Tenant Protected After Foreclosure if Lease Signed Prior to the Trustee’s Sale
The Protecting Tenants at Foreclosure Act of 2009 (“Act”) provided that any bona fide residential lease entered into prior to the date of foreclosure would have to be honored by the bank or other new owner. This provision in the Act was unclear but was generally interpreted in Arizona to mean that a bona fide residential lease must have been entered into prior to the date that the notice of the Trustee’s Sale was recorded (recording must be at least 90 days prior to the actual Trustee’s Sale).
The Act was subsequently amended to clarify that a tenant with a bona fide residential lease prior to the transfer of title was protected. In other words, any residential lease entered into prior to the date of the Trustee’s Sale, and not the date that the notice of Trustee’s Sale is recorded, is protected. For example, if a residential tenant signs a bona fide 2-year lease the day before the Trustee’s Sale, the residential tenant would be entitled to stay in the home for the entire two years, provided that the tenant makes rent payments to the bank or other new owner.
Note: this amendment to the Act was effective July 21, 2010, as part of the Dodd-Frank legislation. Perhaps due to the complexity of the Dodd-Frank legislation this amendment to the Act has received little publicity.