The Protecting Tenants at Foreclosure Act (PTFA), effective as of May 20, 2009, provides residential tenants in all 50 states with new protections when landlords lose rental properties to foreclosure. While residential leases in New York used to be extinguished at foreclosure and tenants could be evicted quickly, tenants now have the right to stay in their homes after foreclosure for at least 90 days, or, if they have a one or two year lease, they may stay in the home throughout the entire remaining term of the lease.

The PTFA applies to foreclosures of all residential property such as single family houses, 2 to 4 unit houses, and condos. This includes tenants with month-to-month leases, without formal leases but verifiable rent payment history, and with Section 8 leases. Protections are limited to “bona fide” leases where the tenant is not the mortgagor or the mortgagor’s relative, the lease is the result of an arms-length transaction, and the rent is not substantially less than market rent unless reduced by a subsidy.

Although leases are protected by the PTFA, a lease (except for Section 8 leases) can be prematurely terminated upon 90-days notice if the purchaser of the foreclosed property intends to reside in the property.

New York State legislation signed in December 2009 provides further protections for New York tenants residing in foreclosed properties. Most notably, the legislation requires that New York tenants receive written notification of the foreclosure action and the change in ownership of the property.

This is an important victory for tenants. In the past, tenants received little notice prior to foreclosure evictions. Now they will receive at least 90 days notice and their leases will be protected, with limited exceptions.

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