The Code of Virginia addresses the rights of tenants after foreclosure of residential properties. The current law incorporates the federal Protecting Tenants at Foreclosure Act (PTFA). Under current law, and subject to certain requirements, a tenant can remain in the property for the remaining lease term if the tenant complies with the requirements of the lease, including by paying market value rent.
In Virginia, these rights will change effective July 1, 2017. Under the new law, a tenant’s lease automatically terminates at the time of foreclosure. After foreclosure, the tenant can remain in the property as a month-to-month tenant as long as the tenant continues to pay rent as set forth in the original lease. The new owner can terminate the lease by giving 30 days’ written notice prior to the next rent due date or notice as otherwise required by the terms of the original lease. The new statute does not specifically address a tenant’s right to terminate the lease, but under existing Virginia law, a tenant can terminate a month-to-month lease by providing 30 days’ written notice.
This Virginia statutory change gives banks and lending institutions more options following a foreclosure. The change alleviates the concern that an owner after foreclosure will be stuck with a tenant claiming a lifetime lease of the property for below market rent. Now, the new owner can terminate any existing lease on 30 days’ notice—rather than being forced to wait until expiration of the full term of the lease. In the alternative and subject the existing tenant’s own right to terminate the lease, the new owner can continue to collect rent and evict tenants who fail to pay rent.