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Selling a Foreclosure? Don’t Ignore the Tenant

The foreclosure crisis is easing but chances remain good that you’ll continue to list and sell foreclosures for a while. If you’ve had tenants in some of the foreclosures you’ve already sold than you’re probably familiar with that 2009 federal law that protects tenants against eviction when the owner loses the property to the lender.

The law is “The Protecting Tenants at Foreclosure Act” and it gives tenants two types of protection, depending on their situation. If they’ve signed a long-term lease agreement with the owner, than they’re entitled to continue renting their home for the duration of that lease agreement. So, if they have nine months to go on their lease when the owner loses the property to foreclosure, than you as the listing agent of that property have to honor that existing lease. That means no eviction or no rent increases (unless a rent increase is part of the existing lease) until the agreement expires.

If they haven’t signed a long-term lease, than they’re entitled to a minimum of three months notice before they have to leave.

There are exceptions to the law and other provisions you have to be aware of, but those are the two basic components.

Learn a little more about the law, and what protections you must accord tenants in these transactions, in this 5-minute video with NAR Regulatory Affairs and the National Law Center on Homelessness and Poverty.

NAR summary of the PTFA.

Full text of PTFA.

Robert Freedman

Robert Freedman is manager of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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Comments
  1. Melinda Epps

    If a short term tenant (less than 90 days left on their lease) does not pay the rent per the lease agreement can they be evicted or do they still have the right to the 90 days.

    The question would be the same for a long term tenant if they did not pay for 90 days. Can they be evicted prior to the 90th day.

  2. The law on “The Protecting Tenants at Foreclosure Act” would surely benefit the tenants as long as they are are aware of such law. As a tenant, it is important to consider as well the current status of the property before dwelling with it.

  3. Robert Freedman

    Thanks for your question about whether PTFA applies when tenants violate their lease agreement. On the face of it, it would seem the lease agreement would hold, so if the tenant violates a term of the lease, whether it’s a long-term or short-term lease, than the tenant would be subject to removal, regardless of PTFA. But that’s just an opinion, and isn’t authoritative, so let me suggest you pose the question to an authority on the topic, which is the National Law Center on Homelessness and Poverty, which can be reached here.

  4. BB

    How do I keep (non paying) tenants from presenting a fake lease to new owner when house when house goes up for auction? They are the reason for the foreclosure in the 1st place. The have threatened,lied, intimidated, and stolen their way to this point and house goes up for auction in 1 week. They are still in it. I called bank and they do not seem to care.It just kills me they get a “free ride” like this for SO long. In OUR house!!! We do not have the money to evict them.

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