1. Tenants in Foreclosure New Laws and Updates Tovah Flygare, Attorney, Southern Minnesota Regional Legal Services e-mail: tovah.flygare@smrls.org

2. Tenants in Foreclosure: New Laws and Updates Generic Timeline New Federal Law State Law and updates Q&A

3. Generic Timeline ***Timeline varies with different foreclosure agreements and processes*** Month 1 minus 4- 6 weeks Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Notice of Sheriff Sale * given to occupant *Landlord must notify prospective tenant of foreclosure in writing (MN Stat. 504B.151) Sheriff Sale Property sold at auction to highest bidder Redemption Landlord in possession Redemption Landlord in possession Redemption Landlord in possession Redemption Landlord in possession Redemption Landlord in possession *tenant can use security deposit as rent for last month of the redemption period (MN Stat. 504B.178) End of redempt -ion Tenant must get notice to vacate from new owner under Federal or State law

4. New Federal Law PTFA 702 bona fide tenant has minimum of 90 days notice from immediate successor in interest. Bona fide tenant with bona fide lease can live out lease unless new owner will occupy as primary residence. PTFA 703 (Section 8) Foreclosure is not “good cause” to terminate a lease. New owner cannot terminate lease because of foreclosure unless new owner is moving in as primary residence and gives 90-day notice. New owner bound by HAP and lease.

5. New Federal Law: “Bona fide” Bona fide tenant: rents from mortgagor, not mortgagor or mortgagor’s spouse, child, parent; Bona fide lease: entered into before foreclosure; result of arm’s length transaction; rent is not substantially less than market rate or is subsidized under government program

6. State Law and Updates 1. Landlord’s notice to Tenant 2. Lender’s Notice of Tenant’s Rights 3. New Owner’s Notice to Tenant 4. Utilities –Pay and Deduct 5. Security Deposit –Last month of redemption period 6. Mandatory Expungement

7. Landlord Notice to Tenant Minn. Stat. § 504B.151. Landlord must provide written notice to prospective tenants about foreclosure or contract for deed cancellation. Landlord can only make lease for the shorter of: 2 months or the remaining time of redemption or cancellation period.

8. Landlord Notice to Tenant: Example Tenant signs a year-long lease and moves into a property only to find there are only 2 months left of the redemption period although Landlord never told tenant about foreclosure. Tenant has a legal argument that the lease is illegal, in some cases can use this to break lease or void lease.

9. Lender Notice of Tenant’s Rights Minn. Stat. § 580.042. Foreclosing lender is supposed to give this notice to tenants in a foreclosed property. Foreclosing lender usually only serves a notice of the sheriff’s sale on whoever is at the foreclosed property.

10. Example See attached example

11. Immediate Successor In Interest/ New Owner Notice to Tenant* After the end of the redemption period the new owner (usually the foreclosing lender) must give bona fide tenants 90-day notice to vacate or let them live out their bona fide lease. –Careful about giving personal information to debt collectors unnecessarily. If state law offers tenants more protection, then state law applies.

12. Example See attached examples

13. Different requirements for Section 8* For section 8 tenants the new law amends section 8(o) to provide that in the case of an owner who is an immediate successor in interest pursuant to foreclosure during the term of the lease vacating the property prior to sale shall not constitute other good cause, except that the owner may terminate the tenancy effective on the date of transfer of the unit to the owner if the owner (i) will occupy the unit as a primary residence and (ii) has provided the tenant a notice to vacate at least 90 days before the effective date of such notice. In addition, in the case of any foreclosure on any property in which a recipient of section 8 assistance resides, the immediate successor in interest in such property pursuant to the foreclosure assumes such interest subject to the lease between the prior owner and the tenant and to the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit.

14. Utilities Minn. Stat. § 504B.215 Water –Give notice to Landlord –Can pay current charges –Not responsible for arrears, late fees –Not subject to deposit. Gas & Electric –Give notice to Landlord –Service must be restored for at least one billing period –If less than 5-unit building, tenant can put account in own name

15. Security Deposit Minn. Stat. § 504B.178, subd. 8 Tenant may use security deposit for rent in the last month of a contract for deed cancellation period or mortgage foreclosure redemption period.

16. Mandatory Expungement Minn. Stat. § 484.014, subd. 3. Expungement shall be granted for tenant of foreclosed property if: –Redemption period is over and tenant vacated before the eviction action started; OR –Tenant lived at property during redemption period and did not receive notice to vacate before eviction action.