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Federal Protections Seek To Help Tenants In Foreclosed Homes

Kenneth R. Gosselin

March 21, 2010

New state and federal laws enacted in the last two years are supposed to protect renters in a foreclosed property, preventing them from being tossed out with little or no notice when the bank takes over.

Try telling that to Sharie Evans.

When she moved into her apartment on West Division Street in New Haven last June, she thought she had quite a deal after signing a one-year lease for a two-bedroom apartment for $700 a month.

But in February, Evans, a single mother and a certified nurse's aide, got a shock when she was served with an eviction notice, giving her five days to move out. Her landlord had lost the four-family house in a foreclosure, and the bank was now calling the shots.

"Where are you going to go in five days?" asked Evans, 28, the mother of a 9-year-old son.

Evans never should have had that notice delivered in the first place. A new federal law requires that tenants in foreclosed properties receive at least 90 days' notice, or until a lease expires, before an eviction can begin.

The federal law went into effect last May, but housing advocates say some banks, law firms and real estate agents are still not following the new provisions. A month ago, Connecticut Attorney General Richard Blumenthal put pressure on violators to adhere to the new law.

Evans and her cousin, Monique Walters, a tenant in the same four-family house, received their notices three days after Blumenthal held a news conference to call attention to the problem.

"The bank had no right to do that," said Amy Eppler-Epstein, a lawyer at the New Haven Legal Assistance Association, which is representing Evans and Walters. "Everything should have been put on hold."

In the meantime, Evans and Walters are looking for new places to live but have until their leases end, as stipulated by law.

Helping The 'Forgotten' Victims

If you are a renter, experts recommend becoming familiar with the Protecting Tenants at Foreclosure Act, signed into law by President Obama on May 20, 2009.

The push for the law came as foreclosures rose both nationally and in Connecticut amid the housing recession. While the plight of owners losing their homes captured a lot of attention early on, tenants became what advocates called the "forgotten" victims of the crisis.

Often, tenants didn't even know a property was in foreclosure before they found themselves being evicted. The federal law strengthened existing Connecticut statutes that generally gave tenants 30 days to find a new home, or at least 60 days if there was a written lease.

Residential foreclosures and mortgages 90 days or more past due were at record levels in Connecticut at the end of last year, an indicator that more landlord foreclosures may be coming.

The protections don't hinge on whether tenants are current on their rental payments. Sometimes, legal aid lawyers say, landlords facing foreclosure can't be found by tenants.

Also, if the tenant lives in a subsidized Section 8 apartment, the contract has to be honored by the foreclosing bank. There are some restrictions. The tenant cannot be the landlord who lost the property, or a spouse, parent or child of the former owner. The tenant also must be paying a market-rate rent for the apartment.

A lease can be broken if the property is purchased and will be used as the primary residence by the new owner.

Housing advocates say the federal law goes a long way to protecting tenants, but they are concerned that the law phases out at the end of 2012. There is a push in the state legislature to write the federal protections into permanent legislation in Connecticut.

Foreclosing lenders can offer tenants a cash payment to move out sooner, an incentive that was standardized by a new Connecticut law in 2008. Under Connecticut's Cash for Keys program, a tenant must be offered in most cases $2,000. The new statute was intended to ensure that tenants got a reasonable amount if they agreed to move out quickly.

"Lenders were foreclosing and going to people and saying, 'If you get out in a week, we'll give you $500'," said Rafael Podolsky, an attorney at the Legal Assistance Resource Center of Connecticut in Hartford. "It has to be a reasonable amount. It was intended to end the misuse of absurdly low offers."