Help for Tenants in Foreclosed Buildings
What do I need to know?
On May 20, 2009 President Obama signed a law that gives some new protections to most tenants whose landlords are going through foreclosure. The law takes effect immediately. Here is the gist of the law:
- For a tenant at will (no lease), the new owner must give you 90 days notice before bringing an eviction action.
- For a tenant with a lease, the new owner must honor the terms of the lease, unless he is planning to live in the unit. In that case, the new owner must give you 90 days notice to move.
- For Section 8 tenants, the new owner must honor your lease unless the unit will be used as the new owner's home. Again, a new owner who plans to live in your unit must give you 90 days notice to move.
Learn more details below.
What are your rights, with and without a lease?
Again, the law protects tenants with a lease differently from those without a lease. Here are the details:
- No lease (tenants at will) and month-to-month renters: All tenants are entitled to at least 90 days notice to quit, or notice to vacate.
- Tenants with longer-term leases: Tenants with leases have greater protection. Most tenants with leases will be able to stay until the end of their lease term. But if the new owner plans to live in your unit, then the same rules that apply to month-to-month tenants apply to you. You are entitled to 90 days notice before the new owner can bring an eviction against you.
However, your lease will be protected only if:
- you are not a close family member of the landlord in foreclosure,
- your tenancy is the result of a genuine business deal, and
- the rent is fairly close to the fair market price.
These exceptions are meant to address "sweeheart" deals - where your tenancy is not a typical business arrangement. Tenants of subsidized housing (e.g. "Section 8" voucher choice tenants) are protected by this law.
How does this work for tenants with Section 8 assistance?
The new law provides similar protection for tenants with Section 8 housing aid but it works a little bit differently. For starters, your lease and Housing Assistance Payment (HAP) contract will carry over and be in effect between you and the new owner. Your landlord can't force you to move simply to make sure the building is empty as part of the foreclosure.
Exception: It is possible for the new owner to evict you before the end of your lease, but only if:
- Your unit will be used as the new owner's home, and
- The new owner gave you at least 90 days notice.
How does this new federal law fit in with existing state laws on evictions?
We interpret this law to mean that, in the context of a foreclosure, any particular state law requiring a shorter "notice to quit" for tenants-at-will is expanded to 90 days. However, if you fail to pay rent or commit another evictable offense, the usual state notice laws may still apply.
How do I know who to pay rent to?
Typically, it is the current owner who is entitled to the rent payments. So do your best to figure out when the building is changing hands. Then start paying rent to the new owner. If you are in doubt, or you cannot figure out who owns the building, be sure to save your rent money. Then you will be able to pay the new owner when the time comes, giving you the option to stay longer. At the very worst, you will have saved the money you will need to move. As always, keep good records of your rent payments.
If there are signs that the current owner has stopped taking care of your building or stopped making utility payments for services like water, you may want to get legal advice before making any more rental payments.
Can I get help with moving expenses?
Military tenants may be entitled to extra help with moving expenses if you have to find new rental housing because your landlord is in foreclosure. Temporary storage of your household goods may also be included in this “short distance” move. The law does not apply if you or your family member owns the home that is in foreclosure.
Check with your local military legal assistance office to see if you are eligible for this benefit.
What if I have more questions?
As with any new law, situations will arise that raise more questions as to exactly how the law applies. Contact your nearest civil legal services office or military legal assistance office for more help.