Protecting Tenants under Foreclosures

While this may not seem such a big deal to many of our readers, - read: nonlawyers -, HOA lawyers have a very difficult practice. Not only is it important to be well versed in the major areas of the practice, such as Real Estate, Colorado Common Interest Ownership Act, Corporation and Non-Profit Corporate Acts, Contracts, Litigation, especially Collections, but also knowledgeable in other areas to seek expert advice to make sure the client receives the best and most accurate information. Examples include laws regarding fair housing, employment, bankruptcy, taxes and other esoteric areas.

With all the new laws being passed directly involving HOA’s (see Mark Payne’s most recent posting) and those affecting HOAs indirectly, it is important to be aware of situations that may have impact how we attorneys offer advice.

Last year Congress passed Public Law 111-22, Title VII –Protecting Tenants at Foreclosure Act, effective May 20, 2009. The law was passed to protect bona fide tenants against immediate evictions by the successor in interest of “any foreclosure on a federally-related mortgage or loan or on any dwelling or residential real property after the date of the enactment [May 20, 2009]…” The law appears to focus on public trustee foreclosures on mortgages covered under federal law. But, because of the inclusion of “…or on any dwelling or residential property after the date of enactment…,” I would interpret the intent of “or” to include all foreclosures on dwellings and residential real property with or without it being a “federally-related mortgage,” - including HOA lien foreclosures as well.

 

 While this enactment supersedes any state law which gives a shorter period of time to vacate, it specifically allows for any longer periods provided by state law or regulations. So if there is state legislation which gives tenants longer periods of time, the state law controls.

If there is a non-owner tenant in the property, the law requires successors in interest to give bona fide tenants a notice to vacate at least 90 days before the effective date of the notice.  The law describes the rights of a bona fide tenant and what constitutes a bona fide lease or tenancy. But reading the statute in its entirety, I would recommend that the 90 day notice should always be given at the end of the redemption period to start the time to evict the bona fide tenant. (It is clear that the foreclosing party can not proceed sooner than that, such as the time of commencing the foreclosure action, since it would not have an ownership interest until the redemption period ends.)