Tenants and Foreclosure Florida

Imagine the shock of discovering that a home, condominium or apartment in which you are a tenant, is in the process of being foreclosed on, and you are told you have a short period of time to vacate the premises.

Fortunately, there are laws and safeguards in place to protect the rights of tenants in homes being foreclosed upon, some of which have been enacted recently, in light of the wave of foreclosures sweeping the country.

Mortgage giants Freddie Mac and Fannie Mae, which are both currently being operated under federal government regulators, have developed new rules and guidelines that apply to tenants and their rights should the property they are renting fall into foreclosure, and is either sold to a new owner or taken over by the mortgage holder. The measures are designed to allow renters to remain in the property if they wish to remain there. Typically, Fannie Mae and Freddie Mac will hire a local property management firm to manage and market their real estate-owned, (REO), properties, and to determine if in fact a tenant is in residence there. The property manager will then present the tenant with options, such as either remaining in the residence under a new rental agreement, or vacating the unit. In what is commonly called a “cash for keys” arrangement, a tenant may agree to accept a fixed amount of money to move out, typically around $1,000, and are given a 90-day time frame in which to relocate.

The Fannie Mae / REO program stipulates:

• The program is open only to current renters, not new tenants or former owners of the property.
• Rental agreements are month-to-month only.
• Renters must pay a reasonable market-rate rent based on local rents of comparable properties and other factors.
• Renters who were paying less than the market-rate rent may be offered some accommodation.
• Renters who can’t afford the market-rate rent or prefer to move out will be offered relocation assistance, typically at least one month’s rent.
• Renters who live in high-cost housing areas may be offered higher sums to move out.
• No security deposit is required.
• The property must meet state and local rental property codes.

Guidelines of the Freddie Mac program include:

• Rental agreements are month-to-month only.
• Renters must show they earn enough income to afford the rent.
• Renters must pay market-rate rent, or the rent they had been paying to the former homeowner, whichever is less.
• If the homeowner or property doesn’t qualify for the rental program, the occupant will be offered relocation assistance.
• No security deposit is required.
• This program is open to current renters and former owners who occupy the property.
• The property must meet state and local rental property codes.
• Renters must agree to allow a sales agent to show the home to potential buyers.

In addition to the Fannie Mae and Freddie Mac programs, many states and local municipalities have written laws and regulations designed to protect a tenant in a foreclosure property. In Florida, a renter’s right to remain in the property cannot be terminated unless they have been named as a party in the foreclosure lawsuit. Unfortunately, state statutes require no advance notice of impending foreclosure action against the property’s landlord be supplied to the tenant. The obligations and rights of the tenant differ greatly based on whether the tenant was named as a party in the foreclosure proceedings. In other words, it is up to the mortgage lender whether to evict the current renter, or work with them to allow them to remain on the premises. In a case where the tenant has not been named a party in the foreclosure lawsuit, and is served with an eviction notice executed by the local sheriff’s department, they have the right to file an affidavit with the sheriff’s office to obtain a stay execution of the writ of possession. Alternatively, the tenant may choose to file a motion to extend the sheriff’s execution of the eviction, providing time to possibly revise a rental arrangement with the lender, or the property’s new owners.

In most cases where a tenant has structured a new agreement to remain in the premises, they must agree to allow the property to be shown by local real estate agents, as the mortgage holder will most likely be attempting to market the property for sale.

In 2009, the federal government passed the Protecting Tenants at Foreclosure Act, which falls under the Helping Families Save Their Homes Act. This bill requires that tenants of foreclosed residential properties be provided notice to vacate at least 90 days in advance of the date by which the purchaser or the mortgage holder seeks to have the property empty. However, where the purchaser will occupy the property as the primary residence, the term of any bona fide lease remains in effect.

These requirements also apply to tenants in multifamily housing owned or overseen by the Department of Housing and Urban Development, (HUD). Local laws may allow for a greater time period for the tenant to vacate the premises, and the renter will be granted whichever time frame is longer.

If you are a tenant with questions about how an impending foreclosure will affect you, you have some resources from which to seek help. An attorney, local non-profit housing counselor or legal aid organization can provide assistance to ensure that your rights are protected under the law.