Tenant’s Rights in Foreclosure UPDATE

Tenant’s Rights in Foreclosure UPDATE

Sign_of_the_Times-ForeclosureI have previously written about the protection tenants have when their landlord gets foreclosed on their rental property. The main protection for renters was the federal law entitled “Protecting Tenants at Foreclosure Act of 2009.” Unfortunately, that law expired on December 31, 2014 and a new federal law has not been passed to take its place. Therefore the only remaining protection in North Carolina is state law. North Carolina has passed amended legislation that provides some of the protections previously given by the federal law.

One provision under North Carolina law that can protect a tenant before any sale or foreclosure occurs is to record the written lease in the Register of Deeds office. If that is done, any buyer, including a buyer at foreclosure, takes the property but is bound by the lease, just like the prior landlord was. If the tenant or landlord do not want the lease recorded (where it becomes public record) a memorandum of lease can be recorded which just has the names of the parties, the property description, and the term.

When the lease is not recorded and when a purchaser obtains the property through a foreclosure sale, and the purchaser is not going to occupy the property as his primary residence, in most cases, the tenant can remain through the length of the remaining lease or one year from the date the purchaser acquired the title, whichever is shorter. If the purchaser is going to occupy the property as his primary residence, or it is an oral lease, then the purchaser can evict on 90 days notice. N.C. Gen. Stat. Sec. 45-21.33A. Usually a bank or mortgage company or investor takes the property at a foreclosure sale so it is rare that the purchaser is buying for their personal residence. The tenant protection will not apply if the tenant is related to the prior landlord/debtor or the rent is substantially below fair market value and again 90 days notice is required to evict.

North Carolina law will also apply to the  the tenant’s right to end the lease. If the property contains less than 15 units, the tenant can, upon notice of foreclosure sale, terminate his lease by giving the landlord written notice of termination at least 10 days after the notice of sale. N.C. Gen. Stat. Sec. 42-45.2

-Bradley A. Coxe is a practicing attorney in Wilmington, NC who practices in Personal Injury, Car Accidents, Medical Malpractice, Contract and Real Estate disputes, and all forms of Civil Litigation. Please contact him at (910) 772-1678.