help families recover » protect renters
Foreclosure prevention efforts tend to focus on homeowners, yet many of the properties facing foreclosure -- including both single-family homes and multifamily buildings -- are occupied by renters, leaving these families at risk of eviction even if they are paying their rent on a timely and regular basis. According to the Mortgage Bankers Association, almost 20 percent of all foreclosures involve likely rental properties (one- to four-unit properties that are not owner-occupied) (Joint Center for Housing Studies 2008).

A 2009 report from the National Low Income Housing Coalition indicates that (a) around 40 percent of families impacted by foreclosures are renters and (b) rental properties could be involved in more than 20 percent of foreclosures nationwide. The report also cites statistics from places where other studies have been done, including findings that 43 percent of foreclosures in Hennepin County, Minnesota, and approximately half of foreclosures in Nevada, Illinois, and New York involved properties likely occupied by renters (Pelletiere 2009). A study conducted in California found that rental units Why renters?

See Mary Cunningham's commentary Renters Need Protection against Foreclosure Too [PDF].
accounted for 38 percent of residences in foreclosure in 2010 based on data from ForeclosureRadar.com and the 2009 American Community Survey (Treves 2011).  In Rhode Island, more than 35 percent of foreclosures between 2009 and 2010 involved multifamily homes (Housing Works RI 2011).

Visit the Maps & Data section of this site to access data that can be used to identify areas where renters might be vulnerable to foreclosure.

Legislative options that can help protect renters in the case of foreclosure include:



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Protecting renters

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Dealing with displacement



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Rebuilding credit



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Preventing displacement



Adopt laws that prevent tenants from being evicted or having utilities shut off due to foreclosure

A wave of research released in 2008 and 2009 brought attention to the reality that renters were being displaced by foreclosure, whether or not they had paid their rent on time. At the time, most tenants were not protected from eviction once their home was foreclosed upon because of state "first in time, first in right" laws, which maintain that if the mortgage was recorded before the tenant signed the lease, then the lease becomes obsolete if the property enters foreclosure. One of the few exceptions was of housing choice (Section 8) voucher recipients and tenants living in rent-controlled units; both were often able to maintain their leases after foreclosure by law.

In response to renters’ vulnerability to foreclosure, laws have been adopted at the federal, state, and local levels to offer renters protection against foreclosure. At the federal level, the Protecting Tenants in Foreclosure Act (PTFA), part of the Helping Families Save Their Homes Act, was signed in to law on May 20, 2009. PTFA provides renters whose landlords have lost their properties due to foreclosure the right to stay in the home for 90 days after the foreclosure or through the term of their lease unless the property is sold to someone who will occupy the home. PTFA is currently set to expire at the end of 2014. If PTFA is not made permanent, many renters will again be at risk of eviction with little advance notice if their landlord loses the property to foreclosure. Click here [PDF] for more information about PTFA from the National Law Center on Homelessness & Poverty.

Some states and localities have enacted permanent protections for renters in the case of foreclosure or offer renters’ greater protection than is provided by the PTFA. For example, Massachusetts enacted legislation that clarifies the rights of voucher recipients to remain in their homes after foreclosure. In addition, some states (including Massachusetts, New York, New Jersey, and
Renters' Legal Protections by State

  • Click here to view the National Housing Law Project’s database of State and Local Tenant Protection Laws in Foreclosure Situations
  • In 2008 and 2009, the National Low Income Housing Coalition (NLIHC) focused some of their research efforts on the legal protections of renters, by state, in the case of foreclosure. Click here to leave this site and view a comprehensive list of resources and articles that NLIHC compiled.
New Hampshire), a number of cities, and the District of Columbia require "just cause" as a condition for eviction. "Just cause" laws protect renters by ensuring that landlords can only evict with proper cause, such as not paying rent on time. In general, foreclosure does not count as a cause for eviction in these locations. More information about "just cause" laws can be found in PolicyLink's Equitable Development Toolkit.

While PTFA has improved the situation for renters affected by foreclosure, research by the National Law Center on Homelessness & Poverty documents that violations of PTFA are common and need to be addressed systematically (NLCHP 2010). Public information efforts can help to inform renters of their rights. In New Jersey, the Department of the Public Advocate maintains an online toolkit with information for renters about foreclosure. The Baltimore Homeownership Preservation Coalition has initiated a public outreach campaign to increase awareness about renters’ rights under PTFA.

Renters affected by foreclosure may also find that the property’s water, electricity or other utilities have been cut off. If utility services are being provided under the landlord’s name and the bills are delinquent, renters may feel they have no choice but to vacate the property. Utility cutoff is especially problematic because, under PTFA, renters have the legal right to remain in the home for the duration of their lease. Utility cutoff effectively denies them this right.

Some states have adopted laws specifically to ensure renters are able to maintain utility service in foreclosed rental properties. For example, Minnesota tenants have the right to maintain or restore utility service when the landlord fails to pay the bill. Other cities and states are following suit. In January 2010, a new law went into effect in California that protects tenants from utility cutoff. The law requires that renters receive advance notification of a utility shutdown, allows renters to put accounts in their own names without liability for delinquent amounts, and enables renters to deduct from their rent any costs incurred for utility services that were the responsibility of the landlord (Treves 2010).

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Adopt or increase notice requirements to tenants about pending foreclosures or displacement

Prior to the adoption of the Protecting Tenants at Foreclosure Act (PTFA), the new owner (typically the mortgage servicer) of a foreclosed rental property could evict the occupants with as little as three days' notice in some states. PTFA requires 90 days advance notice before even month-to-month tenants can be asked to move out, allowing tenants some time to prepare for a move and plan accordingly. A number of states have also developed policies to ensure that tenants receive a warning of a pending foreclosure, adequate notice before being asked to move due to foreclosure, or both. Notice requirements allow tenants more control over their housing and may alleviate some stress by providing a more reasonable move-out schedule.

Similar to efforts to prevent eviction of renters in foreclosed properties (link to previous section), some states and localities have enacted permanent protections to provide notice to renters in the case of foreclosure. If PTFA is allowed expire as scheduled in 2014, renters will again rely on the notice requirements provided by state and local laws, so even a law that provides less notice than PTFA may help to protect tenants in the future. In Minnesota, a law that went into effect in 2008 requires the new property owner after foreclosure to provide at least two months' notice for tenants to vacate (Birnberg 2008) In 2010, the law was amended to grant further protections to renters. The law now requires the foreclosing party to notify tenants that their lease is still valid during the foreclosure process. During the six-month redemption process following foreclosure sale, tenants cannot be evicted.

Pantages
Photo by William Wright/William Wright Photography, courtesy of
Seattle Office of Housing


In November 2008, the City of Chicago passed an ordinance to require notification to tenants of a pending foreclosure within a week of the beginning of the foreclosure process. Since the full foreclosure process can be lengthy, this notice effectively gives tenants a few months or more to prepare for the property to be transferred to a new owner. In July 2008, lawmakers in California passed a law requiring owners to provide 60 days' prior notice to tenants before being evicted from a foreclosed property (Gomez 2008).

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Ensure that foreclosure-related evictions do not harm renters' future housing options

Landlords commonly reject applicants who have been evicted from prior rental properties, even if the tenant paid their rent on time. Eviction can also damage a renter's credit rating, making it difficult to obtain future housing or get approved for a loan. However, when evictions are due to rental property foreclosures, rather than a renter's actions, this policy may exclude applicants unnecessarily. Communities should consider adopting policies that address this problem to make it easier for renters to access new housing after foreclosure.

A bill passed in Minnesota in 2007, eliminates evictions from renters' legal records when the evictions are due to foreclosure (Green 2008). The state legislature in Illinois passed a similar law that seals the court records of evictions in cases of renters evicted due to foreclosure. In 2010, a law was signed in California to keep eviction records private unless the new owner obtains judgment within sixty days of the foreclosure that proves the renters were evicted on legitimate grounds.

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