“At least a half-dozen state and federal laws have protections for tenants of rental properties going through foreclosure.  The owners of foreclosed properties -- often banks -- as well as property managing and servicing companies and real estate brokers must adhere to these protections so that tenants are not improperly uprooted from their homes,” Consumer Protection Commissioner William M. Rubenstein said.

The federal Protecting Tenants at Foreclosure Act of 2009, as clarified by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires that most tenants in occupancy at the time a property title is transferred between owners due to foreclosure cannot be required to vacate for at least 90 days after title passes, or until the end of their lease, whichever is later. This includes leases entered into while the foreclosure action was pending. Tenants must receive notice of the foreclosure and their rights to stay before any post-foreclosure eviction may be brought in court. 

Certain tenants are not protected, including the mortgagor and his/her child, parent, or spouse; tenants with leases that were not the result of arms-length transactions; and tenants who pay substantially below market rent (other than subsidized rents).

The new owner of a foreclosed property is also subject to the terms of any existing Section 8 lease and Housing Assistance Payments (“HAP”) contract between the prior owner and the public housing authority. If a tenant in a foreclosed property is a Section 8 tenant, then the new owner must assume the HAP Contract.

The Connecticut Identification of Landlord Law (Conn. Gen. Stat. §47a-6) requires that at the time ownership changes, the tenant be given written notice of the name and address of the property manager, i.e. the person in charge of making repairs.

By definition, any individual or entity that acquires a property by foreclosure is a landlord (CGS section 47a-1) and must therefore comply with the duties of landlords as defined in CGS section 47a-7, including making repairs and doing what is necessary to keep the premises in a fit and habitable condition; keeping common areas of the premises clean and safe; maintaining electrical, plumbing, sanitary, heating, ventilating and other facilities in good and safe working order;  providing and maintaining appropriate receptacles for the removal of ashes, garbage, rubbish and other waste and arranging for their removal; and supplying running water and reasonable amounts of hot water.

Even if the tenant’s lease expired, the tenant remains entitled to the protection of all state and local laws that protect tenants. So, agents managing foreclosed property have the same maintenance responsibility as someone managing any rental property. Owners must assume liability for utilities if the prior owner paid utilities under a prior rental agreement or when the utilities are not individually-metered for the tenant’s exclusive use.

The Connecticut Cash for Keys Law (Conn. Gen. Stat. §47a-20f, as amended by Section 3 of Public Act 10-181) requires that if money will be offered to tenants to persuade them to move following a foreclosure, the payment must be double the total of the security deposit and unpaid interest, or two months’ rent, or $2,000 – whichever is greater.

Under the Connecticut Security Deposit Act -- Conn. Gen. Stat. §47a-21(e) -- when a tenant moves out following a foreclosure, whoever owns the property at that time must return the security deposit to the tenant, even if that security deposit had been paid to the previous property owner, and was never transferred to the new owner. It is not true that tenants must reclaim their security deposits from their former landlord. The Act also specifies how quickly a security deposit must be returned, the amount of interest to be paid on security deposits, the requirements for escrow of a security deposit, and penalties.

The Connecticut Just Cause Eviction Law (Conn. Gen. Stat. §47a-23c), applies to buildings with five or more dwelling units. Under this law, occupants who are at least 62 years old or are physically disabled cannot be required to move without “cause.” Change of ownership, including a change resulting from foreclosure, does not constitute cause.

“New owners of foreclosed properties and their agents – whether they are property managers or real estate brokers – all are responsible for assuring compliance with all laws so that tenants  are given the right to stay in their homes  for as long as the law requires after the foreclosure,” Rubenstein said. “These laws exist for a reason.  Particularly in these economic times, the tragedy of someone losing their property by foreclosure should not be multiplied by displacing tenants unlawfully.”

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