New federal law protects tenants of foreclosed properties
Published November 1, 2009 | November 2009 issue
A federal law enacted May 20, 2009, protects tenants from immediate eviction in cases where the ownership of residential rental properties changes hands due to foreclosure. The Protecting Tenants at Foreclosure Act of 2009 is designed to ensure that tenants facing eviction from a foreclosed property have adequate time to find alternative housing. The law requires the persons or entities that take ownership of foreclosed rental properties to provide 90 days' notice to tenants prior to eviction. It also requires the new owners to allow tenants with leases to occupy the property until the end of the lease term, unless the unit is sold to a purchaser who will occupy the property, in which case the 90-days'-notice requirement applies.
Community development corporations, housing counseling agencies, and other organizations that may be concerned with the foreclosure crisis and tenants' rights may wish to share information about the new law with the populations they serve. The Board of Governors of the Federal Reserve System (Board) encourages financial institutions, which are usually the immediate successors in ownership when a foreclosure is completed, to discuss any questions related to the new law with their legal counsel, as appropriate. The Board has issued examination procedures to ensure financial institutions are aware of and in compliance with the new law. To read the procedures, visit the Consumer Affairs Letters page and view the attachment to letter CA 09-5.