In May of 2009 the federal government passed the Protecting Tenants at Foreclosure Act as part of the Helping Families Save Their Homes Act of 2009.  Although this legislation gives certain significant rights to tenants that occupy residences that have fallen into foreclosure, these rights are contingent upon a “bona fide” lease being executed between the tenant and landlord prior to the issuance of a notice of foreclosure on the subject property.  This federal act does not place any requirement on owners and landlords to notify a tenant before renting that a foreclosure on the property is imminent.

If a landlord were to enter into a lease with a tenant after the issuance of a notice of foreclosure, that tenant would not be afforded the protections as stated in federal act and the tenant could be subject to a hasty eviction.  With the amount of homes going into foreclosure in Arizona and a general lack of awareness of the federal law, many tenants were being forced to flee their homes with only a few days notice.  Therefore, in order to further protect tenants the Arizona Legislation has amended the Arizona Residential Landlord Tenant Act to include provisions that require landlords to notify prospective tenants in the rental agreement if the property which is being rented is undergoing a foreclosure.  The tenant must also be told if a sale date for the property has already been set.

The new law, found in A.R.S. Section 33-1331, also gives tenants remedies if the landlord fails to give notice as proscribed in the statute.  The tenant may deliver a written 10-Day notice pursuant to A.R.S. Section 33-1361 which allows the landlord ten days to remedy the noncompliance with the rental agreement or the lease will terminate.  The tenant can also recover damages as a result of the landlord’s noncompliance and obtain injunctive relief.  If the tenant has submitted a security deposit as part of the lease agreement the landlord will have fourteen business days to issue the refundable portion of the security deposit to the tenant.  The new law does not apply to multifamily residential rental units consisting of four or more connected units

This new law, when coupled with the federal act, provides tenants with significant protections whether or not the lease was entered into prior to the issuance of a notice of foreclosure and arms them against landlords that rent a foreclosed on property and walk away with the tenant’s rent and security deposit.

Matthew Koglmeier

Aaron Coleman

Koglmeier Smith, P.C.