I have been hearing about new federal protections for renters when a landlord defaults. There may even be something in the law about honoring existing leases. So...what about this...if you are renting a place you like, with a landlord who might default, would it be possible to negotiate a long-term lease (say 5-7 years) at a bargain basement rent which the bank would then have to honor? One could pay the landlord for the favorable lease in some sort of lump sum payment to compensate in part for the lower payment which money he'd probably be happy to get. Anyone know what the new rules are and whether gaming them like this is plausible? Is there something in there that says it has to be FMV? It would be pretty nifty to get a big windfall like this...also--are such leases assignable?
hmmm wait; here's a piece of the law. not sure how it works:
SEC. 701. SHORT TITLE.
This title may be cited as the `Protecting Tenants at Foreclosure Act of 2009'.
SEC. 702. EFFECT OF FORECLOSURE ON PREEXISTING TENANCY.
(a) In General- In the case of any foreclosure on a federally-related mortgage loan or on
any dwelling or residential real property after the date of enactment of this title, any
immediate successor in interest in such property pursuant to the foreclosure shall assume
such interest subject to--
(1) the provision, by such successor in interest of a notice to vacate to any bona
fide tenant at least 90 days before the effective date of such notice; and
(2) the rights of any bona fide tenant, as of the date of such notice of foreclosure--
(A) under any bona fide lease entered into before the notice of foreclosure
to occupy the premises until the end of the remaining term of the lease,
except that a successor in interest may terminate a lease effective on the
date of sale of the unit to a purchaser who will occupy the unit as a
primary residence, subject to the receipt by the tenant of the 90 day notice
under paragraph (1); or
(B) without a lease or with a lease terminable at will under State law,
subject to the receipt by the tenant of the 90 day notice under subsection
(1),
except that nothing under this section shall affect the requirements for termination
of any Federal- or State-subsidized tenancy or of any State or local law that
provides longer time periods or other additional protections for tenants.
(b) Bona Fide Lease or Tenancy- For purposes of this section, a lease or tenancy shall be
considered bona fide only if--
(1) the mortgagor under the contract is not the tenant;
(2) the lease or tenancy was the result of an arms-length transaction; or
(3) the lease or tenancy requires the receipt of rent that is not substantially less
than fair market rent for the property.
(c) Definition- For purposes of this section, the term `federally-related mortgage loan' has
the same meaning as in section 3 of the Real Estate Settlement Procedures Act of 1974
(12 U.S.C. 2602).
Banks generally goes to court get eviction notice irrespective of lease. You have to fight in court to get bank accepted your previous lease.
It's about time. My only question is why does it expire in 2012? and I do think that 90 days is kinda long. I think 30 to 60 days should be enough.
The reason for this legislation is that in some states when the property was foreclosed tenants were given 20 minutes to move. The sheriff shows up at your door and tells you that you have 20 minutes to get your family and belongings out. People have lost all their belongings and been thrown out on the streets through no fault on their own. They paid their rent and their landlord didn't hold up their end of the deal. That's horrible. At least if you're the one who didn't pay your rent or mortgage you know whats coming.
Won't work if I'm reading the legal code correctly.
A "bargain basement rent" would likely fall afoul of the "bona fide lease" definition at the bottom of that section of code. If it's substantially less than fair market value, it won't fly legally.
And, even if it did fly, section 2(A) in the legalese above gives the new owner the right to terminate the lease subject to giving the tenants a 90 day notice IF they are planning on occupying the property as a primary residence. So this really would only be a "poison pill" to an investor who was planning on renting the property out.
well, what about just a good deal. the bargain basement end of fmv.
what about if it's just the bank taking it back; would they be stuck wiht the lease?
Oh Gawd!
We've had people on here for months complaining that having the government force banks to restructure a loan makes contracts meaningless.
Now, we have a law that forces banks to HONOR contracts and people are complaining about that!
I think I need a drink...
what about if it's just the bank taking it back; would they be stuck wiht the lease?
Yes if close enough to FMV (with appropriate rent increases if a long term lease to show it is meant to be a FMV lease), but they can also show and sell the home while you are leasing and then when sold you get 90 days to leave. So it isn't like the tenant can just hold on forever. Also all this has to be done before the NOD is filed and be an arms length transaction. Lots of hoops to jump through for little reward.