The Protecting Tenants at Foreclosure Act of 2009 was signed May 20, 2009

There is a new law that everyone should become familiar with if they are involved with foreclosed properties. On May 20, 2009 the Protecting Tenants at Foreclosure Act of 2009 ("PTFA") was signed by President Obama. The new law will definitely change the ability of the a new property owner to recover possession of a foreclosed property. This new law and how it will affect the purchaser should be considered before foreclosing on a unit.

Understanding who is protected by the law is first. The law states that the "bona fide tenant" is protected by the new law. One must first understand who is a bona fide tenant. A bona fide tenant of the previous owner is someone who entered into a lease agreement before the Notice of Foreclosure was recorded, the lease was negotiated at "arms-length," and the rent is not "substantially" lower than the fair market rent for the property. An exception may apply to the fair market value requirement if the rent is reduced because of a subsidy. The protections do not apply if the tenants are a child, spouse or parent of the former owner. If this is the case then the tenants are not bona fide.

So you have purchased a foreclosed property or you have foreclosed on a property and you have determined the tenant is bona fide and is on a fixed term lease. That tenant may remain in possession of the property until the lease expires. However, they must comply with the terms of the lease. Should the tenants fail to comply with the lease terms, the property owner may utilize the same remedies they would otherwise to enforce the lease terms. For example the tenant does not pay timely, a 3 Day Notice to pay or Quit may be served. PTFA does not affect any federal, state or local provisions for subsidized tenants that have longer time periods or other additional protections for their tenants. In other words, the tenant still receives the same rights and obligations provided by the subsidized housing rules or rent control.


There are a few exceptions that will allow the new owner to recover possession prior to the end of the lease term. If the new owner is going to use the property as his principal residence, a 90-Day Notice to Quit can be served notwithstanding a fixed term lease with the prior owner.

It is also important to note that if the tenant is a bona fide tenant and the tenancy is month-to-month a 90-Day Notice to Quit may be served to recover possession of the subject property. They may not stay there indefinitely but you would have to wait for the 90 Day Notice to expire.

Homeowner associations should consider the impact PFTA will have on their association when they are deciding whether or not to foreclose on a unit. Certainly this is not the only thing to consider but it should be part of the equation. It is most certainly something an association should be familiar with before they take steps to recover possession of a foreclosed property. this posting is not meant to cover all aspects of the new law and you should consult with your attorney and real estate professional prior to purchasing a foreclosed unit or before attempting to gain possession of a foreclosed unit. The law will terminate on December 31, 2012. To see the complete text of PFTA click on this link.