If you purchase a foreclosure home and there is a tenant on the property you should provide them with the 90 day notice as soon as possible. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. No. 111-203, 124 Stat. 1376, 2204 (2010)) amended the Protecting Tenants at Foreclosure Act of 2009 (“PTFA”) to further define the date of notice of foreclosure as the date which complete title to the property is transferred; therefore, a new owner must have the Certificate of Title before providing a 90 day notice to a tenant. While determining if the tenant has a “bona fide” tenancy, it is good practice to provide the 90 day notice immediately once the Certificate of Title is issued.
It is important to understand that there are people who are taking advantage of the PTFA. Some homeowners will create a lease that is largely in favor of the tenant and charge a minimal rent rate and rent the property to friends or family. The PTFA has addressed this in the Act. It makes clear that it only provides protection to certain types on individuals residing on the property. The PTFA specifically states:
The protections of this law apply to tenants under a “bona fide” lease or tenancy. A lease or tenancy is “bona fide” only if: (1) The mortgagor or a child, spouse, or parent of the mortgagor under the contract is not the tenant; (2) The lease or tenancy was the product of an arm’s-length transaction; (3) The lease or tenancy requires the receipt of rent that is not substantially less than fair market rent or the rent is reduced or subsidized due to a federal, state, or local subsidy.
(Pub. L. No. 111-22, Div. A, Title VII, 123 Stat. 1632, 1660-62 (2009)).
If you are thinking about purchasing a property at a foreclosure sale, it is really important to do adequate research to determine if there is anyone residing on the property because tenants do have protections under the PTFA. Be aware too that if you purchase a property that someone resides in, it may take extra time and money to evict or eject the tenant. On the flip side, if you are looking to rent the home you purchased, you may end up with a great tenant who is ready to pay you rent, without having to do any more work on your own!