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Tenants in Foreclosure. New Laws and Updates Tovah Flygare, Attorney, Southern Minnesota Regional Legal Services e-mail: tovah.flygare@smrls.org. Tenants in Foreclosure: New Laws and Updates. Generic Timeline New Federal Law State Law and updates Q&A.

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tenants in foreclosure

Tenants in Foreclosure

New Laws and Updates

Tovah Flygare, Attorney, Southern Minnesota Regional Legal Services

e-mail: tovah.flygare@smrls.org

tenants in foreclosure new laws and updates
Tenants in Foreclosure: New Laws and Updates
  • Generic Timeline
  • New Federal Law
  • State Law and updates
  • Q&A
generic timeline timeline varies with different foreclosure agreements and processes
Generic Timeline***Timeline varies with different foreclosure agreements and processes***
new federal law
PTFA 702

bona fide tenant has minimum of 90 days notice from immediate successor in interest.

Bona fide tenant with bona fide lease can live out lease unless new owner will occupy as primary residence.

PTFA 703 (Section 8)

Foreclosure is not “good cause” to terminate a lease.

New owner cannot terminate lease because of foreclosure unless new owner is moving in as primary residence and gives 90-day notice.

New owner bound by HAP and lease.

New Federal Law
new federal law bona fide
New Federal Law: “Bona fide”
  • Bona fide tenant: rents from mortgagor, not mortgagor or mortgagor’s spouse, child, parent;
  • Bona fide lease: entered into before foreclosure; result of arm’s length transaction; rent is not substantially less than market rate or is subsidized under government program
state law and updates
State Law and Updates
  • 1. Landlord’s notice to Tenant
  • 2. Lender’s Notice of Tenant’s Rights
  • 3. New Owner’s Notice to Tenant
  • 4. Utilities
    • Pay and Deduct
  • 5. Security Deposit
    • Last month of redemption period
  • 6. Mandatory Expungement
landlord notice to tenant
Landlord Notice to Tenant
  • Minn. Stat. § 504B.151.
  • Landlord must provide written notice to prospective tenants about foreclosure or contract for deed cancellation.
  • Landlord can only make lease for the shorter of: 2 months or the remaining time of redemption or cancellation period.
landlord notice to tenant example
Landlord Notice to Tenant: Example
  • Tenant signs a year-long lease and moves into a property only to find there are only 2 months left of the redemption period although Landlord never told tenant about foreclosure.
  • Tenant has a legal argument that the lease is illegal, in some cases can use this to break lease or void lease.
lender notice of tenant s rights
Lender Notice of Tenant’s Rights
  • Minn. Stat. § 580.042.
  • Foreclosing lender is supposed to give this notice to tenants in a foreclosed property.
  • Foreclosing lender usually only serves a notice of the sheriff’s sale on whoever is at the foreclosed property.
example
Example
  • See attached example
immediate successor in interest new owner notice to tenant
Immediate Successor In Interest/ New Owner Notice to Tenant*
  • After the end of the redemption period the new owner (usually the foreclosing lender) must give bona fide tenants 90-day notice to vacate or let them live out their bona fide lease.
    • Careful about giving personal information to debt collectors unnecessarily.
  • If state law offers tenants more protection, then state law applies.
example12
Example
  • See attached examples
different requirements for section 8
Different requirements for Section 8*

For section 8 tenants the new law amends section 8(o) to provide that in the case of an owner who is an immediate successor in interest pursuant to foreclosure during the term of the lease vacating the property prior to sale shall not constitute other good cause, except that the owner may terminate the tenancy effective on the date of transfer of the unit to the owner if the owner (i) will occupy the unit as a primary residence and (ii) has provided the tenant a notice to vacate at least 90 days before the effective date of such notice.

In addition, in the case of any foreclosure on any property in which a recipient of section 8 assistance resides, the immediate successor in interest in such property pursuant to the foreclosure assumes such interest subject to the lease between the prior owner and the tenant and to the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit.

utilities minn stat 504b 215
Water

Give notice to Landlord

Can pay current charges

Not responsible for arrears, late fees

Not subject to deposit.

Gas & Electric

Give notice to Landlord

Service must be restored for at least one billing period

If less than 5-unit building, tenant can put account in own name

Utilities Minn. Stat. § 504B.215
security deposit minn stat 504b 178 subd 8
Security Deposit Minn. Stat. § 504B.178, subd. 8
  • Tenant may use security deposit for rent in the last month of a contract for deed cancellation period or mortgage foreclosure redemption period.
mandatory expungement
Mandatory Expungement
  • Minn. Stat. § 484.014, subd. 3.
  • Expungement shall be granted for tenant of foreclosed property if:
    • Redemption period is over and tenant vacated before the eviction action started; OR
    • Tenant lived at property during redemption period and did not receive notice to vacate before eviction action.