October 9, 2009

by Spencer Scheer, Esq.

There is some confusion re the effect of the recently enacted federal law entitled Protecting Tenants at Foreclosure Act (PL 111-22), and the impact it has on the eviction notice that is required to be provided to tenants after a foreclosure.  Many people believed that the new law mirrored recent California legislation that increased the eviction notice period to 90 days, and  only  applied when the tenant was under federal or state funded housing programs i.e. Section 8   (See Wasatch Property Management v. Degrate, 35 Cal.4th 1111 (2005) and California Civil Code section 1954.535, requiring 90 day notice in certain instances where the tenant is subject to federal or state housing programs).

The new federal law goes beyond the limited applicability of the California statutes. It applies to all tenants occupying property after a foreclosure . The law increases the eviction notice period to 90 days for  any tenants in residential properties (and can allow the tenants to stay on longer if they have a bona fide lease).  Bullet points are listed below.   You should carefully review your eviction notices to make sure they are up to date and that they are in compliance with the law.

                        *Law effective May 20, 2009.

            *Sunset: 12.31.12

             *Tenants with leases in effect prior to date NOD recorded, can stay for duration of lease (if the lease term is beyond 90 days) and  if lease for fair market rent and rent paid).

Exception: If the new owner will occupy the property as his primary residence, then the new owner can terminate the remainder of the lease, but must still give 90 day notice.

            *  If lease ends in less than 90 days from foreclosure, you must give the tenant a minimum 90 day notice. 

            * Does not apply to owner-occupants or child or spouse or parent of borrower.

There are many unanswered questions e.g. what if lease was subordinated as a condition of the loan,  prior to loan. Is it extinguished by foreclosure ? Questions will likely be resolved via court cases. 

Please call SLG if you have questions.