Protections for Tenants in Foreclosed Properties

California Foreclosure Forum Presentation Kent 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).

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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.

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