Protecting Tenants at Foreclosure Act is Back

By Arizona REALTORS® General Counsel Scott Drucker, Esq.

On June 23, 2018, the Protecting Tenants at Foreclosure Act went back into effect, once again protecting the rights of tenants when the property they are leasing goes into foreclosure.

The Act was first passed in 2009 and established protections for tenants in the event their landlord failed to pay the mortgage for the leased property, causing it to fall into foreclosure. Specifically, the Act permitted tenants, following foreclosure, to remain in the property until the end of their lease unless the property is sold to a purchaser that will use the property as a primary residence.

However, even under this exception, the tenant must still receive a minimum of 90 days’ notice before the lease can be terminated.1

Initially, the Act was scheduled to expire at the end of 2012. It was then extended through December 31, 2014, at which time the Act expired. Fortunately, on May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act was signed into law, restoring the Act effective June 23, 2018. No expiration date has been imposed.

The protections afforded by the Act apply to bona fide tenants, defined as a person in possession of the property, with or without a written lease, if the:

  • Tenant is not the mortgagor (borrower) or the child, spouse, or parent of the mortgagor;
  • Lease or tenancy constitutes an arms-length transaction; and
  • Rent is not substantially less than the fair market rent for the property.

Pursuant to the above requirements, lenders and other foreclosure purchasers are protected from certain situations in which the tenant attempts to unfairly remain in possession of the rental property.

For more information, see Senate Bill 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act.

1Related Legal Hotline Q&As (members only):
Month-to-Month Tenant Has Right to Stay in Home for Ninety Days after Foreclosure Sale
Protecting Tenants at Foreclosure Act of 2009

Scott M. Drucker, Esq., a licensed Arizona attorney, is General Counsel for the Arizona REALTORS® serving as the primary legal advisor to the association. This article is of a general nature and reflects only the opinion of the author at the time it was drafted. It is not intended as definitive legal advice, and you should not act upon it without seeking independent legal counsel.

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