The U.S. Court of Appeals for the Sixth Circuit recently confirmed that the federal Protecting Tenants at Foreclosure Act (PTFA) does not provide a private right of action. The Court did find, however, that violations of the PTFA may be used by tenants to support causes of action under state law.
The case involved tenants who filed suit against Freddie Mac, arguing that they were unlawfully evicted from their rental property after their landlord defaulted on her mortgage and the property was sold at a foreclosure sale. The U.S. District Court for the Western District of Kentucky granted Freddie Mac’s motion to dismiss, finding that, while the PTFA imposes requirements on successors-in-interest to foreclosed properties to protect tenants, the PTFA does not provide a private right of action. On appeal, the tenants argued that their claims do not arise under the PTFA, but that they were asserting wrongful eviction, denial of due process, and emotional distress claims under Kentucky law.
The Sixth Circuit reversed in part and affirmed in part. The appellate court agreed that the PTFA does not provide a private right of action, but held that tenants may use violations of the PTFA to establish the elements of state law claims: “[i]n cases where successors in interest do not initiate judicial proceedings, tenants have no opportunity to raise the PTFA as a defense. Thus, they must be permitted to use available state law causes of action, such as wrongful eviction, to enforce the PTFA’s protections.” The Sixth Circuit also found that the PTFA (successors-in-interest to foreclosed property assume such interest subject to the rights of bona fide tenants) preempted the provisions of Kentucky law at issue (foreclosure terminates the rights of tenants). See Pub. L. No. 111-22, Sec. 702, 123 Stat. 1632, 1661. The Court reasoned that the “purpose of the PTFA could not be accomplished if it did not preempt state laws that set lower standards for successors in interest that the Act requires.” Thus, the Sixth Circuit reversed the District Court’s dismissal of the tenants’ wrongful eviction claim.
Mik v. Fed. Home Loan Mortg. Corp., 743 F.3d 149 (6th Cir. Feb. 7, 2014)