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New Federal Law Extends Lease of Tenants in Foreclosures

On May 20, 2009, Congress and President Obama signed a federal law , S. 896 that provides that tenants' leases will survive a foreclosure sale, at least until the foreclosure purchaser sends them a 90 day notice to terminate the tenancy.  This law is nearly identical in content and result to bills the Public Justice Center actively fought for in the last session of the Maryland General Assembly, but which were unfortunately killed in the House Environmental Matters Committee and never voted on in the Senate Judicial Proceedings Committee.  Where Maryland feared to go, the federal government has moved forward to protect innocent tenants!
The new law provides that a successor in interest at a foreclosure sale (the "foreclosure purchaser") takes the property "subject to ... the rights of any bona fide tenant." If the tenant has a lease entered into before the foreclosure, the tenant has the right to continue occupying the property until either (1) the end of the remaining term of the lease, or (2) the new owner sells the property to someone who will live in the property as a primary residence, and gives the tenant 90 days notice to vacate.  If the tenant does not have a lease or the tenancy is terminable at will (such as a month to month tenancy), the new owner may give the tenant the 90 day notice to vacate at any time.  In any scenario, the new owner becomes the landlord for at least 90 days.   A "bona fide" tenant is one where the tenant is not the mortgagor or a member of the mortgagor’s family, the lease or tenancy is the result of an arms length transaction, and the lease or tenancy requires rent that is not substantially lower than fair market rent or is reduced or subsidized due to a Federal, State or local subsidy. The new law applies to Section 8 tenancies at well. None of these provisions preempt more protective state and local laws and all of these provisions expire at the end of 2012.
The combination of increased notice given to Maryland tenants by the Maryland General Assembly and the increased rights given to all tenants by the U.S. Congress now gives the recognition and relief to tenants we sought.

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