May 2, 2016
by Kevin Dobie
Usset, Weingarden & Liebo, PLLP
USFN Member (Minnesota)
More than a year following the expiration of the federal Protecting Tenants at Foreclosure Act (PTFA), asset managers are still negotiating the state-by-state approach to addressing tenants occupying foreclosed properties. While some may find the piecemeal approach difficult and daunting, the PTFA is unlikely to make a comeback any time soon.
Federal S.730 and Federal H.R.1354 were introduced in March 2015 to make the PTFA permanent. Federal S.1491 was introduced in June 2015, proposing the same permanent PTFA bill within a larger piece of legislation (the Community Lender Regulatory Relief and Consumer Protection Act of 2015). Hearings have been held on this second piece of legislation, and Senate cosponsors have signed onto S.1491 as recently as November 2015, but there has been no activity since then. All three bills remain in their respective Senate and House committees. The website govtrack.us gives each of the bills a 1 or 2 percent chance of becoming law.
PTFA critics assert that the act does not address long-term leases, and it is expensive to prove that a lease is not bona fide, which is often required when a landlord and tenant enter into a below-market rate lease shortly before the foreclosing entity acquires the property. In general, proving that a lease is not bona fide requires an expert witness on the rental market and, oftentimes, the real estate listing agent is not familiar with rental rates in the area in order to testify to such. Proponents of the act note that it is unfair that tenants may be summarily evicted shortly after entering into a bona fide lease, especially where the tenant is current on his rent payments.
Asset managers must continue to monitor eviction laws on a state-by-state basis. As for Minnesota, the state law largely mirrors the PTFA, and it is likely here to stay. In Minnesota, foreclosure purchasers must send a 90-day notice to all tenants and must continue honoring bona fide leases for the duration of the lease. If the mortgagor or a close relative is the occupant, there is no notice requirement, and foreclosure purchasers may commence eviction actions immediately after the redemption period expires.
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Spring 2016 USFN Report