North Carolina Governor Pat McCrory signed HB 174/Session Law 178 into law on August 5, modifying several requirements to the foreclosure process in the landlord-tenant context. Of particular importance, the bill amended the Homebuyer Protection Act and enhanced certain protections and notice requirements for tenants of real properties in foreclosure. Specifically, the bill added the following protections, among others, for pre-existing tenants of foreclosed properties:
- Unless the purchaser at the foreclosure sale will occupy the foreclosed property, she/he/it assumes title of the property subject to the rights of any pre-existing tenant to occupy the premises until the end of the remaining lease term or one calendar year from the date the purchaser acquires title, whichever is shorter; and
- If the purchaser plans to occupy the residence, she/he/it must provide all pre-existing tenants in possession of single-family residential property at least 90 days’ notice to vacate before making an application for possession. This provision also applies if the tenant has an oral lease or the lease is terminable at will.
The bill was also designed to allow for purchasers of real property subject to option contracts to pursue monetary damages separately from the summary ejectment/eviction process. A judgment rendered in an action to recover possession of a premises no longer bars a separate or subsequent action to recover monetary damages or other remedies against the breaching party.
Lenders and potential third party purchasers at foreclosure sales should be mindful of the new landlord-tenant protections in North Carolina, as well as the option to seek monetary damages in addition to orders of possession in certain ejectment/eviction situations.