When foreclosed properties are purchased, many buyers are unaware that tenants have rights under both state and federal law. In a recent court case, Maryland’s Court of Appeals scolded a lender for acting too soon to get rid of a tenant.
Under the federal Protecting Tenants at Foreclosure Act (PTFA), a purchaser of a foreclosed residential property must provide advance notice to a tenant if the tenant will be required to vacate the residence. The new owner must provide tenants with a notice that advises the tenant of the right to occupy the residence for the remainder of the lease or, if there is no lease or the lease is terminable at will under state law, the tenant has the right to occupy the property for 90 days. However, the foreclosure must involve a federally-insured mortgage, the foreclosure must take place after the enactment of the PTFA and the tenant must qualify as a “bona fide tenant.”