Please see the NEW rules now in effect. All Realtors should be aware of this by now.

Under the Helping Families Save Their Homes Act, tenants have the right to stay in their homes after foreclosure for 90 days or through the term of their lease. There are exceptions for below market rent, type of owner, etc. Please read the details to determine how it applies to your situation.

Under the new law, which went into effect on May 20th, tenants will have to receive 90-days notice prior to being evicted, when their rental home is foreclosed upon. In addition, tenants must be allowed to stay in the property through the end of their lease, with two exceptions:

* The new owner wants to occupy the property as a personal residence, and
* There is no lease (month to month), or there is a lease but state law allows the lease to be terminated at any time upon notice.

Even under these exceptions, the tenants must be given 90-days before they can be evicted. Notification must be provided by the “immediate successor in interest”. In some cases, this notification will come from the bank (when they assume the home), and in other cases it may be the new owner. Much will depend upon state law.

A number of states have existing laws protecting tenants. This law will preempt existing state law, except where the state law offers greater protection.

The protections of this law apply only to “bona fide” tenants – who have a written contract, the lease was the result of an arms-length transaction, and the rent is not substantially less than the fair market rent for the property. Under any conditions, tenants may still be evicted if they violate the lease terms.
These provisions expire on December 31, 2012.

Hi Tierra27 - I will give you an example of what one bank does for these situations. Please remember, it will be different at every bank.

I am a listing agent for one bank and work with tenants living in properties that have been foreclosed as per instructions from the bank that owns the property.

Usually we are instructed to offer cash for keys to tenants - I have seen anywhere from $1000 to $2500. They usually give 30 days notice, sometimes 60 days to the tenants. And the latest notification actually said that tenants with a valid signed lease can stay the term of their lease but you would have to provide this documentation to the bank's representative when they come to your door.

It helps a lot if you work with the bank's representative - this person will frequently just be a real estate agent who has had this additional unpleasant responsibility thrown upon them. We can also give the tenant first right to buy the property if the tenant mentions this. Some listing agents may not know about this option, but if you push it with them and remain persistent, they can present it to the asset manager at the bank.

Thanks,
Sonal

The new owner will have a right to evict her and she will likely have to move if it goes to foreclosure assuming the bank or new owner wants the property vacant. She does have a right to her security deposit back and possibly a one or two months rent (+/-) for compensation. This is negotiable with the new owner and if she presses she may get some compensation. If the new owner / bank is stuborn, they will be able to evict her. I hope this helps. Let me know if you have additional questions at jay@jrlgrouponline.com. Best regards, Jay

Here is some more information regarding this situation:

•Tenants should continue to pay rent until a foreclosure is final. Otherwise, a landlord can go to court to evict a tenant for failure to pay rent. Any court action, even if not carried out, can make it difficult to rent another property.

•Tenants might learn for the first time that property has been foreclosed after being contacted by a lender or new owner. In this case, tenants should talk directly to the lender or new owner about an agreeable date to move out.

•Lenders or new property owners can’t remove tenants or their belongings without a court order.

•Tenants do not have a legal right to continue living in a property that has been foreclosed.

•Tenants are entitled to the return of their security deposit based on the terms of the lease after a foreclosure is final.

There are some laws being put into place helping renters in these situations, but to my knowledge they have not been put into place as of yet. According to Fairfax County, the terms of the lease agreement are terminated once the home is foreclosed on. Here is a number for the county to gather more information on - Call 703-222-8435, TTY 711, or get help in person at 12000 Government Parkway, Suite 433, Fairfax, between 8 a.m. and 4:30 p.m.

I have heard of banks helping those renters by letting they stay in the property and also seen situations where they have given them cash for keys...basically moving expenses. What you have to focus on is the security deposit that the landlord is holding. If the home is in foreclosure, search for notices in the Washington Post and other papers. Good Luck.

Jimmy Mulhern