New Law in Colorado Promises Protection to Tenants Living in Foreclosed Houses
The recent housing crisis has caused many landlords to surrender their properties to foreclosure causing many tenants to be evicted by the new owners who fail to give them proper notice and time to make new arrangements. To tackle this problem the Congress has recently passed a law – Protecting Tenants at Foreclosure Act (PTFA) that will reduce the pace of eviction following foreclosure.
Prior to the passing of PTFA when a foreclosure is completed the ownership is granted either to one who has bid the highest (generally it is the lender) at the public auction or to the redeemer of a second lien.
If the property has been rented out on lease at the time of the sale the new owner can keep the tenants by filing a notice with the personnel conducting the sale. If this is not done then the leases become invalid by the foreclosure process. The new owners can then start with the eviction of the occupants and regain the property from the tenants as thought fit.
PTFA slows down the power of the new owner following foreclosure to throw out the tenants. It stipulates that the new owner would have to grant at least 90 days grace period to the tenant from the time the new deed has come into effect. Even if the lease was contracted while the house was in foreclosure the tenant is entitled to this grace period of 90 days. If no written deed exists then the tenancy would be cancelled according the wishes of the new landlord.
If the lease had been contracted prior to the starting of the foreclosure then PTFA allows the tenant to continue to remain on the property till the completion of the terms of the lease. But if the property has been sold to a new owner for whom this unit is the primary residence then the tenant would have to vacate – but after expiry of 90 days.
PTFA does not refer to the problem of the respective positions of the new owner and the renter if the latter has been defaulting during the lease period.
Thus to avail of the benefits of PTFA the lease has to be in proper order – the tenant must not be the owner of the unit or a close relative like child, spouse or parent. The lease must not be between two persons who have close business deals. The rent taken by the landlord must not be less than the rent in the fair market unless it is subsidized as per federal, state or local law.
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