Protections for Tenants in Foreclosed Properties

California Foreclosure Forum PresentationKent Qian - National Housing Law Project

March 11, 2011

Protecting Tenants at Foreclosure Act of 2009 (PTFA) Public Law 111-22, Sections 701-704 Enacted on May 20, 2009 Amended on July 21, 2010 Section 702 protects bona fide tenants Section 703 gives additional protections

to Section 8 voucher holders Sunsets on Dec. 31, 2014

2

Section 702 - Coverage

Protects all bona fide tenants in any dwelling or residential real property

A lease or tenancy is bona fide only if: Tenant is not the mortgagor or the mortgagor’s

child, spouse, or parent; and Lease was the result of an arms length

transaction; and Rent is not substantially less than fair market

rent (unless the reduction is due to governmental subsidy)

3

Section 702 – General Provisions

All bona fide tenants Must be given at least 90 days’ notice

Bona fide tenants with more than 90 days remaining on lease Entitled to stay until the end of the lease, if

lease entered into before “notice of foreclosure”

EXCEPTION: lease may be terminated with a 90-day notice if purchaser will occupy unit as primary residence or if lease terminable at will under state law 4

Section 702 -“Notice of Foreclosure” For a tenant to remain until the end of the

lease, the lease must be entered into before the “notice of foreclosure”

Date of notice of foreclosure - the date title is transferred through foreclosure (Dodd-Frank Amendment)

5

Section 702 -Rights of Bona Fide Tenants After a foreclosure, the new owner takes the

property subject to the rights of any bona fide tenants, including: Return of security deposit Habitability Utilities

6

Section 703 - Section 8 Tenants

Section 8 tenants are deemed to be bona fide tenants

New owner takes title subject to both the Section 8 lease and the HAP contract

EXCEPTION: Lease may be terminated with a 90 day notice if new owner will occupy unit as primary residence

Any eviction notices must also be sent to the Housing Authority. 24 CFR 982.310(e)(2)(ii).

7

State and Local Protections

Code Civ. Proc. 1161b 60 days’ notice 30 days’ notice if owner remains on the

property Civ. Code 1962 Local Just Cause for Eviction Laws

8

Utility Shutoffs

For individually metered units (including SFHs), 10-day notice of shutoff. Pub. Util. Code 777, 10009

For master metered units, 15-day notice of shutoff. Pub. Util. Code 777.1, 10009.1

Tenants have the right to put the accounts in their own names without paying for the landlord’s arrearages.

9