Archive for August, 2011

For those investors who buy tenant occupied homes at foreclosure auctions the Congress and the Washington Legislature have imposed new and inconsistent notice requirements on  purchasers who want to evict the tenants after taking ownership of the property. Under previous state law, if the bank or other lender who was foreclosing the deed of trust securing the property chose to foreclose also the tenant‘s interest, then the buyer at the foreclosure sale could summarily evict the tenants twenty days after the sale by using the unlawful detainer procedures of Chapter 59.12 RCW. Those procedures provide for three days‘ notice to be served on the tenant and then the owner could proceed with a summons and complaint for eviction.

Under the 2009 state and federal laws, a purchaser oftenant occupied residential property at a foreclosure sale (smaller than five units) must comply with additional procedures and wait longer to evict inherited tenants. In addition the foreclosure purchaser‘s right to evict inherited tenants under the new state law may depend on the foreclosing lender‘s compliance with a new state law requirement that the lender mail notice of the intended foreclosure to the tenant ninety days before the foreclosure sale.

Under the new state law, the buyer at a foreclosure sale must provide tenants with one written notice regardless of whether eviction will be sought and a second written notice if the owner wants to evict. The wording of the first notice is specified in the statute, RCW 61.24.060. The first notice must tell the tenants that the property was sold at foreclosure and that if the occupants are not tenants the owner is entitled to possession twenty days after the sale, and if the occupants are tenants the owner may either give them a new rental agreement or give them written notice (the second notice) to vacate at sixty days or more from the date of the second notice. The first of these notices must be sent by both first class and either certified or registered mail, with return receipt requested.

The new federal law, called the Protecting Tenants at Foreclosure Act of 2009, requires the buyer in the foreclosure sale to notify residential tenants at least ninety days before being. The federal law, which is found at Public Laws No. 111-22, sections 701 through 704 also appears to limit the right of a foreclosing lender to foreclose the interest of a tenant under a residential lease that is for longer than a month to month tenancy. Under the federal law only if the purchaser intends to occupy the dwelling as a primary residence can the tenant‘s term lease be foreclosed, and then only after the tenant receives the federally required ninety day written notice.

Both of these laws took effect during the summer of 2009 and only time will tell how courts sort them out. It is possible for a buyer at foreclosure to comply with both notice requirements by giving the ninety day notice that is the federal standard as the second of the two notices that are required by state law. The state requirement for that second notice is for sixty days or more. The federal requirement is silent on the method of giving notice and so the state requirement will probably be sufficient as to method.

So if the investor‘s business plan is to buy, evict the tenants, fix up and sell the property, these time requirements should be kept in mind for planning purposes. Washington courts are sticklers for procedural errors in the eviction process and noncompliance could result in delays in the project.

About the author…
Doug Owens is a member of the REAPS legislation committee. Doug practices real estate law and general business law from his office in Seattle. He offers a 10% discount for REAPS members and he can be reached at 206-985-6679 or [email protected]

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