State and Federal Laws Affecting Subsidized Tenants in Foreclosed Properties 1

1. State and Federal Laws Affecting Subsidized Tenants in Foreclosed Properties1 Massachusetts Law Reform Institute 99 Chauncy Street, Suite 500, Boston, MA 02111-1703 PHONE 617-357-0700 ▪ FAX 617-357-0777 ▪www.mlri.org September 29, 2010

2. Laws in a Nutshell (Federal) Protecting Tenants at Foreclosure Act of 2009 (“PTFA”) (expires December 31, 2014) 2 3 Requires minimum 90 days notice to terminate tenancies after foreclosure. Unexpired leases survive foreclosure unless new owner sells to person that will occupy unit. New owner assumes HCV lease & HAP contract. New owner’s desire to have unit vacant is not “other good cause” for termination of HCV lease or HAP contract under 24 CFR §982.310. (Massachusetts) G.L. c. 186A (2010) (“post-foreclosure just cause eviction law”) Requires banks and related entities (“banks”) to notify tenants of new ownership and management after foreclosure. Prohibits banks from evicting tenants in foreclosed properties without “just cause”, or unless there is a binding P & S agreement, and without complying with certain notification provisions. (Massachusetts) G.L. c. 186, §§13 & 13A (2007) Deals with the effects of foreclosure on different types of tenancies and provides that subsidized leases and contracts survive foreclosure.

3. The New Just Cause Eviction Law (c. 186A) The new post-foreclosure just cause evictionlaw (G.L. c. 186A)4: Prohibits foreclosing banks from evicting “bona fide” tenants without “just cause” or a binding purchase and sale agreement. Requires banks to give tenants written notice with contact information for the bank and the person responsible for management and maintenance.

4. C. 186A:Which tenants in foreclosed “bank owned” properties are protected? All tenants in bank owned properties are entitled to contact information notices. “Bona fide” tenants can’t be evicted unless there is just cause or unit is under binding contract for sale to a third-party. Tenants in properties purchased at foreclosure sale by private investors or individuals are not protected by this law.5

5. C. 186A:What notices must a foreclosing owner provide to tenants after foreclosure? A foreclosing owner must provide written contact information notice including: Name, address, and telephone of the foreclosing owner. Name, address, telephone of the person responsible for repairs/management. Address where rent should be sent.6

6. C. 186A:When must the contact information notice be provided? Contact information notice must be provided within 30 days of the foreclosure.

7. C. 186A:How must the contact information notice be delivered to tenants? Foreclosing bank must: Post notice in prominent location in the building. Mail notice to each unit. Slide notice under the door to each unit. (foreclosing bank must do all three)

8. C. 186A:When can “bona fide” tenants be evicted by a foreclosing bank? A foreclosing bank can evict a “bona fide” tenant under only two circumstances: If there is “just cause” (nonpayment or various tenancy violations). If there is a purchase and sale agreement with a third party.7

9. C. 186A:Who is a “bona fide” tenant? Not the parent, child, or spouse of former owner (the person who took out the mortgage). Must have entered into lease/tenancy through an “arms length” transaction. Persons with rental subsidies will generally qualify. A lease is not required – “tenants at will” of former owner can be “bona fide” tenants.8

10. C. 186A:What is an “eviction” for which foreclosing bank needs just cause? “Eviction” is defined VERY broadly as . . . • “An action without limitation . . . which is intended to actually or constructively evict a tenant or otherwise compel a tenant to vacate…”9

11. C. 186A:Examples of “Eviction” • Serving a notice to quit or court complaint. • Refusing to repair so that the tenants are forced to leave because of substandard or dangerous conditions. • Offering “cash for keys” without telling tenants they cannot be evicted except for just cause. • Telling tenants they must leave because of the foreclosure.

12. C. 186A:What constitutes “just cause” to evict? There are six “just cause” reasons for eviction: Non-payment of rent (or use and occupancy). Material violation of an obligation of the tenancy. Refusal of written request to renew/extend lease with the foreclosing owner. Creating or allowing a nuisance in the unit, damaging the unit, or disturbing other occupants. Illegal activity in the unit. Refusal to allow the foreclosing owner reasonable access to inspect, repair or show to prospective purchaser.10

13. C. 186A:Non-payment as “just cause” to evict Foreclosing bank can evict for non-payment only if: It notified tenant in writing of the amount of rent (should generally be same as before foreclosure). 30 days have passed since contact information notice was posted and delivered. It delivered to the tenant, at the same time as the contact information notice, written notice of tenant’s right to a court hearing before eviction.

14. C. 186A:Material violation of the tenancy as “just cause” to evict A foreclosing bank can only evict for a material violation of an obligation of the tenancy if: 30 days have passed since contact information notice posted and delivered. It delivered to the tenant, at the same time as the contact information notice, a written notice of tenant’s right to a court hearing before eviction. It delivered written notice of the alleged material violation. 30 days passed since the notice of the violation was received and tenant has not cured the violation.

15. C. 186A:Refusing to extend or renew lease or tenancy agreement as “just cause”to evict A foreclosing bank can evict for tenant’s refusal to extend/renew lease or tenancy agreement if: • Lease or tenancy agreement with former owner expired after August 9th 2010. • Bank requested in writing that tenant extend/renew lease or tenancy agreement. • 30 days passed since contact information notice was posted and delivered. • Bank delivered to the tenant, at the same time as the contact information notice, a written notice of tenant’s right to a court hearing before eviction.

16. C. 186A:Other “just cause” to evict Foreclosing bank can also evict for the following reasons but only if it delivered the contact information notice and, at the same time, a written notice of tenant’s right to a court hearing before eviction • Creating nuisance in unit, causing substantial damage, or disturbing other occupants. • Illegal activity in the unit. • Refusing reasonable access for repairs or to show unit.

17. C. 186A:What if the foreclosing bank does not provide the contact information notice? Foreclosing bank cannot evict for “just cause” if contact information notice has not been posted and delivered. Foreclosing bank may be fined $5,000 per “eviction” that violates the new law, or be held liable for damages under other laws.11

18. C. 186A:What if an investor or individual, not a bank, buys at foreclosure? • Tenants in properties purchased by individual or investor not in the mortgage business are not protected by new just cause eviction law. • These tenants are protected by the federal “Protecting Tenants at Foreclosure Act of 2009” (“PTFA”), §702 and may finish term of their leases or are entitled to at least 90 day notice to quit.12 • After PTFA expires 12/31/14, tenants will still be protected by c. 186, §§13 & 13A and subsidized leases will continue to survive foreclosure.

19. What other protections do tenants in foreclosed properties have? All post-foreclosure owners must maintain the property up to standards of the State Sanitary Code.13 No matter what their status, tenants have the right to a court hearing prior to being put out. Under no circumstances can a post-foreclosure owner force a tenant to leave without a court order.14

20. How do these 3 laws affect HCV tenancies after foreclosure? (overview) • C. 186A - Protections and obligations apply to all bona fide tenants, including those with state and federal subsidies, when “banks” purchase at foreclosure. No matter what the status of HCV lease, banks cannot evict without just cause or existence of a binding P & S agreement. • PTFA - Applies even if someone not in the mortgage business buys at foreclosure. Subsidized leases survive foreclosure and simply wanting property vacant is not “other good cause” for lease termination under 24 CFR §982.310 (unless owner sells to third party who intends to move in).15 • G.L. c. 186, §13A – Provides that subsidized leases survive foreclosure.

21. What are the rights of a tenant with HCV lease if no foreclosure involved? The new laws only apply to tenants in properties that have not gone through foreclosure. Standard HCV rules apply: • Owner may only terminate lease in first year for tenant fault that breaches lease. • Owner not obligated to renew lease and may decline to do so without any reason or tenant fault depending on actual termination provisions in lease. • Owner can terminate mid-lease after initial lease term for “good cause” including business reasons depending on actual termination provisions in lease.

22. What are the rights of a bona fide tenant with HCV lease when there is a foreclosure? But if there is a foreclosure, the rules are different: • Whoever buys at foreclosure (bank, investor, individual) must assume existing HCV lease and HAP contract (G.L. c.186, §13A; PTFA, §703). • If post-foreclosure owner is a “bank”, must also deliver and post contact notices 30 days after foreclosure. (c. 186A). • If post-foreclosure owner is a “bank”, even after initial lease term, can’t terminate lease unless there is just cause or a binding purchase and sale agreement. (c. 186A). • Unclear if under c. 186A bank must renew the HCV lease and if refusal to renew would be an illegal “eviction” under c. 186A.

23. Case #1: Bona fide tenant has 9 months left on firstyear of HCVP lease - property foreclosed and purchased by bank or similar entity • Bank must assume lease and HAP contract (G.L. c. 186, §13A and PTFA, §702). • Bank can’t evict except for tenant fault. (c. 186A and 24 CFR §982.310(d)(2)). • Bank must post contact information notice within 30 days of foreclosure (c. 186A).

24. Case #2: Bona fide tenant has 9 months left on first year of HCVP lease - property foreclosed and purchased by private individual or investor • New owner assumes lease and HAP contract (PTFA, §702 and G.L. c. 186, §13A). • New owner can only evict during initial term for tenant fault (24 CFR §982.310(d)(2)). • Even if new owner doesn’t renew HCV lease, must give at least 90 day notice (PTFA, §702).

25. Case #3: Bona fide tenant is in second year of HCVP lease (subsequent to initial lease term) – property foreclosed and purchased by bank or similar entity • Bank assumes lease and HAP contract (c. 186, §13A and PTFA, §702). • Bank can only “evict” for just cause or if there is a binding purchase and sale agreement (c. 186A). • Bank’s desire to have property vacant is not “other good cause” to terminate lease (24 CFR §982.310(d) & PTFA, §703). • Bank must post contact information notice within 30 days of foreclosure (c. 186A). • Unclear if a refusal to renew lease at expiration would constitute an illegal “eviction” (c. 186A).

26. Case #4: Bona fide tenant is in second year of HCVP lease (subsequent to initial lease term) – property foreclosed and purchased by private individual or investor • New owner assumes lease and HAP contract (GL. C. 186, §13A and PTFA, §702). • New owner can refuse to renew when lease expires (HCV rules). • New owner can terminate lease for “other good cause” in accordance with 24 CFR §982.310, but: • new owner’s desire to have the property vacant does not constitute “other good cause.” • new owner can terminate lease if he or she sells to a party who intends to move into the unit (PTFA, §703). • 90 day notice provision applies (PTFA, §702).

27. Where can I find more information concerning these laws? The full text of the new “just cause” eviction law, G.L. c. 186A is at: http://www.malegislature.gov/Laws/SessionLaws/Acts/2010/Chapter258 Summary of GL c.186A, and other laws on rights of tenants in foreclosed properties, can be found at: www.masslegalservices.org/Tenant-Rights-After-Foreclosure Additional information on PTFA can be found at: www.nlihc.org/template/page.cfm?id=265 For more information contact: Judith LibenSenior Housing AttorneyMass. Law Reform Institute99 Chauncy St. Boston, MA 02111617-357-0700 X327 jliben@mlri.org

28. Endnotes 1 This presentation was prepared by MLRI Senior Housing Attorney Judith Liben and Jacob Taylor, Northeastern Legal Fellow. Protecting Tenants at Foreclosure Act of 2009, 12 U.S.C. § 5220 note; Pub. L. No. 111-22, tit. VII, 123 Stat. 1632, 1660-62 (2009)(as amended by Pub. L. No. 111-203, tit. XIV, § 1484 (2010)). HCV regulations have not yet been amended to reflect the statutory changes made by PTFA. HUD has, however, implemented the changes through notices. See HUD Notices PIH 2009-52(HA) (Dec. 15, 2009) & PIH 2009-17(FR) (June 18, 2009), both are available at: http://www.hud.gov/offices/pih/publications/notices/2009.cfm As of September 13, 2010 this law is not yet posted as G.L. c. 186A on the mass.gov website or Westlaw. The session law is called “An Act Relative to Mortgage Foreclosures”, St. 2010, c. 258 (August 7, 2010). Full text of law may be found at http://www.malegislature.gov/Laws/SessionLaws/Acts/2010/Chapter258 5 The law only applies to “foreclosing owners” as defined in the law. See c. 186A, § 1 (definition of “foreclosing owner”). 6 The provisions dealing with the contact information notice are in § 3. 7 See § 2. 8 “Bona fide tenant” is defined in § 1. 9 This language comes from the statutory definition in § 1. It is not clear at this time how broadly courts will interpret this language but it would appear to cover many actions by foreclosing owners other than service of legal documents.

29. Endnotes 10 “Just cause” is defined in § 1. 11 §§ 3 & 4 address the notices required in order for a foreclosing to evict for just cause. § 6 addresses the penalties for unlawful evictions. 12 See PTFA §702 (as amended 2010). 13 For more about the basic rights of tenants in foreclosed properties see: http://www.masslegalservices.org/node/23601 and http://www.lawlib.state.ma.us/subject/about/tenantsinforeclosure.html 14 See note #13 above. 15 See note #3 above.