SUMMARY OF S.896, TITLE VII-Protecting Tenants at Foreclosure Act of 2009
On May 20, 2009, President Obama signed into law a mortgage rescue bill that included the above referenced Act. In short, any foreclosure of a federally-related mortgage loan or any residential real property foreclosed on after May 20, 2009 is impacted by this Act.
The major change to existing Arizona law is that arguably any successor in interest to such property shall assume the interest in the property subject to the existing bonafide lease. If that lease was entered into by anyone other than the mortgagor or the child/spouse/parent of the mortgagor, that lease was entered into more than 90 days before the notice of foreclosure, the lease was the result of an arm's length transaction, and the lease requires rent substantially the same as the fair market rent, then that tenant shall have the right to continue to reside in the unit under the same terms and condition of the lease. The tenant must pay rent, permit access pursuant to ARS 33-1343, etc. If they do not, the new owner has all rights and remedies under the lease and Arizona statute.
There is one major exception: In the event that the new owner wants to occupy that unit as their primary residence, the owner must give the tenant a 90 day written notice of termination of the existing lease.
If there is no written lease or if the tenancy is month to month, the new owner must give the tenant a 90 day written notice of termination of the tenancy.
Section 8 leases are subject to this law. However, short sales are not. Additionally, the tenant has no rights under this Act until and unless the home is foreclosed on, the loan was a federally related loan, the lease was in place at least 90 days before the foreclosure, and the lease was an arms-length transaction for at least market rent to someone who is not the owner's child, spouse or parent. Simply receiving notice of a pending foreclosure does not trigger this Act.
