Foreclosure is always bad news, but it can be particularly bad for tenants who face eviction due to circumstances beyond their control. While California state law provides protections to tenants of a foreclosed building, the federal Protecting Tenants at Foreclosure Act of 2009 provides additional protections. These protections include upholding the leases of current tenants and giving those without a lease the right to at least 90 days notice if the new owner decides to terminate tenant rental agreements.
California state law requires new owners of foreclosed buildings to give tenants without a lease 60 days notice to vacate the building. The Protecting Tenants at Foreclosure Act supersedes state laws in most cases, however, and requires that new owners give these tenants 90 days notice.
Under the new federal law, a tenant's lease remains valid, even after foreclosure. A tenant with a lease can continue living in the rental unit throughout the duration of the lease.
While leases usually remain in force after foreclosure, the Protecting Tenants at Foreclosure Act does provide an exception: A landlord who wishes to move into a property herself to end a lease after providing 90 days notice to the tenant.
"Just Cause" and "Good Cause" Evictions
California tenants who live in cities with rent-control laws remain protected by "just cause" eviction laws, which severely limit the reasons for which a landlord can evict a tenant or refuse to renew a lease. Foreclosure is not considered "just cause" to not renew a lease or "good cause" to evict a tenant who pays his rent using a Section 8 voucher.
Cash for Keys
Tenants in foreclosed buildings might be offered money by the building's new owner in exchange for moving out (this is known as "cash for keys"). This may be a good deal for you, but be sure to negotiate enough time to find a new place to live.
Lainie Petersen writes about business, real estate and personal finance, drawing on 25 years experience in publishing and education. Petersen's work appears in Money Crashers, Selling to the Masses, and in Walmart News Now, a blog for Walmart suppliers. She holds a master's degree in library science from Dominican University.