President Obama signed into law the “Helping Families Save Their Homes Act of 2009” on May 20, 2009.   Under this new law there is a section titled “Protecting Tenants at Foreclosure Act.”  This section provides that in the case of a foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this law the successor in interest to the property (in Michigan the successful bidder at the foreclosure sale) from the foreclosure sale shall assume the interest of the property subject to the rights of a “bona-fide tenant.” Therefore, on any foreclosure sale that occurs after May 20th this new law will affect how the eviction proceeding is commenced on tenant occupied properties.  It is important to note that this new law only applies to tenant occupied properties and does not in any way affect properties that are occupied by the mortgagor. 

The law provides that the successor in interest of the property pursuant to the foreclosure sale must provide at least ninety (90) days notice to vacate to any “bona-fide tenant” and if the lease is a “bona-fide lease” that was entered into before the notice of foreclosure allow the bona-fide tenant to occupy the premises until the end of the remaining term of the lease except that the successor in interest of the property may terminate the lease effective upon the sale of the property to a third party that intends to occupy the property as a primary residence, so long as the tenant received the ninety (90) day notice to vacate.

The law also gives an alternative to the above requirement of occupying until the end of the remaining term of the lease.  It states that if there is no lease or the lease is terminable at will under State law then the successor in interest shall provide the tenant the ninety (90) day notice to vacate.

Under Michigan law a pre-existing lease is considered terminated upon expiration of the six (6) month statutory redemption period after a foreclosure sale.  Therefore, the argument can be made that a lease that was entered into would be terminable under State law by the foreclosure sale and invoke Section (2)(B) of the new law, which provides that where a lease is terminable under State law, the successor in interest or successful bidder at the foreclosure sale would take the property subject to the tenants receipt of a ninety (90) day notice to vacate. 

Potestivo & Associates, P.C. is ready for this new law and the requirements it contains.  In order to comply with the new requirement that the “Helping Families Save Their Homes Act of 2009” provides we would suggest that the ninety (90) day notice to vacate is sent within the last ninety (90) days of the redemption period. In this notice we would include language that requests a copy of the lease so that we can review and make a determination on the best way to proceed under these new requirements.  By doing this not only would the notice to vacate period expire at the same time as the redemption period, but we would also have a copy of their lease and there would be little delay with the eviction proceedings. However, in order to implement this new process the eviction referral would have to be sent at least ninety (90) days before the redemption period expires so the required notice could be sent out to all tenant occupied properties and the leases reviewed before any eviction proceedings were commenced.   

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