The Commonwealth of Pennsylvania allows a lender to foreclose on a homeowner’s property if the lender sends the homeowner a written notice of intent to foreclose. A lender may pursue foreclosure proceedings after one missed payment, as provided in the lender’s deed of trust with the homeowner. Since a landlord’s foreclosure breaches the lease agreement with his tenant, Pennsylvania tenants are placed in an unfortunate predicament and must either find substitute housing or risk forced eviction from the new homeowner.
After providing the written notice, a lender must provide a summons with the foreclosure complaint through the local sheriff’s office or private process server. The homeowner has 20 days to answer the lender’s complaint. If the homeowner does not file an answer, the lender must provide an additional 10-day notice period prior to requesting a judicial judgment of foreclosure. Pennsylvania does not provide a right of redemption period for the owner to repurchase the property after foreclosure.
Foreclosure Cancels Lease Obligations
When the landlord owns the property and leases it to a tenant, there is a binding lease providing rights and obligations between them. However, during foreclosure, the tenant’s lease is nonexistent because the landlord-and-tenant relationship ceases to exist. The new homeowner does not assume the previous lease obligations since the original lease created a contractual privity between the landlord and tenant, and there is no privity between the tenant and the new homeowner (or owner-lender).
Protecting Tenants at Foreclosure Act
The Protecting Tenants at Foreclosure Act of 2009 provides tenants with federal safeguards during foreclosure. Congress enacted this bill to help tenants stay in their homes for a limited time after foreclosure. A renter may remain in her home for the remainder of her lease if the tenant’s lease agreement was for a one-year tenancy. The act provides renters with month-to-month leases or week-to-week leases with a 90-day period to find new housing. The new homeowner who purchases the foreclosure must provide tenants with an opportunity to locate substitute housing within these time frames, so long as the tenant pays the new landlord the same rental payment she paid prior to foreclosure.
Exceptions to the Protecting Tenants at Foreclosure Act
The legislative exception to the act allows new owners to forcibly evict tenants without providing them the grace period to finish their leases and find new housing if the new homeowner moves into the property. However, the new homeowner must provide at least 90 days for tenants to move. Therefore, tenants have at least a 90-day window to find new housing.
Tenant Recourse in Pennsylvania
Tenants may be able to sue the original landlord for fraudulently failing to disclose an impending foreclosure. Landlords have a legal duty to disclose information to tenants that would be material to the tenant’s decision to sign the lease agreement. Since disclosing the likelihood of an imminent foreclosure would most likely negate a potential tenant’s decision to lease the property, the landlord’s failure to communicate it to the tenant could amount to legal fraud.
Since real estate laws frequently change, you should not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your jurisdiction.