Federal Laws, Tenant Occupancy & Foreclosures

Here’s a great tidbit from the Washington Association of REALTORS® legal hotline regarding federal laws, tenants & foreclosures….


Are there state and/or federal laws affecting tenant occupancy of rental property after a foreclosure sale?

Yes. Both Washington State and the United States have a law in place addressing a tenant’s right to retain occupancy of housing after a foreclosure sale. The Washington law took effect July 26, 2009. Both federal and state laws impact a buyer’s ability to occupy real property purchased at or immediately after a foreclosure sale.

Under the Washington law, any residential tenant occupying property at the time the property is foreclosed must be given 60 days written notice before an eviction can occur. During this 60 days, the only reasons landlord could expedite removal of the tenant would include tenant committing waste to the property or creating a nuisance.

Under the federal law, a residential tenant in property that is secured by a federally-related mortgage loan is entitled to retain possession following foreclosure for the duration of any bona fide, written lease agreement. If there is no written lease agreement or if the lease is for a month-to-month tenancy, then the tenant must be given 90 days notice before being evicted. During tenant’s occupancy following foreclosure, however, the tenant’s occupancy is subject to the terms of the lease agreement. In other words, tenant will be required to perform tenant’s obligations under the lease. The exception to this federal law is that if buyer intends to occupy the property (as an owner-occupant), then buyer must only give tenant 90 days notice of termination of tenant’s occupancy rights and any lease rights in excess of 90 days will be terminated.

This question was answered by the Washington Association of REALTORS Attorney, Annie Fitzsimmons. The Legal Hotline lawyer does not represent Washington Association of REALTORS® members or their clients and customers.

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