Friday, December 21, 2012



by:  Michael W. Leonard, Esquire
Boyle, Gentile, Leonard & Crockett, P.A.

On May 20, 2009, President Obama signed into law the “Protecting Tenants at Foreclosure Act of 2009” (the “PTF Act”).  The purpose of the PTF Act, at least in part, was to help with the displacement of tenants following the foreclosure sale of residential property.  With foreclosure actions already at a crisis level, the government chose to assist those non-owner occupants who had entered into a written lease with the original owner.  The PTF Act provided that it would end on December 31, 2012. 

The PTF Act, as originally passed, applied to foreclosure actions involving a federally regulated mortgage on any dwelling or residential property, in which the foreclosure action was filed after the PTF Act’s enactment.  12 USCA § 5201, et seq.  Additionally, the PTF Act only applied to leases and tenancies legitimately entered into before “notice of foreclosure”.  Id.  Any successful bidder at a foreclosure sale would take title subject to the lease, with certain exceptions. 

If the lease was an oral lease or a written lease that could be canceled at will, the successful foreclosure bidder could terminate the tenant’s occupancy upon a ninety (90) day notice to vacate.  Additionally, in order to have the protections under the PTF Act, the lease and tenancy must be considered a “bona fide” lease and tenancy.  If so, the successful bidder at foreclosure sale, upon ninety (90) days written notice, had the right to terminate the lease, as long as the purchaser would occupy the property as his primary residence.  Id. 

To be considered a bona fide lease or tenancy, the PTF Act required that the lease be a result of an arm’s length transaction and that, under the lease, rent must be paid that is not substantially less than fair market rent.  Furthermore, the PTF Act specifically excluded as bona fide leases and tenancies, leases from the owner to a child, spouse or parent of the owner. 

A critical question left unanswered by the PTF Act was what exactly was considered “notice of foreclosure”.  This was important because only leases entered into before the notice of foreclosure had protection under the PTF Act.  Many argued that the notice of foreclosure date was the date that the Lis Pendens was recorded in the foreclosure action. 

On July 21, 2010, the President signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). 12 USCA § 5301, et seq.  The Dodd-Frank Act was quite voluminous and covered many subjects, including amendments to the PTF Act. 

One of the changes the Dodd-Frank Act instituted with respect to the PTF Act is that it extended the expiration of the PTF Act by an additional two (2) years to December 31, 2014.

A critical change to the Dodd-Frank Act implemented with respect to the PTF Act was defining “notice of foreclosure”, stating that “notice of foreclosure” means “the date on which complete title to a property is transferred to a successor entity or person as a result of an order of a court or pursuant to provisions in a mortgage, deed of trust, or security deed”.  Title XIV, Mortgage Reform and Anti-Predatory Lending Act §1484, 12 USCA § 5301.  Essentially, this definition makes it possible for tenants who enter into leases even as late as the date of the Certificate of Title to have protection under the PTF Act.  This change likely increases the potential for increased fraudulent leases and tenancies. 

Bidders at foreclosure sales should be aware of these changes and the protections that tenants may have under the PTF Act, as amended by the Dodd-Frank Act. 

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