Federal "Protecting Tenants at Foreclosure Act" expires

Effective on December 31, 2014, the federal "Protecting Tenants at Foreclosure Act of 2009" (PTAFA) expired.

Effective on December 31, 2014, the federal "Protecting Tenants at Foreclosure Act of 2009" (PTAFA) expired. This law provided that when a “federally related” mortgage loan was foreclosed upon (almost every loan), and when the bank bought at the sale and took over as owner, most residential leases would survive a foreclosure—meaning the tenants could stay until the end of the lease. Under the PTAFA, month-to-month tenants (with some important qualifications) were also entitled to 90 days’ notice before having to move out.

Fortunately, even without the federal law, many states (and some cities) give tenants some protection from eviction in default and foreclosure situations. The website of the National Housing Law Project is a useful resource on state and local protections for tenants in foreclosure situations.

For example, under California state law (CCP § § 1161b and 1161c)), tenants in California have the same protection as the federal law (with the bonus that this state law extends to all mortgage loans, not just federal ones). In California, the impact of the PTAFA expiration does not change eviction procedures much, if at all, for an owner who purchases residential real estate at a foreclosure sale.

California law requires all foreclosure purchasers of all residential property to honor fixed-term leases, even those that were entered into after the mortgage loan was made, through the expiration of the lease, unless the foreclosure purchaser intends to reside in the unit, or:

  • the tenant is the spouse, parent, or child of the owner
  • the leasing transaction between the tenant and the former owner was not conducted in an "arms' length" manner, or
  • the rent is "substantially below" fair market value ( except, of course, for government subsidized tenancies).

If any of the above conditions are true (for example, the tenant is the child of the owner), the foreclosure purchaser in California still has to give the tenant a 90-day notice that mirrors, word-for-word, the text in CCP §1161c; and, If the tenant fails to vacate after 90 days, to prove the above reason relied on, in an eviction lawsuit ("unlawful detainer" proceeding) in court.

If the tenancy is one from month to month (as opposed to a fixed-term lease), the foreclosure purchaser in California must also give a written 90-day notice, again of the type stated in CCP § 1161b, to terminate the tenancy.

In many California cities with rent control laws, and a few others without them (such as San Diego and Glendale), just-cause-for-eviction laws my prevent terminating such tenancies even if seemingly allowed under sections CCP § § 1161b and 1161c.

If you are a foreclosure purchaser of residential property in California (especially if the property is located in a city with just-cause eviction protections), and want to give a written 90-day or other notice to the occupant(s), to the effect of terminating a tenancy and/or not honoring a fixed-term lease, contact an attorney who specializes in evictions. (The California Landlord’s Law Book: Evictions does not cover this complicated type of eviction.) Tenants who are caught in the middle between a defaulting owner and an insistent bank, and want to preserve their rental, should also consult an experienced real estate lawyer.

Nolo Products Affected:

Every Tenant’s Legal Guide (Chapter 15, If the Rental Property Is Foreclosed section)

The California Landlord’s Law Book: Rights and Responsibilities (Chapter 18, Rental Properties Purchased at Foreclosure sidebar)

The California Landlord’s Law Book: Evictions (Chapter 11, Eviction of Tenants in Rental Property Purchased at Foreclosure)

California Tenants’ Rights (Chapter 14, Your Rights If Your Landlord Suffers Foreclosure section).