In a previous post, I touched on the process for evicting former owners of residential properties who remained on the premises after the cessation (through Trustee's Sale) of their ownership. In those circumstances, former owners are generally not entitled to any special protections.
Tenants of those owners, however, have multiple layers of protection that must be considered when contemplating a post-foreclosure eviction. These layers arise from both federal and Texas state law.
The federal law, known as the "Protecting Tenants at Foreclosure Act of 2009," (referred to herein as "PFTA") became effective on May 20, 2009 and remains in force until December 31, 2014 under its own "sunsetting provision." The Act will likely be extended by further federal action.
The Texas state law is found in Section 24.005(b), and currently has no expiration date. The state law relates to the amount of notice a tenant is entitled to before they are required to vacate. It provides (in relevant part) as follows:
(b) ... If a building is purchased at a tax foreclosure sale or a trustee's foreclosure sale under a lien superior to the tenant's lease and the tenant timely pays rent and is not otherwise in default under the tenant's lease after foreclosure, the purchaser must give a residential tenant of the building at least 30 days' written notice to vacate if the purchaser chooses not to continue the lease. The tenant is considered to timely pay the rent under this subsection if, during the month of the foreclosure sale, the tenant pays the rent for that month to the landlord before receiving any notice that a foreclosure sale is scheduled during the month or pays the rent for that month to the foreclosing lienholder or the purchaser at foreclosure not later than the fifth day after the date of receipt of a written notice of the name and address of the purchaser that requests payment.
The PFTA, by contrast, requires that in the case of most foreclosures, the successor owner takes title to the property subject to (i) an obligation to give a BONA FIDE TENANT at least 90 days for any notice to vacate; and (ii) the rights of a BONA FIDE TENANT to occupy the property until the expiration of a lease existing at the time the notice of foreclosure is posted (unless the new owner plans to occupy the property as his primary residence).
The PFTA contains a specific definition of BONA FIDE TENANT, and that term is key to whether the federal law's protections apply.
An Owner or Manager faced with existing tenants following a foreclosure sale would be wise to contact an experienced eviction attorney to analyze those tenants' rights to continued occupancy or possession of the property. Acts in violation of federal law could result in penalties or damages being asserted by the tenant against the Owner or Manager.
HUD has issued a helpful explanatory Notice relating to the PFTA.
