How Foreclosures Affect Renters
The subprime mortgage crisis not only affected homeowners, but also affected renters, even renters who were consistently on time with rent. If the landlord loses the property due to foreclosure, unsuspecting renters often are evicted.
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A New Law
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Renters, as of 2008, made up 32 percent of households, according to "Entrepreneur" magazine. When large numbers of renters were getting evicted with little notice, community advocacy groups took note. The National Low Income Housing Coalition released a report that shed light on the severity of the problem. In May 2009, a federal law, called the Protecting Tenants at Foreclosure Act, went into effect which offers tenants some protections.
Surprise Evictions
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Prior to the 2009 law, a surprise and unexpected notice to vacate because of the landlord's troubles trickled down to the renters, some of whom struggled to find housing with little or no notice. Renters would have little legal protection or recourse if that happened. Many renters had no idea their landlord was facing foreclosure, according to "Entrepreneur" magazine.
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Predatory Leasing
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Landlords commonly engaged in predatory leasing whereby they would purposely choose to not inform their tenants of the foreclosure to better ensure they received their rent payments. In the worst cases, the landlord no longer owned the property, but continued to collect rent. The only grievance available to renters was to file in small claims court.
Features of the Act
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The Protecting Tenants at Foreclosure Act established a minimum period of 90 days that a tenant can stay in the property before having to leave. If the tenant has a lease, he can stay until the lease ends if no one purchases the foreclosed home for a personal residence. Otherwise, he has 90 days before he has to leave. The Protecting Tenants at Foreclosure Act is scheduled to remain in effect until December 31, 2012.
To Qualify
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Renters must meet certain provisions to qualify for protection under the Protecting Tenants at Foreclosure Act. They must be bona fide tenants, meaning they cannot be a child, spouse or parent of the mortgage holder. The rent they pay must be market value; it cannot be substantially below market value.
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References
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