Lenders should be aware of a new Florida law, which requires lenders to provide existing tenants with at least thirty days to vacate the property after the foreclosure sale.  Florida Statute § 83.561, titled “Termination of Rental Agreement Upon Foreclosure”, became effective on July 1, 2015.  The law replaces a recently expired federal law titled Protecting Tenants at Foreclosure Act. As such, the implementation of this new Florida statute may come as no surprise to lenders. However, lenders should understand their statutory rights and responsibilities prior to evicting tenants after foreclosure.

The Protecting Tenants at Foreclosure Act (“PTFA”), a federal law enacted in 2009, required lenders to take foreclosed properties subject to existing leases and further entitled tenants to a 90-day notice prior to eviction.  The law was subsequently extended by the Dodd-Frank Act, and it expired on December 31, 2014.  Without further federal extensions of the law, the states were left to create their own legislation to fill the void.  Within six-months, the Florida legislature codified its own version of the PTFA.

Under the new statute, the purchaser at the foreclosure sale (the lender) takes title subject to the rights of the tenant as defined under the statute.  Fla. Stat. § 83.561(1).  Specifically, the tenant is entitled to the protections of § 83.67, Florida Statutes, which merely sets forth statutory prohibitions and does not place additional burdens or affirmative obligations on the lender.  As further comfort, the statute is explicit that the lender does not assume the obligations of the existing lease, unless the lender expressly assumes the agreement.  Fla. Stat § 83.561(4).  Most—if not all—lenders will want to evict the tenant in possession rather than assume the existing lease.

Prior to eviction, the lender must deliver a written 30-day notice of termination to the tenant. The notice of termination must be delivered by delivering or mailing a copy to the property or leaving a copy at the residence.  Fla. Stat. § 83.561(4).  The tenant may remain in possession of the premises for 30 days following the date of the delivery of the notice of termination.  Fla. Stat. § 83.561(1)(a).  The 30-day notice of termination must be in substantially the following form:

NOTICE TO TENANT OF TERMINATION

You are hereby notified that your rental agreement is terminated on the date of delivery of this notice, that your occupancy is terminated 30 days following the date of the delivery of this notice, and that I demand possession of the premises on (date). If you do not vacate the premises by that date, I will ask the court for an order allowing me to remove you and your belongings from the premises. You are obligated to pay rent during the 30-day period for any amount that might accrue during that period. Your rent must be delivered to (landlord’s name and address).

After the 30-day notice period expires, the lender may then move the court for a writ of possession based upon a sworn affidavit that the 30-day notice of termination was delivered to the tenant and the tenant failed to vacate the premises at the conclusion of the 30-day period.  Fla. Stat. § 83.561(2).  The writ of possession will then allow the lender to properly evict the tenant and take possession of the property.

The statute provides for certain circumstances in which the 30-day notice of termination is unnecessary.  For instance, the lender may immediately evict if: (1) the tenant is the mortgagor in the foreclosure action, or is the child, spouse or parent of the mortgagor; (2) the lease was not the result of an arm’s length transaction; or (3) the lease allows the tenant to pay rent substantially less the fair market value, unless the rent is subsidized by the government.  Fla.Stat. § 85.561(a)–(c).  As a practical matter, the identity of the tenants or the terms of the lease may not be readily apparent to the lender to determine whether any of the above exceptions apply.  Therefore, it may be prudent to deliver the 30-day notice of termination as a matter of course, rather than expend resources to determine the applicability of the statute.  Additionally, these exceptions may prove to be a defense for any claims of wrongful eviction under the statute.

In the early stages of a foreclosure action, the lender generally learns of the existence of a tenant in possession. During the litigation, the lender should assess whether the loan documents contain an assignment of rents clause and perfect its rights to payment.  The monthly rental amount will prove useful when asserting the lender’s right to collect rent from the tenant during the 30-day notice of termination period.  A copy of the lease obtained during the litigation should also prove useful for demanding post-foreclosure rent from the tenant.  In sum, when the lender is aware of a tenant in possession at any time prior to the foreclosure sale, the lender should be prepared to immediately deliver the termination notice upon issuance of the certificate of title in compliance with the new Florida statute.