New Arizona Law Requires Landlords Facing Foreclosure to Notify Tenants
A new amendment to the Arizona Residential Landlord and Tenant Act is designed to protect tenants from landlord foreclosures, and adds more legal liability to the landlord… again.
Three years ago, in response to the housing market crash and foreclosure wave, an amendment to the Arizona Residential Landlord and Tenant Act required landlords to give their tenants written notice when the property was in a state of “potential foreclosure” at the time the rental agreement contract is signed. This was intended to protect tenants from moving into properties that were in the process of foreclosure, so that they would not be taken by surprised and forced to move. Now landlords’ responsibility (and liability) is being expanded by House BIll 2281, which is in the process of being enacted into law by Arizona legislature. Governor Jan Brewer signed the bill last month after a bustle of new laws were passed at the end of the legislative session ending June 14.
Landlords in Arizona will now be required to provide notice to their tenants of a potential foreclosure on the property within five (5) business days of receiving notice of the trustee's sale. The addition to House Bill 2281 has very clear intention – to prevent landlords that are in financial distress from entering into contracts with tenants simply to make a quick buck before the property is lost, and warn tenants that the home may soon belong to a new owner. If the tenants are unable to reach an agreement with the new owner, they may eventually face eviction (after a 3-12 month foreclosure and transfer process, plus another 90 days after a new owner formally attains ownership).
There is already a federal law protecting these tenants, the Protecting Tenants at Foreclosure Act (currently extended through the end of 2014), which Arizona expands upon with its new legislation.
The new law has serious implications for Arizona landlords. Failure to provide written notice to all tenants within five days of foreclosure action being initiated can result in tenant lawsuits against the landlord for damages, which is the last thing a landlord already in financial straits needs.