August Letter to the Editor: What happens to my lease after foreclosure?

Question: I am currently negotiating a residential lease in California. My landlord is likely to default very shortly, so I am asking for below-market rent. Will this lease remain intact after foreclosure?

Answer:

Before the federal Protecting Tenants at Foreclosure Act (PTFA) was passed, any landlord/tenant relationship under the rental agreement or lease which was junior to a foreclosed lien was wiped out at the foreclosure sale. The new landlord was able to serve a 30-day notice to quitA notice the landlord serves the tenant if the tenant has made an incurable breachNonmonetary defaults that cannot be cured by a tenant. or a statutory breach. due to foreclosure to remove the tenant from the premises.

If an occupant under a junior rental or lease agreementThe written document which sets the terms of a fixed-term tenancy. remained in possession after receiving the 30-day notice to quitA notice the landlord serves the tenant if the tenant has made an incurable breachNonmonetary defaults that cannot be cured by a tenant. or a statutory breach. due to foreclosure, the new owner-by-foreclosureThe winning bidder at a trustee's sale who takes title to the property sold on a trustee's deed. could evict the residential occupants through an unlawful detainer (UD) action.

However, this process changed in 2009 under the PTFA. Under the PTFA, any bona fide lease entered into prior to the notice of foreclosure remains intact when the owner-by-foreclosureThe winning bidder at a trustee's sale who takes title to the property sold on a trustee's deed. (OBF) purchases the property to be used for any purpose other than as a primary residence.