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Mortgages

What should I do if the house or apartment I’m renting goes into foreclosure?

Under federal law – the Protecting Tenants at Foreclosure Act (PTFA) – you have certain protections if your rental house or apartment goes into foreclosure:

  • Notice before you can be evicted. You have the right to a 90-day notice period before you can be evicted if you have a valid lease.
  • The right to continue renting. You have the right to continue renting the property if you signed the lease before the foreclosure notice. If the new owners will occupy the property as their primary residence or if you do not have a lease or have a lease that can be terminated at will under State law, then the new owners are only required to allow you to occupy the property until the 90-day notice period ends.  Otherwise, they must allow you to occupy the property for the remaining term of the lease.

There are some exceptions to these protections. You are not protected under the PTFA if:

  • You are the borrower who was foreclosed upon.
  • You are the child, spouse or parent of the borrower who was foreclosed upon.
  • The lease was not the result of an arms-length transaction. An arm's length transaction is an agreement made by two parties freely and independently of each other, and without some special relationship, such as being a relative, having another deal on the side or one party having complete control of the other.
  • The rent you are required to pay is substantially less than fair market rent (unless the rent is reduced or subsidized under a Federal, State, or local subsidy).

State and local laws may offer you additional protections, so you should contact an attorney familiar with tenant rights to learn more. Be sure to ask for an attorney with experience helping tenants living in foreclosed properties.

Another resource is the Renters in Foreclosure Toolkit from the National Low Income Housing Coalition, which includes sample letters that you can send to the new owners of foreclosed properties and judges informing them about the requirements of the Protecting Tenants at Foreclosure Act. These sample letters can help you explain the PTFA and your rights as a tenant because some property owners, attorneys, and judges may not be familiar with the PTFA and your rights as a tenant living in a foreclosed house or apartment. You may also qualify for free legal services. Please refer to the list of state legal aid services included below.

The Protecting Tenants at Foreclosure Act expires on December 31, 2014. This summary will be updated if the Protecting Tenants at Foreclosure Act is extended by the United States Congress.

You may also want to consult an attorney. If you need help finding an attorney, you can view this list of legal aid services in your state, or you can find lawyer referrals in your county and state by visiting the American Bar Association website.

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