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.”
Maryland’s General Assembly has enacted a parallel state statute and the Court of Appeals has amended the Maryland rules governing motions for possession following a foreclosure sale so as to coordinate with those laws. The Maryland statute also requires a “successor in interest” of a residential property – which in most cases is the new owner — in foreclosure to provide at least a 90-day advance notice to a bona fide tenant explaining whether and when the tenant must vacate the property.
Judy Curtis rented her home from a landlord who defaulted on the mortgage. U.S. Bank National Association (USBNA), as trustee for the mortgage-backed security that owned that debt, foreclosed on the landlord’s deed of trust and apparently decided to terminate Curtis’ lease. In doing so, it sent conflicting notices to Curtis about her right to remain in the property and also filed a motion for immediate possession of the property that did not give her 90 days notice.
Curtis opposed USBNA’s motion for possession on the basis that it had been filed too soon. The circuit court granted USBNA’s motion and ordered her to pay $1419 each month into a court registry until her appeal was resolved. Although Curtis appealed to the Court of Special Appeals, she also asked the state’s top court, the Court of Appeals, to hear her case. The Court of Appeals decided to adjudicate the matter.
A purchaser at a foreclosure sale is ordinarily entitled to possession of the property upon ratification of the sale, payment of the purchase price and conveyance of legal title, the court observed. However, that general rule is not at play when the purchaser steps into the shoes of a landlord, the court said.
Curtis, the court pointed out, received three different, conflicting notices – one that told her to immediately leave the property, a second told her that USBNA would take legal action if she did not leave by March 23, 2011 and the third, a motion served on her by USBNA during January 2011, sought to expel her from the property but told her that she was a bona fide tenant. “[T]his succession of post-sale correspondence would have left anyone perplexed,” the court said. The court also pointed out that the notices could also be construed to believe USBNA was confused as to its rights and obligations under the federal statute.
“In our view, USBNA failed to comply with the PTFA and Maryland Rules in its efforts to oust Ms. Curtis from her residence,” the court declared. In addition, the court said, at the time when USBNA filed its motion for immediate possession, it did not have a right of possession. The filing of the motion was premature, the court said.
“We hold that, when a purchaser sends a bona fide tenant (as defined in the PTFA) contradictory and misleading notices, one of which directs the tenant to vacate the property “immediately,” and fails to correct the misleading notice, the purchaser has not met its obligation under the PTFA to provide and accurate advance notice to the tenant. A motion for possession filed by the purchaser before it has a right to immediate possession is premature,” the court said.
Judy Curtis v. US Bank National Association was released August 20, 2012.
Belsky & Horowitz has represented consumers in mortgage, bankruptcy and debt collection cases for many years. Although foreclosures are difficult to stop once they are started, our attorneys have represented individuals facing foreclosure for more than 20 years and have achieved a very high success rate in stopping foreclosure sales, reorganizing client finances and helping with unpaid income tax problems through the use of a Chapter 13 bankruptcy.
In Chapter 13, foreclosure, repossession, garnishment, seizure or legal action is “stayed” – placed on hold — and a court-approved reorganization plan is put into place which pays creditors an amount to satisfy their claims. Clients obtain a fresh start without the burden of long-standing past due debt. This saves the clients’ home, stops interest from accumulating and offers a great deal of emotional relief from creditor action to collect debts.
Contact our bankruptcy attorneys for a free consultation and let us help you to resolve your credit and debt problems through prompt and professional action that will make what otherwise would appear to be an impossible situation a very manageable one for you and your family!