If you have a renter who signed a lease and your property is at risk of foreclosure, that renter may have some protections and rights that you should be aware of.
What the Federal Law Says
In 2009, the federal law known as the “Helping Families Save Their Homes Act of 2009” was enacted. The aim of the law was to keep in a foreclosed home as long as they had a bona-fide lease in place at the time of the recorded notice of foreclosure by the lender. However, this act is subject to a number of limitations. And unfortunately, many tenants are still left without proper recourse after foreclosure.
The law allows some tenants to finish out the term of their lease even after the foreclosure. For month-to-month tenants without a lease, they must be given at least 90 days advance notice of termination. This, of course, is only if the federal law applies to the tenant's specific facts. In part, the loan that is being foreclosed is a “federally related” home loan. The law protects “bona-fide tenants” as they are defined under that law.
What Arizona Law Says
Arizona has a law that requires landlords to give written notice to tenants of the property to be rented if the foreclosure action was already initiated (Arizona Revised Statutes, §33-1331). If the landlord fails to provide the required notice, the tenant may terminate the lease, get a refund of the security deposit, and possibly obtain other relief. If the lease was entered into before the foreclosure action was started, then whatever rights exist will be determined by the lease itself. Some leases contain clauses that specifically state that the landlord may not allow the property to become the subject of a trustee's sale.
Who Notifies the Tenant of a Foreclosure?
Not only might the landlord have an obligation to tell the renter, but if the building is managed by a Realtor or property manager, they may have the obligation to communicate with the renter as well. The answer will depend on the type of tenancy and other relevant issues, such as when the lease ends relative to the foreclosure date. The specific facts of each situation need to be properly analyzed before determining whether notice is needed or not.
Have questions about your rights and those of your tenants? Contact Poulos Law to schedule a consultation.