Understanding Foreclosure: Federal Protections for Tenants Living In Properties that are Going Through Foreclosure
The Protecting Tenants at Foreclosure Act (PTFA) is a federal law that provides certain protections for tenants when the property they are renting is being foreclosed.
Who is protected and excluded by the PTFA?
PTFA applies to (1) any residential property that has a federally related mortgage loan and to (2) any bona fide lease or tenant meeting the bona fide criteria.
Exception #1: If the new owner wants to move in, the tenant is excluded from the majority of the PFTA’s protections and is only promised a 90-day notice to terminate the lease even if they have a bona fide lease.
Exception #2: Even if the tenant qualifies for protection under PTFA, they can still be evicted for cause (violating the lease or failing to pay rent).
What kind of protection does the PTFA give tenants?
Under PTFA, the new owner is required to:
- Honor the tenant's bona fide rental agreement for the full term of the lease;
- Provide a 90-day notice to terminate the tenancy that also follows state law; and
- Serve the notice after the title has been passed to the new owner.
If the new owner files an eviction case after buying the foreclosed property, then the tenant has a right to seal the eviction court record.
What happens when a tenant is not covered by the PTFA?
The tenant may be covered by Illinois state law.