Stealing Bases: Lenders Using Writs of Assistance To Remove Tenants Post-Foreclosure in Violation of State and Federal Law
Another troubling foreclosure practice has come to light in Oregon. Lenders are using common law writs of assistance to avoid the post-foreclosure eviction process and summarily remove tenants in derogation of both state and federal laws.
State and Federal Law Protects Tenants From Summary Eviction Post-Foreclosure
Writs of assistance are creatures of common law arising from a court’s equitable powers. In the foreclosure context, writs of assistance are often used to secure the assistance of a sheriff in removing a foreclosed homeowner who refuses to leave after the sale.
Tenants, unlike owners, generally have a right to remain in the possession of the property for a period of time after the sale. Congress passed the Protecting Tenants at Foreclosure Act (PTFA) in 2009. The PTFA allows tenants with a “bona fide” lease to remain in possession of the property for the greater of 90 days after foreclosure or the remainder of the lease term. A lease is “bona fide” if (1) the tenant is not the spouse, child, or parent of the homeowner; (2) the lease resulted from an arm’s-length transaction; and (3) the rent is not substantially less than fair market value. Under the PTFA, the immediate successor-in-interest to the property (i.e., the purchaser at the foreclosure sale) takes subject to the bona fide lease.
EXAMPLE: Suppose Larry Landlord enters into a one-year, arm’s length rental agreement with Sally Struthers, a stranger to Larry. The agreement requires Sally to pay rent of $600 per month, the going rate in that area. Four months after entering into the agreement, Larry’s property “goes back to the bank” after a foreclosure sale. Because Sally has a bona fide lease, Larry’s lender must honor the remaining 8 months on the lease.
There is an exception if the purchaser intends to occupy the property as a principal residence. In that case, the purchaser can terminate the lease after 90 days even if there is a longer time remaining.
EXAMPLE: Suppose Larry’s property is sold to a couple who want to live there. Under the PTFA the couple could require Sally to move out after 90 days even though Sally still has 8 months remaining on her lease.
The PTFA also requires the purchaser to give the tenant a 90-day written notice to vacate, which is generally longer than what state law requires. Ordinarily, a landlord could terminate a month-to-month lease with only 30 days notice.
EXAMPLE: Suppose Sally has a month-to-month lease. Even though a landlord ordinarily could terminate the lease with 30-days notice, the purchaser must give Sally at least 90 days notice to vacate.
The requirements of the PTFA do not entirely replace state law. They merely supplement state law, ensuring that most residential tenants will have at least 90 days notice to vacate after a foreclosure, and, in some cases, allowing a tenant to remain through the end of the lease term.
Oregon law also has a provision protecting tenants after a judicial foreclosure. ORS 18.946 allows a tenant who is paying rent to the purchaser to remain in possession until expiration of the lease or at least until the six-month redemption period expires.
How Lenders Are Avoiding These Laws Using Writs of Assistance
As we have seen, after a foreclosure sale most residential tenants are entitled to remain in possession for at least 90 days and, in some cases, for much longer than that. Furthermore, the PTFA ensures that tenants will know how much time they have by requiring the purchaser to give the tenant at least 90-days written notice to vacate. But some lenders are using writs of assistance to avoid these laws, with unwary judges signing the writs and unwary sheriffs relying on the writs to throw tenants out into the street.
How does this happen? Increasingly, foreclosure mills are naming unidentified “occupants” as defendants in judicial foreclosures actions then taking default judgments. The judgments contain a provision stating that, if any “defendant,” including one of the unidentified occupants, refuses to surrender possession “immediately” upon demand by the purchaser, the lender may apply for a writ of assistance.
After the sale is completed, and unbeknownst to the tenant, the lender files a motion for the writ of assistance instead of filing a proper FED action. The lender may not even attempt to demonstrate that the absence or expiration of a bona fide lease or that a proper 90-day notice was given after the sale. The unchallenged writ is signed by the judge and delivered to the sheriff, who can then promptly evict the tenant.
Stealing Bases Foreclosure Style
Sadly, the practice has come to light solely because at least one sheriff and one circuit court judge have recently questioned the propriety of issuing writs of assistance to summarily evict residential tenants who may have a right of possession even after the owner’s right is terminated by the sale.
Absent careful scrutiny by the courts, there is little other than good conscience to stop this practice. Most tenants may never realize that their rights have been violated. Even if they do, most tenants are financially unable to mount a legal battle to remain in the home.
Hopefully the bench and the bar in Oregon will take a closer look at this troubling practice and ensure that tenants’ rights are not trampled by lenders in a rush to foreclose.Photo © 2014 by Keith Allison under a Creative Commons Attribution-ShareAlike 2.0 Generic License.