Spring 2010-#8. Understanding Tenants at Foreclosure: How the Federal "Protecting Tenants at Foreclosure Act" Changes Vermont Foreclosure Practice.

• Author: by Caroline Lefebure

Vermont Bar Journal

2010.

Spring 2010-#8.

Understanding Tenants at Foreclosure: How the Federal "Protecting Tenants at Foreclosure Act" Changes Vermont Foreclosure Practice

THE VERMONT BAR JOURNALVolume 36, No.1Spring 2010Understanding Tenants at Foreclosure: How the Federal "Protecting Tenants at Foreclosure Act" Changes Vermont Foreclosure Practiceby Caroline LefebureA recently enacted federal law, the "Helping Families Save Their Homes Act of 2009," provides tenants living on property in the foreclosure process greater protections than current Vermont law.(fn1) Title VII, the "Protecting Tenants at Foreclosure Act" (the "Act"), protects the tenants by providing a longer ninety-day notice to vacate than the state's current thirty-day notice.

Protecting Tenants at Foreclosure Act

Section 702 of the Act discusses the effect of foreclosure on preexisting tenancy. The Section broadly applies to tenants living on property subject to any "foreclosure on federally-related mortgage loan or on any dwelling or residential real property after the date of enactment."(fn2) The statute applies to foreclosure actions pending or commenced after the enactment date, May 20, 2009. Tenants whose rental property changed title before enactment are not subject to the Act.

Section 702(a) of the Act outlines which tenants are eligible for a ninety-day notice to vacate and which are eligible to stay on property more than ninety days. First, those who must be served with a ninety-day notice to vacate are those tenants meeting the definition of "bona fide."(fn3) Section 702(b) defines "bona fide" tenants as those who are not the parent, spouse, or child or the mortgagor, who entered into the transaction at arms length, and who do not pay substantially less than fair market value for rent.(fn4) Second, the ninety-day notice must be given regardless of lease type or length-for example, month-to-month leases, term leases for a year or more, leases terminable at will, oral leases, etc. Third, the ninety-day notice must be given regardless of whether the lease was entered into before or after commencement of the foreclosure action.(fn5)

Section 702(a) outlines when the tenant may be allowed to stay on the property for more than ninety days and the exception to general rule. The general rule is that if the lease term goes beyond ninety days after...