Tenant Rights During and After Foreclosure Under the PTFA

If the home or apartment you rent is foreclosed on, federal law gives you real protection: under the Protecting Tenants at Foreclosure Act, a bona fide tenant is entitled to at least 90 days’ written notice from the new owner before any eviction, and a bona fide fixed-term lease generally survives the foreclosure through the rest of its term. Those are the core tenant rights during and after foreclosure under the PTFA, and they apply to virtually every residential rental in the country, not just properties tied to federally backed loans.¹ Commercial leases are not covered.

State and local laws that give tenants a longer notice period or stronger rights still control. The PTFA sets a federal floor, not a ceiling.²

Do You Count as a Bona Fide Tenant

Everything else depends on this. The PTFA only protects tenants whose leases are legitimate, and the statute spells out three requirements you have to meet:

You are not the borrower who defaulted, and you are not the borrower’s child, spouse, or parent.
Your lease was the product of an arm’s-length transaction, meaning it was negotiated between independent parties rather than arranged to stall foreclosure.
Your rent is not substantially less than fair market rent for the area, unless the reduced rent comes from a federal, state, or local housing subsidy.²

The family exclusion is narrow. Only children, spouses, and parents of the borrower are disqualified; siblings, in-laws, roommates, and other relatives are not.³

In practice, the burden of proving your tenancy is bona fide falls on you. Keep the signed lease, rent payment records like canceled checks and bank statements, and any written correspondence with your landlord. If you want to confirm your rent is in the fair-market range, HUD publishes Fair Market Rent figures annually for every metropolitan area and county.⁴

The 90-Day Notice

Once the foreclosure sale closes and title passes to a new owner, that owner cannot simply order you out. Federal law requires at least 90 days’ written notice before eviction can take effect, and the clock starts when you actually receive the notice, not when it is mailed or posted.³ Every bona fide tenant gets this window, whether you signed a long lease or rent month-to-month.

The statute doesn’t dictate a specific method of delivery. There’s no requirement of certified mail or personal service, but new owners often use those methods because they need proof of receipt if they later go to court. A judge will usually require evidence that the 90 days ran before allowing an eviction to proceed.¹

If your state or city requires a longer notice period, the longer period controls.²

What Happens to Your Lease

If you have a bona fide lease with a set end date, the new owner has to honor it through the end of its term. A lease with eight months remaining at the time of the sale means eight more months of tenancy, foreclosure or not. The sale does not void or shorten the lease.³

One exception exists. If the new owner intends to occupy the property as a primary residence, they can end the lease early, but they still have to give the full 90 days’ notice.² Banks and investment firms don’t live in the houses they buy at auction, so this exception is really only available to individual buyers of single-family homes.

Month-to-Month and Oral Agreements

Tenants without a fixed-term lease still get the 90-day notice. What they don’t get is a future end date to protect, because there isn’t one.² A tenant with eleven months remaining on a signed lease keeps those eleven months. A month-to-month tenant gets 90 days.

Section 8 Voucher Holders

Housing Choice Voucher tenants have stronger rights. The new owner takes the property subject to both your existing lease and the Housing Assistance Payments contract between the previous owner and the public housing authority. Both survive the foreclosure, and the new owner has to keep accepting the subsidy payments.⁵

Foreclosure by itself is not “good cause” to terminate a Section 8 tenancy. A new owner who just doesn’t want to be a Section 8 landlord has no legal basis to end the arrangement. The only exception is the same primary-residence one that applies to other tenants, and it still requires 90 days’ notice.⁶

Contact your local housing authority as soon as you learn about the foreclosure. The PHA has to update its records, redirect payments, and may need to reinspect. It also has authority to deny a HAP contract assignment if the new owner has a history of housing code violations, fair housing violations, or similar problems. If the new owner refuses to participate or the PHA declines the assignment, your voucher is portable to another qualifying property.⁶

What to Do When You Learn About the Foreclosure

Most tenants find out through a notice posted on the property or a letter from the lender. The Consumer Financial Protection Bureau recommends contacting the sender right away to identify yourself as a tenant, not the homeowner, and reaching out to your landlord even though many stop communicating by this point.⁷

Verify the foreclosure independently at the county office where deeds are recorded, often called land records, recorder, or assessor. A document called a lis pendens is typically filed at the start of proceedings, and the deed transfer after the sale shows who bought the property. Many counties provide free online access.⁷

Keep paying rent to your current landlord during the foreclosure process unless a court or the foreclosing lender tells you otherwise. After the sale, rent is owed to the new owner. Be careful in that transition: if someone claims to own the property, ask to see the recorded deed before paying rent, signing anything, or letting them inside. Scams targeting tenants in foreclosed properties are common, and someone who can’t produce a recorded deed probably isn’t the owner.⁷

Utility Shutoffs

A landlord who has stopped paying the mortgage may also have stopped paying utilities. If a shutoff notice arrives or service is cut, call the utility directly. In many cases you can arrange to pay the bill yourself, even if the account is in the landlord’s name, so you don’t lose heat or water while the foreclosure runs its course.⁷

Rent, Deposits, and the New Owner’s Obligations

The new owner steps into the previous landlord’s role. The PTFA itself doesn’t set habitability standards, but state and local landlord-tenant law, building codes, and federal laws like the Fair Housing Act still apply. Broken heat, plumbing failures, and structural hazards are the new owner’s responsibility to fix.³

Security deposits get complicated. The new owner is typically responsible for returning your deposit when you move out, even if the previous landlord never handed the money over. State laws vary on how that liability transfers and on how quickly the deposit has to be returned. Keep a copy of the original lease showing the deposit amount, and document the condition of the property with photos when you eventually leave.

Keep paying rent to the new owner once you’ve confirmed who they are. Stopping payments because you’re frustrated, or because the old landlord told you to, is one of the fastest ways to lose your PTFA footing. Keep written records of every payment.

Cash-for-Keys Offers

New owners sometimes want to avoid waiting out the notice period or a remaining lease. In a cash-for-keys arrangement, the owner pays you to leave voluntarily by a set date. Offers usually range from a few hundred to several thousand dollars, more in high-cost markets or when the owner wants a fast turnaround.

These deals are voluntary. Turning one down does not change your PTFA rights. If you do negotiate, get the terms in writing: the exact payment, when you get it, and what condition the property has to be in at handover. A few states have specific rules on cash-for-keys offers in foreclosure, including minimum compensation, so check local law before signing.

Enforcing Your Rights

One important limit: courts have held that the PTFA creates no private right of action, so you cannot sue a new owner in federal court for violating it.⁸ The law works as a shield, not a sword.

That shield has real force. If a new owner tries to evict you without the required 90-day notice, raise the PTFA as a defense in the eviction case. Courts routinely dismiss eviction actions filed without the notice. You can also use PTFA violations to support state law claims like wrongful eviction, which may carry damages beyond staying in the property.⁸

If a mortgage servicer or bank violates your rights, you can file a complaint with the Consumer Financial Protection Bureau at consumerfinance.gov/complaint or by phone at (855) 411-2372. The CFPB forwards complaints to the company and tracks responses, though it does not adjudicate individual disputes.⁹ For an eviction that’s already moving, contact a local legal aid organization. Many have housing attorneys who handle foreclosure-related tenant cases at no cost.

1
Federal Deposit Insurance Corporation. V-16 Protecting Tenants at Foreclosure Act of 2009
2
Office of the Law Revision Counsel. 12 USC 5220 – Assistance to Homeowners
3
Office of the Comptroller of the Currency. Protecting Tenants at Foreclosure Act – Comptrollers Handbook
4
HUD User. Fair Market Rents
5
Federal Register. Protecting Tenants at Foreclosure – Notice of Responsibilities Placed on Immediate Successors in Interest Pursuant to Foreclosure of Residential Property
6
U.S. Department of Housing and Urban Development. Housing Assistance Payments Contract
7
Consumer Financial Protection Bureau. What Should I Do if the House or Apartment Im Renting Goes Into Foreclosure
8
Justia. Mik v Federal Home Loan Mortgage Corporation
9
Consumer Financial Protection Bureau. So How Do I Submit a Complaint