“Protecting Tenants at Foreclosure Act” is Back
Under the 2010 Dodd-Frank Act, there was a provision that protected tenants in a state court residential, foreclosure action. This provision gave special rights to tenants, and as a result, it slowed the foreclosure process down when there was a tenant who qualified for this protection. This law was a frustration to our clients and fortunately, this law sunset or expired on December 31, 2014.
Unfortunately, Congress and the President reenact these protections for tenants in a residential foreclosure under the SB 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act. As you are probably aware, this law was signed into law by the President last week. Based on news reports, it appears that this provision in SB 2155 was not widely known and has surprised many advocates of the new law. As before, the law requires a ninety-day notification to vacate by the lender (or third party new owner) to the hold-over tenant under a “bona fide” lease. This provision for protection to tenants goes into effect 30 days after enactment.
Under the new law, when a lender obtains the property at a foreclosure sale, it may only terminate a bona fide lease after a 90-day written notice to the Tenant. To qualify, the tenant must enter into the lease before “the notice of foreclosure.” Further, a bona fide lease is one in which the tenant is not the borrower’s child, spouse, or parent, and the lease is the result of an arms-length transaction, in which the rent is not substantially less than the fair market rent.
Should you have further questions about this new law or its impact on foreclosures, please do not hesitate to reach out to a lawyer at SVL.