Q: I read the other day that a condominium building in Washington was recently foreclosed on. I rent a condo unit in a new building from the developer and am concerned about my rights should I face the same plight. Do I have any rights in the District?

A: Yes, as a tenant, you have a number of legal rights. The landlord-tenant laws in the District are perhaps the most tenant-oriented of anywhere in the United States.

First, as long as you continue to pay rent and are not violating the terms and conditions of your lease, you have the absolute right to stay in your unit. And this right is applicable irrespective of whether there is a foreclosure. What tenants do not understand is that even if their lease term ends, it automatically becomes a month-to-month tenancy. I often joke that tenants in the District literally have a life estate in the property.

The law is different if the lender forecloses and the occupant is the owner. In that case, no such tenant rights will apply.

Another right is available to tenants under a law commonly called TOPA — the Tenant Opportunity to Purchase Act. Under this law, if you live in a single-family house, a co-op or a condo, when the property owner wants to sell, you must be provided a TOPA notice.

Oversimplified, there are two forms available to landlords: one for use when there already is a third-party contract to buy the property, and one for use when the landlord intends to sell but has not yet received a purchase contract. The tenant has 30 days from the time an offer of sale is received to advise the landlord that he or she is interested in buying the property. If such a statement of interest is presented in writing to the landlord, the tenant has an additional 60 days in which to try to negotiate an acceptable contract with the owner. If a contract is entered into, the tenant has 60 days thereafter to settle. However, if a mortgage lender needs additional time to process the loan and provides a written statement to the owner, the tenant has an additional 30 days in which to go to closing.

The law — and the rules — are complex, and you should consult your lawyer for advice.

If a third party is the successful bidder at a foreclosure sale, tenants are not entitled to receive the TOPA notice. However, if the lender ends up owning the property after the sale and subsequently decides to sell, the lender must provide the tenant with the appropriate TOPA notice.

But what if you are not interested — or financially able — to exercise your TOPA rights, and you wish to remain a tenant? You still have rights, but they may be limited.

As long as the term of your lease has not expired, you have the right to stay in the unit. If an investor was the successful bidder at the foreclosure sale, that buyer cannot evict you just because he wants a higher rent. In legal terminology, that buyer “takes subject to the existing lease.”

However, if the buyer actually — and honestly — wants to live in the unit, he must give you a 90-day notice of his intent to personally use and occupy the property. In no event, however, can you be asked to leave until your lease term is up.

There are no similar protections in Maryland and Virginia. And although the D.C. law is unique, to some extent it became a model for a new federal law. On May 20, President Obama signed into law the Protecting Tenants at Foreclosure Act of 2009.

This law allows tenants in properties that have been foreclosed on to remain in the properties for at least 90 days from the date the successful bidder gives a notice to vacate. Unlike the District’s law, if the buyer intends to occupy the property as his or her principal residence, the 90-day notice will take effect even if the tenant’s existing lease term has not expired. In other words, a bona fide purchaser can break the lease.

But the federal law does not override state or D.C. laws that provide longer notice periods or contain additional tenant protections.

Whenever a law is enacted, there are many questions left for the courts to resolve. For example, the new federal law states: “In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property . . . ” Does this apply to situations in which a condominium association forecloses on a delinquent homeowner?

More important, does this new law protect tenants even if they are delinquent on their rent payments or are otherwise in default on the terms of their lease?

Time will tell. But this new law has a sunset provision: It is scheduled to expire Dec. 31, 2012.

By Benny L. Kass
Saturday, November 28, 2009


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