Protecting Tenants at Foreclosure Act of 2009

Prior to 2009, when a lender foreclosed on a home, the property was sold at an auction and the new owner, frequently the bank that initiated the foreclosure proceeding was now the legal owner of the property. As such, your rights as a tenant under the lease agreement were substantially negated. Practically speaking, the foreclosure action and subsequent purchase of the rental property terminated your lease agreement with your landlord forcing an abrupt uprooting of you and your family.

However, in 2009 in the midst of the foreclosure debacle, the Federal government enacted the “Helping Families Save Their Home Act.” More pertinent to our discussion, is Title VII, “Protecting Tenants at Foreclosure Act of 2009” (Hereinafter the “Act”).

The Act was established to protect the interests of a bona fide tenant who found themselves living in a home that had been foreclosed upon by the bank and then sold at auction. For this discussion, we will presume that the home had not yet been foreclosed upon at the commencement of the lease as that would be illegal and an entirely different dialogue. In effect, the Act guarantees tenants that they will either be permitted to enforce their lease under certain circumstances, or at a minimum, be given a reasonable amount of time (90 days) to find alternative living arrangements following a foreclosure.

First, its provisions only apply when the property sought to be foreclosed is a “federally related mortgage loan” or on “any dwelling or residential real property.” Also, the Act is not retroactive, as it only applies to residential foreclosures subsequent to its May 20, 2009 enactment. Nevertheless, it is still quite broad in scope, as it covers any dwelling or residential property foreclosed upon after its enactment.

The Act continues, and provides that “any immediate successor in interest” in such a foreclosed property, including a bank that takes title to a house after foreclosure, will assume the interest subject to the rights of any bona fide tenant and will need to comply with certain notice requirements. This mandates that any purchaser, whether that is an individual or an entity, comply with certain notice requirements before an eviction proceeding could commence against a rent paying tenant. To some to degree, the Act imputes the existing landlord/tenant relationship that was already in existence prior to the property being foreclosed upon to the new owner. Hence, just as your landlord cannot evict you without notice, neither can the “immediate successor in interest” after a foreclosure sale.

Application: Generally speaking, tenants must be permitted to stay in the residence until their lease expires, with two exceptions:
1) When the property is sold after foreclosure to a purchaser who will occupy the property as a primary residence; or
2) When there is no lease; or
3) The lease is terminable at will under Florida law.
*Even when these exceptions apply, tenants must still receive 90 days notice before they may be evicted.

Additionally, the protections of the Act apply only to tenants under a “bona fide” lease or tenancy. A lease or tenancy is “bona fide” only if:
1) The mortgagor (foreclosed homeowner) or a child, spouse, or parent of the mortgagor under the contract is not the tenant;
2) The lease or tenancy was the product of an arm’s-length transaction; and
3) The lease or tenancy requires payment of rent that is not substantially less than fair market rent; or
4) The rent is reduced or subsidized due to a federal, state, or local subsidy.
*The bona fide lease agreement must have been entered into before the Notice of Foreclosure.

This is a generalized discussion and is not intended for any particular set of facts. By no means does this blog create an attorney-client relationship or privilege between the Attorney and the readers. If you are facing a foreclosure, family law matter, landlord/tenant dispute, or considering buying, selling, or leasing real estate in Southwest Florida, you should speak to a licensed Florida Attorney regarding your specific facts. For a free consultation contact the Guirguis Law Firm, Pllc @ (239)573-9939 or

Posted on June 6, 2012, in Legal and tagged , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. 1 Comment.

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