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There are estimates that up to 40% of homes which have been foreclosed upon in the US are actually homes which renters lived in and have a rental lease signed and in place. In many of these situations, the landlord is desperate and embarrassed and does not tell his renters about the foreclosure proceed that affects the rental property they are living in until the very last minute, so renters have little time to find somewhere else to live. The Obama Administration enacted the Protecting Tenants from Foreclosure Act, a law setting forth new restrictions on the time limit for foreclosure and eviction notices, in an attempt to protect the rights of renters and avoid eleventh hour evictions and relocations,. It is beneficial to review the old foreclosure and eviction system in order to fully comprehend the new law. Traditionally, rental leases or contracts stay in place when a property is sold and the new buyer must honor the rental lease. Foreclosure cases were excluded from this guideline. When a rental property was foreclosed upon, the new buyer had the right to terminate the rental lease and deliver an eviction notice if it was required to remove a renter. The new law sets forth that rental lease contracts are still in effect after a foreclosure sale if an investor buys the property, but not for someone who intends it to be his home, with some exceptions. If the property was purchased to be used as a home and the buyer wants to live in the property, the buyer has the option to serve the renter with an eviction notice, but he must provide them with 90 days advance notice. Existing rental lease contracts also persist after the foreclosure sale if the rental lease was signed prior to the origination of the foreclosing loan, as in the case if a lease was signed three years earlier, but the loan was only originated one year earlier. The 90 day eviction guideline also has exceptions and allows certain situations wherein the new homeowner who bought the property at a foreclosure auction does not have to provide the renters with 90 days notice. This is only true if the renter meets all three of the following: 1. Neither the renter nor his spouse, parents, children ever owned the property. 2. The rental lease is an arms-length transaction. 3. The rent payment listed in the rental lease is fair market rent value, with the exception if it is government-subsidized. These exceptions were created to prevent what is called sweetheart deals wherein renters try to gain a few months of free living without fear of eviction by cheating the system. This new law opens the door to a wave of lawsuits against landlords, where renters try to make a quick buck and accuse their landlords of breach of contract. It is the landlord's duty to stay informed of the risk and exposure to lawsuits such as these so that they can prepare ahead of time should they find themselves in a position where renters are looking to take advantage of the landlord. Both renters and landlords should be well informed on the provisions of the new bill so they can be prepared in case of a foreclosure. There is no way to definitively determine if the new law will cause foreclosure prices to decrease, as buyers are reluctant to buy if there is a possibility of having to go through a potentially lengthy eviction procedure before they can move into or otherwise appropriate the property they have just bought. The bill's expiration date is currently December 31, 2012, and hopefully by then the increased frequency of foreclosures will have subsided. Go to Free Legal Forms site, where you can find many free legal forms and resources including Rental Agreement Forms that you can use for rental lease and contract, protecting your own rights.
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