My association foreclosed on a home and we learned there is a tenant living there – are we stuck with him?

The short answer is yes, but for how long is the real question.  Before I explain the details, it must be noted that the following answer does not apply to the previous owner – any holdover owner may be evicted immediately.  State and Federal laws were changed in recent years to provide protection for tenants who lived in properties that were subsequently foreclosed upon by a mortgage company or association.

The laws ((Minn. Stat. §504B.285 and Federal law 123 STAT 1632, PL 111-22, Sec 702)) state that the “immediate successor in interest” (here the association that foreclosed), must provide tenants with a minimum of 90 days notice to vacate the property.  The 90 day notice can not be given until after the end of redemption period.

If the tenant has a bona fide lease that extends more than 90 days beyond the end of the redemption period, the immediate successor in interest must then honor the term of the lease.  In this instance, the 90 day notice to vacate is still required and should be given 90 days prior to the expiration of the lease.  A bona fide lease is one that is not with the previous owner’s child, spouse or parent; it was the result of an arm’s length transaction; and the rent is not substantially less than fair market rent.  However, if the association sells the property to a buyer who intends to occupy the property as a primary residence, the term of the lease does not have to be honored and the 90 day notice can be given immediately upon sale to the new owner.

During the period that the tenant occupies the property, the tenant must follow the terms of the lease and must pay all rent to the association.  Tenants are not required to pay association assessments as they are not an owner of the property.  Should the tenant fail to follow the terms of the lease or pay the required rent, the association may bring an unlawful detainer (eviction) action immediately without regard to the 90 day notice period.

Both the Federal and Minnesota laws are set to expire on December 31, 2012.  Unless extended, no tenant protections will exist in 2013 and an eviction action can be commenced immediately following the end of the redemption period.

A version of this article first appeared in the "Ask the Attorney" column (written by Nigel Mendez) in the Minnesota Community Living magazine published by CAI-MN.