Thanks in part to the region’s strong economy, foreclosures in the Puget Sound area have eased to levels that are, on average, far below national rates.
But local foreclosures are still happening. Data provided by RealtyTrac.com shows South King County still being hit hard, particularly in Kent, where one out of every 894 homes is in foreclosure, and Auburn, where the rate is one out of every 744 homes. That compares with the national average of one out of every 1,203 homes.
The impacts of a foreclosure are felt by tenants who live in rentals, as well as homeowners. This has prompted federal officials to extend the Protecting Tenants at Foreclosure Act of 2009 through Dec. 31.
It provides that an unexpired residential lease will survive foreclosure for whatever amount of time remains on the lease, assuming the lease is bona fide. This requires that the tenant not also be the mortgagor or the mortgagor’s child, spouse or parent; and the rent due under the lease is not substantially less than market rent, unless the rent is reduced by a subsidy.
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When the federal protections expire at the end of the year, renters will still have help. Several state laws are permanently in place that allow tenants to remain in properties that are going through foreclosure.
The main difference between the federal and state laws centers on the duty of the property’s owner or buyer to provide adequate notice to the tenant.
Whereas federal law requires that the owner provides 90 days’ notice to vacate after the lender or buyer acquires title to the property, state law requires only 60 days’ notice to vacate after the foreclosure has ended. Tenants may assert the federal protections through the end of this year, but must continue to pay rent.
Under state law, a tenant living in a foreclosed property will be offered either a new rental agreement or a 60-day notice to vacate. A tenants entering into a rental agreement with the new owner is responsible to pay rent to the new owner.
If the new owner or buyer chooses to issue a 60-day notice to vacate, he or she may only evict a tenant during that period if the tenant commits waste or nuisance.
If a property-management company was previously involved with the collection of rent, tenants should not continue paying rent to that company. Once a foreclosure has been completed, the property-management company’s contract has ended, and the new owner takes over the receipt of rent payments.
Another hassle for tenants caught in the middle of a foreclosure: It’s likely they prepaid a security deposit, as well as last month’s rent, to the old owner.
In those situations, state law RCW 59.18.270 would require that the foreclosed-upon owner “immediately refund the full deposit to the tenant or transfer the deposit to the successor.” A failure to do so means that the “foreclosed-upon owner is liable to the tenant for damages up to two times the amount of the deposit.”
The only tenants not granted any protections under federal and state foreclosure laws are the previous owners, should they be the residents at the property. A former owner must vacate the property with 20 days after the foreclosure sale or be subject to eviction.
Sean Martin is the director of external affairs of the Rental Housing Association of Washington, a not-for-profit association of more than 5,000 landlord members statewide. Rental Resource is the organization’s biweekly column. For more information for landlords or tenants, visit rhawa.org.