In 2009, Congress enacted the Protection of Tenants at Foreclosure Act (PTFA) that, among other things, requires successors at a foreclosure sale to take subject to the right of a residential tenant to occupy the premises until the expiration of the lease. While the statute refers only to the right to occupy, a California court interpreted the PTFA to make the successor assume all the duties and liabilities of a landlord under the lease. In this case, the tenant sued Deutsche Bank, as trustee, for claims that include those arising from the acts of the prior landlord/borrower. Effective January 1, 2013, the California Legislature enacted AB 2610 that gave tenants in foreclosure even greater protections. However, the federal PFTA was the operative law in this area from 2009 to the end of 2012. As a result of this decision, Nativi v. Deutsch Bank, successors in interest at foreclosures that occurred during this period could be exposed to tenant claims on the basis that the entirety of the tenant leases remained enforceable against successors.

The bank is seeking Supreme Court review and CBA filed an amicus letter supporting the bank or, in the alternative, we asked the court to depublish the decision so that it does not become precedent. Contact Leland Chan at lchan@calbankers.com if you have any questions.