Protecting Tenants at Foreclosure Act (PFTA) Sunsets: What the PTFA sunset means for tenants and foreclosure purchasers
In 2009, during the heart of the housing crisis of the Great Recession, Congress enacted the Protecting Tenants at Foreclosure Act (PTFA). The PTFA was designed to protect honest tenants who did not know the house they were renting was in default and sold at a foreclosure sale. As the tidal wave of foreclosures grew larger and larger during that financial crisis, more and more tenants woke to find the owner of the house they rented had changed by foreclosure. The PTFA was passed by Congress to give some breathing room to those tenants, giving them more time than typical under state law to stay in the house post-foreclosure. As with many federal interventions into the housing market, unintended consequences quickly followed.
A major problem with the PTFA was its 90-day notice to vacate requirement. Rather than a brief notice time period to vacate (as little as 3 days in Texas), if the occupant could show a court a lease—even if it appeared fraudulent on its face—he could stay in the house for at least 90 days or the remaining term of the lease, depending on the situation.
“Dishonest” tenants who were not paying rent took advantage of this situation, using the PTFA to buy more time to stay in a house they should have been legitimately forced to vacate. The PTFA required such tenants to receive a 90-day notice to vacate before the new owner and landlord could evict. This unintended consequence resulted in many investors-owners losing significant money on foreclosed properties (which often took 5 to 7 months to evict a tenant depending on the length of the eviction process in a particular state).
After one extension in 2012, the PTFA is now terminated by “sunset” rule. The practical application of the sunset of this law is that only state law protections apply. In many cases the state law is more efficient and more equitable than the PTFA was.
As a general rule, Texas law requires a 3-day notice to vacate prior to filing an eviction suit. Although Texas requires a 30-day notice to vacate be given to tenants in good standing, this applies only if the tenant pays rent. Those who stop paying rent lose the 30-day protection. Texas law rewards those who pay rent, and does not protect those who fail to pay rent.
There have not been wide reports in the media on the expiration of the PTFA, which is astonishing because of its nationwide reach.
So what does the expiration of the PTFA really mean for landlords in Texas?
A Landlord has to worry only about state laws for eviction. The 90-day rule is gone.
What does the expiration of the PTFA mean for tenants?
A Tenant must pay rent if he does not want to have three days to vacate the property before the new owner files a suit to evict him.