Boyle & Leonard, P.A.

The Federal Protecting Tenants At Foreclosure Act of 2009 Contrasted With Florida’s Act Regarding Termination Of Rental Agreements Upon Foreclosure

By: Michael W. Leonard, Esq.

Boyle, Gentile & Leonard, P.A.

www.boylegentilelaw.com

There are two statutes that a successful purchaser at a foreclosure sale must be concerned with when the property that he or she has purchased is subject to a bona fide lease.  The Federal Protecting Tenants at Foreclosure Act (“PTFA”), Pub.L. No. 111-22, Div. A, Title VII, 123 Stat. 1632, 1660-62 (2009), Title VII, Section 701 to 704, codified as amended by 12 U.S.C. §5220, et seq., which expired on December 31, 2012, pursuant to the sunset provision contained in Section 704, was revived effective December 31, 2014, as if the PTFA sunset provision had never taken effect. 

Florida likewise has legislation codified in Florida’s statute pertaining to Termination of Rental Agreement upon Foreclosure (§83.561).    Although the PTFA does provide deference to state laws that afford greater protection to tenants, the PTFA, preempts any local or state law that provides less protection than that afforded under the PTFA.  Mik v. Fed. Home Loan Mortgage Corp., 743 F.3d 149, 164 (6th Cir. 2014).  It is because of this fact that the differences between Florida’s statute regarding termination of rental agreements upon foreclosure and the PTFA matter.

Both the PTFA and Florida’s statute apply only to a bona fide tenant, meaning a tenant who (a) is not the child, spouse or parent of the mortgagor, (b) occupies the premises pursuant to an arms-length transaction, and (c) whose rental obligations is not substantially less than the fair rental market value.  However, the federal PTFA applies only to federally-related mortgage loans on any dwelling or residential real property and subjects any immediate successor in interest in such property to the requirements of the PTFA.  Furthermore, the PTFA requires an immediate successor in interest at foreclosure (i.e. the successful bidder at foreclosure sale) to honor a bona fide lease unless the successful bidder intends to occupy the unit as a primary residence.  In the event that the successful bidder intends to occupy the real property as his primary residence, he has the right to obtain possession by providing the bona fide tenant with ninety (90) days written notice before he or she may take possession. 

Florida’s statute dealing with termination of rental agreements upon foreclosure likewise affords protections for bona fide tenants. However, there are significant differences that a would-be purchaser would be well served to understand.  First, Florida’s statute applies to all residential premises that are subject to a foreclosure sale, not just those relating to a federally-related mortgage.  Therefore, when a foreclosure sale takes place subject to a non-federally-related mortgage, a purchaser need not concern themselves with the PTFA, but they must still comply with Florida’s law relevant to a bona fide tenant.  Another substantial difference between the two acts relates to the timing of notice that must be provided to a bona fide tenant.  Florida’s act only requires that a bona fide tenant receive thirty (30) days notice.  In contrast, the PTFA requires that a bona fide tenant receive ninety (90) days notice when the purchaser intends to occupy the premises. Therefore, to the extent that there was a foreclosure of a federally-related mortgage, the successful purchaser, who intends to occupy the premises must serve the ninety (90) day notice and not the thirty (30) day notice required under Florida law.  Florida’s act also permits a successful purchaser to take possession of property subject to a bona fide lease whether or not that purchaser at foreclosure intends to occupy the premises. 

Further, the Florida act requires that any purchaser at foreclosure sale comply with §83.67, which places affirmative obligations and duties on that purchaser, thereby potentially subjecting the purchaser to attorneys’ fees pursuant to Chapter 83 if a purchaser violates that statute.  In sum, while there is no private cause of action against a landlord who violates the PTFA (see Mik, 743 F.3d 149, 158), Florida’s statute governing termination of a rental agreement upon foreclosure subjects the purchaser to the requirements of §83.67.  By way of example, a purchaser of property that has bona fide tenants, has an affirmative obligation to insure that the dwelling unit does not lose utilities services. A violation of this statute may subject the landlord to damages and attorneys’ fees, a remedy that is not afforded under the PTFA. 

Additionally, a purchaser of  property at foreclosure, must determine whether the mortgage is a federally-related mortgage, as that term is defined in Section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).  If the mortgage being foreclosure is in fact a federally-related mortgage, that purchaser, if he does not intend to occupy the premises, takes title to the foreclosed property subject to the lease and is obligated to abide thereby.  This purchaser through foreclosure of property that was subject to a federally-related mortgage is subject to the full lease term.  Conversely, if the mortgage is not a federally-related mortgage, a purchaser at foreclosure may oust the bona fide tenant by providing the tenant thirty (30) days written notice, thereby not being subject to the full lease term. 

The type of mortgage under which a purchaser takes title at a foreclosure sale matters.  Be aware of the type of mortgage and the obligations due and owing by the purchaser.  The differences matter.