In response to the increase in foreclosures occurring over the past several years, the legislature has approved a law that states that the foreclosing lender/mortgagee of residential rental property (any number of units) may not evict an existing legal tenant except on one of the following 2 conditions: 1) the foreclosing owner has signed a binding P&S Agreement with a bona fide, arm’s length buyer or 2) the tenant has given “just cause” to be evicted [i.e. failure to pay rent, material lease violation, nuisance, illegal use of rented premises, locking out the owner …].
Note that foreclosing lenders must give notice (posted in the building, via US mail, AND “slid under the door of each unit”) of the foreclosure, with contact/rent payment information and disclosure of right to a court hearing before eviction. Also, a foreclosing lender must allow 30 days following this notice to evict, even if for “just cause,” unless that “just cause” is nuisance, illegal use of premises, or owner lock-out, in which case eviction is available immediately following notice.
It is important to remember that none of these restrictions apply to a subsequent buyer of the foreclosed property. They only apply to the bank or other entity, including Fannie Mae & Freddie Mac, that actually held and foreclosed on a mortgage/security interest in the property or acquired titled w/in 3 years of the filing of a foreclosure deed. Also note that a defaulting mortgagor’s 90-day “right to cure” (4 units or less only) is increased to 150 days through 2015.