MORTGAGE FORECLOSURE - LANDLORD & TENANT RULES

From the CLE seminar held at the Nassau County Bar Association, courtesy of Empire Justice Center:

"Provisions to Help Tenants in Foreclosed Properties

Notice to tenants within 10 days of serving foreclosure on mortgagor (amends RPAPL §1303): Effective January 14, 2010, the foreclosing party must deliver a notice, prescribed by the law, to tenants within ten (10) days of the service of the summons and complaint to the mortgagor. 24 The notice must be on colored paper and on its own page, and informs the tenant that the building where their apartment is located is subject to a foreclosure proceeding, and that they may have the right to stay in occupancy for the remainder of their lease term, of if they have no written lease, for ninety days after they are informed of the name and contact information for the new owner by the person or entity who takes title (the “successor in interest”), and advised of their rights under the new RPAPL §1305. Tenants in 1 to 4 unit buildings must be sent the notice individually by first-class mail to the tenant’s address at the property if the tenant’s identity is known to the plaintiff, or to “occupant” if the identity is not known. For buildings with five or more dwelling units, the notice must be posted outside each exit and entrance.

Limited right of continued occupancy and notice thereof (adds RPAPL § 1305): Tenants 25 in properties in foreclosure are granted the right to remain in the property for ninety (90) days from the date they receive a notice from a successor in interest in the property, or until the end of their lease, whichever is greater. An exception exists that limits a tenant’s right of occupancy to ninety (90) days (for a single unit) if the successor in interest who acquires title intends to occupy a single unit as his or her primary residence and if the unit is not subject to a federal or state statutory system of subsidy or other federal or state statutory scheme. An owner of the residential real property is specifically excluded from the protections of this section. Tenancy continues under same terms and conditions of lease as were in effect at time of entry of judgment, or transfer of ownership including the obligation to pay “fair market rent,” defined as “rent for a unit of residential real property of similar size, location and condition.” 26

Any successor in interest must send a written notice to all tenants informing them of their rights, as well as the name and address of the new owner. Anyone who becomes a successor in interest subsequent to the sending of the 90 day notice must provide tenants with its name and address. The provision does not affect the successor’s right to evict a tenant, as provided for in law (after the greater of the expiration of the 90 day time period or at the end of the lease term), or earlier if the tenant does not pay rent pursuant to the lease.

The law specifically states that these rights are in addition to any other rights of a tenant under law, including rights of tenants not named in foreclosure actions, rights of tenants whose tenancy is subsidized by a government entity, or the rights of tenants whose tenancy is subject to rent control, rent stabilization or federal statutory schemes.

This section applies to actions in which the judgment of foreclosure and sale (under RPAPL §1351) is issued on or after January 14, 2009.

FOOTNOTES

24 The notice is available on Empire Justice Center’s website at www.empirejustice.org.
25 “Tenant” is defined as any person who at the time the notice required by RPAPL § 1303(4) appears as a lessee on a lease of one or more dwelling units of a residential real property that is subordinate to the mortgage on such residential real property; or who at such time is a party to an oral or implied rental agreement with the mortgagor and obligated to pay rent to the mortgagor or such mortgagor’s representative, for the use or occupancy of one or more dwelling units of a residential real property. RPAPL § 1305(1)(c). The lease must also require payment of rent that is not substantially less than the fair market rent for the unit, unless the unit is subject to federal or state statutory system of subsidy or other federal or state statutory scheme. A tenant may not be the owner of the residential real property. RPAPL § 1305(2).
26 RPAPL § 1305(2)."