New Federal Legislation Makes Receiverships Less Risky As A Collection Tool
The Protecting Tenants at Foreclosure Act, which went into effect on May 20, 2009, was designed to provide protections for tenants in the event of foreclosure. In the past, tenants had little or no right to retain their lease when their landlord lost the unit through foreclosure. The new law affords a greater notice period for eviction (increased to 90 days) and allows renters to stay for the remaining term of their lease except in the event that the new title holder intends to occupy the unit as a primary residence.
How does this effect community Associations? For one thing, it makes the collection remedy of receivership less risky than it has previously been. In the past, there was always a substantial risk that costs would be expended to get a receiver appointed, find a renter, and enter into a lease only to have that lease terminated prematurely by a foreclosure. Often the time frames proved too limiting to guaranty the Association would recoup its delinquent assessments and costs. Under the new law, in most cases where a bank forecloses, that tenant will be allowed to remain in the Unit until the lease term naturally expires. The receiver must enter into a valid lease with a tenant for a fair market rent. And if possible the receiver will want to try to enter into a lease term long enough to be sure the association recoups all or a majority of its delinquent assessments and costs.
Contact the knowledgeable collection attorneys at HindmanSanchez, P.C. for more information on receiverships.