The Federal Protecting Tenants at Foreclosure Act

Posted in Foreclosure, Real Estate

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.  In Pennsylvania, virtually no case law existed that interpreted the PTFA.

This changed in August of 2015, with the entry of the trial court’s decision in Bosco Credit VI Trust Series 2012-1 v. Hofer, et al. (Blair County Court of Common Pleas, August 5, 2015), which was an ejectment case that called into question the applicability of the PTFA.  I represented the plaintiff in this case.

The Court eventually held that, considering the purported lease was not for fair rental value under HUD guidelines for the area, the protections of the PTFA did not apply, and therefore the ejectment of the tenant could proceed.

Although the Bosco Credit case has been appealed to the Superior Court of Pennsylvania, its existence represents what is very likely Pennsylvania’s first foray into the murkiness created by the PTFA.