights of any bona fide tenant. If the Foreclosing Party

wishes to evict the tenant, the Foreclosing Party must provide the tenant with 90-

days notice to vacate. However, if a bona fide lease was entered into before the

date of the foreclosure, the tenant has the right to remain at the property until

the end of the lease term, except that the lease may be terminated prior to the

expiration of such lease term upon the sale of the property to a purchaser who will

occupy the property as a primary residence, subject to the 90-days notice. In the

case of a tenant without a lease or if there is a lease terminable at-will, the

tenant must be given the 90-day termination notice. The Act also includes a

provision stating that any State or local law providing for longer time periods or

other additional protections for tenants shall not be affected by the Act.

The Act raises several unanswered questions and issues:

1) The Act may apply to all foreclosures, and not only to loan foreclosures.

Accordingly, lien foreclosures (such as a condominium or homeowner's

association liens) may trigger the Act's notice requirements.

2) The Act may prevent the Foreclosing Party from terminating a lease due to

tenant's default.

3) Title companies insuring title based on a foreclosure sale will likely require an

exception for the rights of tenants pursuant to the Act's notice requirements.

It is unclear whether title companies will be willing to delete this exception

after the notice requirements have been met.

In conclusion, the Protecting Tenants at Foreclosure Act severely affects the rights

of all foreclosing lenders, including lenders foreclosing on condominium projects.