Arizona Residential Landlord Tenant Act
The relevant law for notice to tenants about foreclosure is A.R.S. Section 33-1331. Warning – just because a landlord has an obligation to do something does not mean they will.
33-1331. Notice of foreclosure; effect on lease; damages
- If a rental agreement is entered into after the foreclosure action was initiated, the owner shall include written notice of possible foreclosure with the rental agreement with the tenant. The notice shall include a statement that is substantially in the following form:
This property is undergoing foreclosure. For more information on this action, you should contact ______ (name, address and phone number of the court where the action is filed or trustee, attorney or other responsible party).
A sale at auction may or may not occur as a result of this foreclosure. Currently, the sale of this property has been set for ______ (time, date and place) or no date for sale of this property has been established.
- If the owner receives a notice of trustee’s sale or other notice of foreclosure on the property after a tenant has entered into a rental agreement on the property, the owner shall provide the tenant with written notice as prescribed in subsection A of this section within five business days after receipt of the notice of trustee’s sale. This subsection applies only to the first notice of trustee’s sale or the first notice of foreclosure received by the owner after the tenant has entered into the rental agreement.
- If the owner fails to provide notice as prescribed in this section the tenant may deliver a written notice pursuant to section 33-1361 and recover damages and obtain injunctive relief. The security deposit shall be returned to the tenant as prescribed in section 33-1321.
- This section shall not apply to multifamily residential rental units consisting of four or more connected units.
The relevant law is 33-1331. WARNING: just because a landlord has an obligation to do something does not mean they will.
33-1331. Notice of foreclosure; effect on lease; damages
- If a rental agreement is entered into after the foreclosure action was initiated, the owner shall include written notice of possible foreclosure with the rental agreement with the tenant. The notice shall include a statement that is substantially in the following form:
This property is undergoing foreclosure. For more information on this action, you should contact ________________ (name, address and phone number of the court where the action is filed or trustee, attorney or other responsible party).
A sale at auction may or may not occur as a result of this foreclosure. Currently, the sale of this property has been set for _________ (time, date and place) or no date for sale of this property has been established.
- If the owner receives a notice of trustee’s sale or other notice of foreclosure on the property after a tenant has entered into a rental agreement on the property, the owner shall provide the tenant with written notice as prescribed in subsection A of this section within five business days after receipt of the notice of trustee’s sale. This subsection applies only to the first notice of trustee’s sale or the first notice of foreclosure received by the owner after the tenant has entered into the rental agreement.
- If the owner fails to provide notice as prescribed in this section the tenant may deliver a written notice pursuant to section 33-1361 and recover damages and obtain injunctive relief. The security deposit shall be returned to the tenant as prescribed in section 33-1321.
- This section shall not apply to multifamily residential rental units consisting of four or more connected units.
Federal Protecting Tenants at Foreclosure Act (EXPIRED 12/31/14 then reinstated 12/2017)
Stark & Stark Friday, August 21, 2015
In the aftermath of the 2008 financial crisis, one of the pieces of legislation that was intended to be considered “Main Street”-friendly, which is another way of referring to legislation that is supportive of locally owned small businesses and residences, was the Protecting Tenants at Foreclosure Act (“PTFA”). In short, this statute provided protection for tenants who occupied residential real estate that was subject to mortgage foreclosure.
The PTFA permitted any occupant who was a non-relative of a foreclosure defendant who occupied real estate under an arms-length, bona fide lease for fair rental value, to remain in the property for the balance of the lease term. If the lease did not have a fixed remaining term, occupants were allowed to remain in the property for 90 days before a foreclosing mortgagee could commence ejectment proceedings.
Despite its good intentions, unfortunately the PTFA wound up creating more problems than it solved before it was eventually retired at the end of 2014, because it effectively turned foreclosing lenders into reluctant landlords. Even worse, there was very little case law, be it federal or state, that arose to properly interpret the PTFA, as its originally written provisions were less than clear, and any case law that did exist often varied from jurisdiction to jurisdiction.
RESIDENTIAL EVICTION ACTIONS (REVISED ARIZONA JURY INSTRUCTIONS (CIVIL), 5TH)
Bona Fide Lease Defense Following a Trustee’s Sale:
After a trustee’s sale, the new owner is prohibited from evicting any existing tenants in
certain situations. If an existing tenant wishes to keep possession of the property
following a trustee’s sale, the existing tenant must prove that a “bona fide” lease was in
place at the time of the trustee’s sale.
To qualify as a “bona fide” lease, [defendant/tenant] must prove:
1. That the lease was entered into before the trustee’s deed is delivered;
2. That the tenant is not the defaulting borrower;
3. That the lease is the result of an arm’s length transaction; and
4. That the lease requires an amount of rent that is not substantially less than the “fair
market rent” for the property.
An arm’s length transaction is an agreement between two parties who are not related to
each other and who are not on close terms with each other.
++++++
SOURCE: The Protecting Tenants at Foreclosure Act of 2009 (PTFA), Pub. L. No. 111-22, Sec.
702, 123 Stat. 1660 (2009), 12 U.S.C. § 5220; Bank of New York Mellon v. De Meo, 227 Ariz. 192,
254 P.3d 1138 (Ct. App. 2011) (purchaser at trustee’s sale was required to provide 90 days actual
notice to vacate to tenant even though eviction action hearing did not occur until 97 days after
five-day notice). BLACK’S LAW DICTIONARY, 103 (1999) (arm’s length transaction). See also Dewey
v. Arnold, 159 Ariz. 65, 70, 764 P.2d 1124, 1129 (1988) (Contains a discussion of arm’s length
transactions). An amendment to the PTFA provided that “the date of a notice of foreclosure
shall be deemed to be the date on which complete title to a property is transferred to a successor
entity or person as a result of an order of a court or pursuant to provisions in a mortgage, deed
of trust, or security deed.” Pub. L. 111-203, Title XIV, § 1484(1), 124 Stat. 2204 (2010); 12
U.S.C.A. § 5220, note. See also Logan v. U.S. Bank Nat’l Ass’n, ___ F.3d ___, 2013 WL 3614465
(9th Cir. 2013) (PFTA does not provide a right of action).
COMMENT: Under the PTFA, if a “bona fide” lease exists, then the new owner is required to
honor the lease unless the new owner intends to occupy the property as their primary residence.
If the new owner intends to occupy the property as their primary residence, then the new owner
must provide the tenant with 90-days notice to vacate. The effect of foreclosure on Section 8
tenancies is governed by amendments to the United States Housing Act of 1937. See generally 42
U.S.C. § 1437(f). See also Curtis v. Morris, 186 Ariz. 534, 925 P.2d 259
