This bill protects one of the innocent victims of the foreclosure crisis—the families who, after paying their rent each month, are suddenly told they must move out of their homes because their landlord has gone into foreclosure.
For tenants of any residential property where title transfer occurred on or after May 21, 2009 [such as where a house is sold at foreclosure and a tenant was renting the house] S.896 requires the new owner (read bank) to honor the existing lease, unless the new owner will live in the home. If the new owner will live in the home, the new owner must provide a 90 day notice.
What is the remedy for the potential situation that this law creates? Here is the hypothetical situation: If a homeowner knows they are heading towards foreclosure, they can enter into a lease agreement with a tenant for a period of say, 2 years for an upfront advance rental payment of say, $10,000. The bank, after foreclosure, would theoretically be unable to evict the tenant, for 2 years, and since the tenant had paid her rent upfront in advance, the bank could not collect any rent during that 2 year time period because the bank would have to honor the existing rental lease agreement between the prior landlord and the current tenant.
The remedy is to assert the provision of S.896 which limits the application of the law to bonafide tenants: In other words, advance a claim against the tenant that she was “in cahoots” with the landlord in violation of S.896 and therefore, that law does not apply, and as such, the bank can evict the tenant.