Rights of a Tenant in Repossessing
The harm coming to tenants caught in a foreclosure between a property owner and a lender has not gone unnoticed. Congress responded with legislation providing tenants with rights that surpassed all but the most extensive local and state tenant-rights laws. In fact, tenants have more rights after a foreclosure than former owners do, although that's not particularly comforting when you've just gotten an eviction notice.
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Congressional Action
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The Protecting Tenants at Foreclosure Act was passed in 2009 to help tenants in a foreclosed property. It contains two key provisions. It mandates that foreclosing lenders honor existing leases, and it requires them to provide tenants with 90 days notice before beginning court action on an eviction. If a buyer purchased the foreclosed property at or after an auction, he is exempted from the 90-day notice if he intends to live in the property himself. Before passage of this law, a lease was invalidated at foreclosure unless it was signed before the mortgage was taken out, and the state law in most places only required 30 days notice prior to an eviction.
Rent Control Rights
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While most of the country is not subject to any rent control, many large cities like New York, Los Angeles, San Francisco and Washington, D.C., are. In these cities, it is illegal to evict tenants after a foreclosure unless they are not living up to the terms of their lease or there is a narrowly defined and legislated reason behind the eviction. Foreclosure is not among the legislated reasons for eviction.
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State Eviction Prohibitions
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New Jersey and New Hampshire both prohibit evictions based solely on foreclosure. Like rent control cities, these states require "just cause" to evict a tenant and foreclosure is not a just cause. Tenants may, subject to very few exceptions, remain in their homes forever so long as they comply with lease terms.
Money at Move-Out
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Conducting a full-blown eviction is expensive and can bring adverse publicity to lenders. To prevent having to go that route, many lenders offer cash incentives to tenants to voluntarily move. Tenants can try negotiating with the lenders for both cash and more time to move out. Formal programs of this type are known as "cash for keys."
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