We take hundreds, and sometimes thousands of calls from prospective tenants each month. Inevitably, a few of these prospects tell us they must move because their current Landlord is facing foreclosure.
My staff will not give legal advice, simply because we’re not attorneys and we will not take on that liability. However, most people (Tenants, Realtors and even Investors) do not realize that Tenants now have powerful rights during the foreclosure process, so long as a legitimate lease is in effect.
Way back on May 20th, 2009, President Obama signed the "Protecting Tenants at Foreclosure Act of 2009,” which essentially gives a Tenant the right to stay in a foreclosed home if the Tenant can produce a lease. So, banks, and in some cases individual investors, will become the new Landlord.
One exception to the Act, sometimes referred to as PROTAFA, is when a homeowner, looking to occupy the property as a personal residence, purchases the home. In that case, the homeowner must provide the Tenant with a 90-day notice.
There are several ramifications to the ACT. For example, if we purchase an occupied property at a Sheriff Sale, we must understand who is actually occupying the property: the Owner or a Tenant? In today’s landscape, it’s much easier to remove an Owner from a property than a Tenant.
Banks, on the other hand, are now forced to be Landlords and, frankly, aren’t very good at it. Our company was involved for a few months in managing some of these occupied properties through Freddie Mac. To say the process is inefficient and clumsy is an understatement.
At any rate, as a real estate professional, it’s important to understand PROTAFA and refer your clients to the Act where appropriate.