Interpreting the Protecting Tenants of Foreclosure Act of 2009

Abstract

In the summer of 2007, mortgage foreclosure rates were increasing in nearly all metropolitan areas. By the end of 2008, the foreclosure crisis had spread to suburban areas as well. Foreclosures in the United States are at an all time high, and the number of foreclosed properties will likely increase as the recession's impact continues.

While foreclosure negatively impacts individual owners and surrounding neighbors, it often also results in the involuntary displacement of tenants. The foreclosure crisis impacts a great number of tenants in part because of the “substantial rise in investor-owned borrowing after 2002.” In 2007, over 4,800 foreclosures in Chicago were filed on two-to-six unit buildings, which are typically occupied by tenants. In comparison, there were approximately 7,300 filings on one-unit properties, which are often owner-occupied. Moreover, foreclosures on two- to six-unit buildings represent many more than just 4,800 households.In fact, “renters displaced by foreclosures [likely] exceeded owners in 2007 in Chicago.” Similarly in New York City, an increase in foreclosure filings in 2008 affecting multi-family dwellings with five or more units impacted 16,000 renter households. The numbers increased in the first quarter of 2009, as 4,500 rental households in multifamily dwellings with five or more units were affected by foreclosure filings. While it is difficult to say with certainty how many rental households the foreclosure crisis has affected, estimates indicate “nearly twenty percent of foreclosures involve” one- to four-unit, tenant-occupied properties.

One potential consequence of this tenant displacement is homelessness. Due to “little notice and scant savings,” low-income tenants are susceptible to becoming homeless. Displaced tenants are also at risk of homelessness due to the fact that tenants are generally younger and have lower incomes than homeowners. Low-income households, in turn, have the greatest housing cost burdens. These cost burdens, coupled with a lack of affordable housing, increase the risk of homelessness for displaced tenants.18 As stated by the White House Press Secretary, “[o]ne of the often overlooked problems of the foreclosure crisis has been the eviction of renters in good standing, through no fault of their own, from properties in foreclosure.”

In response to these “often overlooked problems,” on May 20, 2009, Congress passed the Protecting Tenants at Foreclosure Act of 200920 (PTFA) as Title VII of the Helping Families Save their Homes Act of 2009. PTFA requires existing leases to be honored when a property is foreclosed. In the event that the tenant does not have a lease or the lease is terminable at will, the tenant is entitled to 90 days' notice to vacate. This article will examine PTFA and its effect on state law in various jurisdictions. Part II analyzes three aspects of PTFA: (1) what PTFA accomplishes; (2) vagueness within PTFA; and (3) issues that PTFA does not address. The second part of the article will consider how PTFA impacts state law in six jurisdictions: Arizona, Georgia, Illinois, Ohio, Virginia, and Washington, D.C.

Keywords: PTFA, tenants, protecting tenants, Protecting Tenants at Foreclosure Act, housing, state law, federal law, preemption