Protecting Tenants at Foreclosure Act of 2009

A new federal law protects innocent tenants from eviction after foreclosure.[1]

The purchaser at foreclosure takes the property subject to any unexpired lease.  The law also requires the foreclosure auction purchaser to give notice to vacate to any month-to-month tenant.  The notice must be served at least ninety days prior to its effective date.

The law expires at the end of 2012.

[1] S. 896, Public Law No: 111-22, signed by Pres. Obama May 22, 2009.

Purchaser in Possession

In most jurisdictions a purchaser who takes possession under a real estate purchase agreement is not a tenant.[1]  The Uniform Landlord-Tenant Act excludes “occupancy under a contract of sale of a dwelling unit or the property of which it is a part, if the occupant is the purchaser or a person who succeeds to his interest”.[2] 

Possible ramifications include the seller being denied the right to pursue the summary unlawful detainer process to regain possession from a defaulting purchaser, the remedy of distress is not available, and the seller is not liable for defective conditions of the premises.  

Some commentators have argued that since early possession does not naturally arise from the vendor-vendee relationship the parties are best viewed as landlord and tenant.  Some courts have agreed.

This argument may be most persuasive when there is a lease with an option to purchase and the option remains unexercised.[3]

[1] See Schoshinski, American Law of Landlord and Tenant, §1.7.

[2] See Uniform Residential Landlord and Tenant Act at (last accessed 04-20-09).

[3] Napper v. National Mortg. Group, Inc., 194 Ga.App. 148, 390 S.E.2d 70 (1990).