LURLINE R. JOHNSON (R), ABR, CRB, CRS, GRI RMP
Property Profiles, Inc.
Past President, Oahu Chapter
National Association of Residential Property Managers
Q. We received a notice on our door saying that our rental property is going into foreclosure. We just renewed our lease and have another 11 months left to go. What are our rights as a tenant?
A. Unfortunately you are not alone. Although this is not as prevalent as it was in the past, renters are still being affected by foreclosures almost as often as homeowners. The mortgage industry crisis that started in 2006 resulted in millions of foreclosed homes across the nation. Most of the occupants are the homeowners themselves, but they have been joined by numbers of renters who discover, often without advance notice, that their rented house or apartment is now owned by a bank, which wants them to vacate.
Prior to 2009, most renters lost their leases upon foreclosure. These rules changed dramatically on May 20, 2009, with the enactment of the “Protecting Tenants at Foreclosure Act of 2009″– Public Law 111-22. This legislation provided that leases would survive a foreclosure meaning the tenant could stay at least until the end of the lease, and that month-to-month tenants would be entitled to 90-days notice before having to move out. In fact month-to-month tenants were in an even better situation because these tenants always knew that they could be terminated with a proper 45-day notice, and 90 days is considerably longer than they would normally receive to terminate a contract. An exception was made for the buyer of a fore-closed property whose intention was to live at the property. This buyer could terminate a lease with 90 days notice – regardless of whether it is a fixed lease or month-to-month.
This law would come into play only if it was a bona fide lease or tenancy where the tenant was not related to the mortgagor if it was an arms-length transaction and if the lease required the receipt of rent that was not substantially less than fair market value.
Unfortunately this “Protecting Tenants at Fore-closure Act of 2009” – Public Law 111-22 came to an end in December 2014, so there is no more protection for tenants regarding foreclosures. Unless the federal government reinstates the law, you may be out of luck and needing to move before the end of your lease. A bill was introduced in March 2015 to permanently extend the Protecting Tenants at Foreclosure Act.