Landlords, tenants, and foreclosure purchasers are often confused about how long a tenant may reside at a property if the property is sold at a foreclosure sale. The answer depends on the timing of the lease, the mortgage, and the clarity of the notice provided to the tenant.
If a lease was created prior to the mortgage that triggers the foreclosure, the purchaser at a foreclosure sale takes the property subject to the lease. If instead the mortgage preceded the lease, the foreclosure sale purchaser is entitled to take possession of the property, free of any tenants, upon ratification of the sale, payment of the purchase price, and conveyance of legal title. However, even in that case, federal and state law provides any residential tenant a 90-day notice of eviction under certain circumstances, before a foreclosure purchaser may take possession. Such notice is effective only if it is clear and unambiguous.
Both the federal Protecting Tenants at Foreclosure Act, and Maryland law require that a foreclosure purchaser provide a 90-day notice to a tenant to vacate a residential property when the foreclosure involves a federally-related mortgage and the tenant is a bona fide tenant. For purposes of the statute, that means the mortgagor (or the child, spouse, or parent of the mortgagor) is not the tenant, the lease was the result of an arms-length transaction, and the tenant is paying at least the fair-market value of rent.
Purchasers in foreclosure must exercise particular care in providing the notice to ensure their right to take possession free of any tenancy 90 days later. A recent decision by the Maryland Court of Appeals emphasized that the notice be provided clearly, serving the purpose of allowing a tenant to plan and prepare to vacate a property within 90 days. Confusing or misleading notices are ineffective. For example, the Court of Appeals held that where a foreclosure purchaser sent a notice demanding immediate possession and another failing to correct the misleading notice, both notices were found to be ineffective.
Moreover, the Court of Appeals held that the foreclosure purchaser could not ask the court for possession until the 90-day notice had been properly provided, thereby requiring the foreclosure purchaser to restart the entire notice period.
Because of the strict interpretation of the 90-day notice in Maryland, foreclosure purchasers would do well to consult an attorney about how to satisfy the notice requirement on the first attempt before taking possession of residential property.
For more information please contact Vincent Guida at firstname.lastname@example.org.