Foreclosure of Rental Properties

The recent housing slump has increased both foreclosures and rental occupancy. When a property with active tenants is sold at foreclosure, tenants and new owners often ask if the tenants may continue occupying the premises after the foreclosure and, if so, for how long. The answers differ under competing state and federal laws. Nevada and the federal government have enacted seemingly conflicting laws affecting a tenant’s ability to remain in a property after foreclosure. Whether federal or state law applies depends on the answers to various questions, including:

* Is the existing lease for a fixed term (e.g., 12 months), or was it month-to-month?

* How often did the tenant pay rent?

* Did the foreclosing lender provide required notices to the tenant?

* Is the foreclosing party an institutional lender with a large portfolio of loans or an individual investor?

* Were the tenant and previous owner related to each other?

Under Nevada law, a tenant may have the right to remain in the premises for up to 60 days after foreclosure. During this 60-day period, the tenant must pay rent to the new owner, but the tenant and new owner may also negotiate a new lease agreement. If the new owner wants to move in or the tenant wishes to move out, they can agree to this as well. However, in certain situations, the new owner may be able to force the tenant to move out immediately after the foreclosure.

By contrast, the federal government has enacted the Protecting Tenants at Foreclosure Act of 2009 (“PTFA”). Under PTFA, a tenant may be able to continue occupying the premises for up to 90 days after foreclosure and, in some cases, throughout the entire remaining balance of the lease term. Again, however, the new owner may be able to force the tenant to move out immediately under some circumstances.

An experienced attorney can answer questions that you have in connection with real estate transactions, long-term loans, foreclosures, and evictions. Rod Woodbury can be reached at 933-0777 or by e-mail at rod@woodbury-law.com.