The Protecting Tenants at Foreclosure Act of 2009, part of the Helping Families Save Their Homes Act of 2009, was signed into law by President Obama on May 20, 2009. The Act contains several provisions designed to help tenants who are lawfully occupying a property that is foreclosed on due to the landlord's failure to pay the mortgage. The Act applies in foreclosure proceedings involving any federally-related mortgage loan on a residential property, which includes most residential properties in Arizona. The Act is set to expire on December 31, 2012, unless Congress extends it prior to that date.
The most important protections offered by the Protecting Tenants at Foreclosure Act are restrictions on the ability of the party taking title to the property after foreclosure to evict the occupying tenant. In order to obtain these protections, the tenant must be able to demonstrate that they are not the defaulting borrower or closely related to the defaulting borrower, that they are occupying the property pursuant to a legitimate lease, and the rent payable under the lease is not substantially less than the fair market rent for the property. If these conditions are met the tenant is deemed a bona fide tenant entitled to the protections of the Act.
If a foreclosing party (the person who bought the property at the foreclosure sale) finds a bona fide tenant residing at the property, he or she must honor the lease and cannot evict that tenant before the expiration of the lease term.
There is an exception, however, if the foreclosing party intent to utilize the property for his or her own primary residence or sells the property to a new owner to use as a primary residence. In that case, the foreclosing party or new owner can evict a bona fide tenant upon 90-days' written notice, even if the lease term extends beyond the 90-days.
Finally, if there is no written lease or the lease is terminable at-will, the foreclosing party can evict the tenant upon 90-days' written notice.
Since the Protecting Tenants at Foreclosure Act was enacted, Arizona courts have dealt with many landlords and tenants affected by the Act, which has wide-ranging implications in today's real estate market. In many cases the foreclosing party is not aware of the protections afforded to tenants and a peaceful resolution can be reached without judicial intervention. When that is not possible, an experienced landlord tenant lawyer can protect your rights, whether you are bona fide tenant or foreclosing party seeking to secure possession of your new home.