Predatory Leasing No. 2: Investors May Not Evict Post-Foreclosure Tenants

Atlanta, GA. The "Helping Families Save Their Homes Act of 2009," brings with it the curious anomaly that the ability to evict a post-foreclosure tenant turns on the status of the post foreclosure purchaser – not the tenant. I usually write on Georgia law, however, this aspect of landlord-tenant law affects every single post-foreclosure tenancy in the United States (assuming that the underlying mortgage has some federally insured component).

Most Banks are now aware that post-foreclosure tenants will be required to be given a 90‑day Notice to Quit. [1] However, few of them know that the status of whether a tenant may be successfully evicted post foreclosure turns on the status of the purchaser not the status of the tenant.

In my previous article on this matter, “Coming Attractions: Predatory Leasing,” [2] I pointed out the obvious change in Georgia law (and obviously the law of all States) that post-foreclosure tenants are not subject to summary eviction but must be given a 90‑day Notice to Quit.

A more careful review of Section 701 of "Protecting Tenants at Foreclosure Act," reveals that not only are tenants under a bona fide lease protected for the entire term of the lease and must be given 90 days Notice to Quit if an eviction is filed, they are (strangely) protected by the status of the purchaser. Whether a tenant may be evicted post-foreclosure turns on the status of the purchaser. That is, one must look to the phrase "sale of the unit to a purchaser who will occupy the unit as a primary residence," [3] to determine whether movant has standing to evict a post-foreclosure tenant. This is a bizarre twist in landlord-tenant law and may be a doorway to endless mischief in post-foreclosure evictions.

Consider the following fact patterns post foreclosure. Almost always a Bank will own the Note in the first mortgage foreclosure. Assume: The Bank goes to the stairs, bids in the property, takes back the residential home under a first mortgage foreclosure. The Bank then places the residential home on its REO list and holds the home in inventory for resale. If a bona fide tenant with a lease occupies that residence, the Bank may not evict that tenant prior to the termination of the lease. If, however, the Bank sells its REO property to Mr. and Ms. Homebuyer, [4] the Bank may file an eviction proceeding against the tenant and terminate the lease. Ninety days is still required as Notice post sale. It also appears that the start date for the filing of a post-in-time foreclosure begins on the day that the Bank CLOSES the sale of the house as opposed to the date it merely signs a contract to purchase. [5]

Consider the same fact pattern, except the Bank sells the property to an investor. Assume that in a first mortgage foreclosure, the Bank sells the residential home on the courthouse steps to itself. It then places the home in its REO inventory and begins to look for a buyer. It finds a buyer who happens to be a hard money lender investor as opposed to Mr. and Ms. Homebuyer. The Bank closes on a sale with the hard money lender, but it is now PROHIBITED from filing an eviction against the tenant. Thus, the status of the purchaser as opposed to the status of the tenant in the sale transaction itself determines whether the REO Bank may file an eviction. This is a truly bizarre anomaly in landlord tenant law.

Because federal law preempts all State laws and all eviction laws this anomaly runs through the eviction process of all 50 States.

In Georgia, eviction is a summary proceeding brought by a landlord against a tenant holding over, against a tenant at will or a tenant at sufferance. [6] Trespassers are generally evicted by the police. In the summary eviction proceeding in Georgia, a landlord moves that he has possession of the property or a right to own possession of the property and that the individual or individuals occupying the property are in a landlord-tenant relationship with him. The landlord then shows that due to some default on behalf of the tenant (usually non‑payment) the landlord is entitled to summary possession of the premises. The summary proceeding in Georgia limits the scope of the proceeding and the evidence that may be introduced. The tenant may challenge that he is not in a landlord relationship with the landlord or that he is not in default for non‑payment or some other default term of the lease or that no money is owed or that he is no longer a tenant. The tenant may not raise other issues. [7]

Under this new federal preemption of State landlord-tenant law, a tenant will now be able to inquire concerning whether the property was mortgaged under an FHA or government-insured loan, whether the foreclosure was properly completed, whether the Bank that bought the property at foreclosure has "in fact" sold the property to a new owner and, more specifically, whether that new owner intends to use the property for residential purposes. If a tenant, post foreclosure, may show as a matter of fact that the purchaser, post foreclosure, does not intend to use or occupy the property for "residential" purposes, the tenant will be entitled as a matter of federal preemption to summarily dismiss the eviction proceedings. That is, the landlord no longer has “standing” to evict that tenant.

Except in the case of disputed commercial evictions, residential evictions tend to move through dispossessory court like subway trains moving through stations. They clip along one after another with little evidence, little delay and little time spent by the judiciary resolving each claim. As a litigator, I can envision possible “circus” by a tenant who intends to challenge a post-foreclosure eviction against the Bank. It would appear that under federal preemption, a tenant would be legitimately allowed to conduct discovery against the Bank for the purpose of determining whether a sale occurred, to whom that sale was made, the date of sale, the transfer of title. And, it would appear, that the tenant would be entitled (as a matter of law) to depose the new owners for the purpose of determining, factually, whether they intend to hold the property for investment purposes or occupy it for residential purposes. If a tenant can show, as a matter of fact, that the subsequent purchaser intends to hold the property for investment purposes as opposed to occupying the property as an owner occupier, the tenant would be entitled to a summary dismissal of the eviction proceedings. Only by significantly questioning the subsequent purchaser, would the tenant be able to ferret out whether the purchaser was a hard money lender, an investor or the subsequent protected class of Mr. and Ms. Homeowner.

There would appear to be no downstream remedy for the purchaser if the Bank is unsuccessful in evicting the tenant. Unless some clause is inserted in the purchase and sale contract, the "investor" purchaser would simply be “up a creek” with a property it could not occupy and it would be stuck with that tenant until the conclusion of lease.

No one has focused on the monetary differential associated with the post-foreclosure lease. The reason that property goes to foreclosure is that the occupant cannot pay the $3,000.00 or $4,000.00 a month necessary to own the property under the first and second mortgage. Given that the average market rent may very well be between $1,200.00 and $1,500.00 a month, the post-in-time REO Bank and/or hard money lender will be losing effectively $2,500.00 a month for every month that post-foreclosure tenant occupies the property. Thus, there is a significant incentive for tenants to “game the system” and obtain lengthy leases on property that is heading to foreclosure. The tenants must, have a bona fide lease in place, before the Notice of foreclosure arrives.

Perhaps the federal courts will determine the ultimate meaning of whether this is a “due process” deprivation of a post-in-time purchaser, because the ability to maintain an eviction is based on the purchaser's status. If we never get a significant Federal Circuit opinion on this anomaly it will be because this law sunsets on December 31, 2012.

Until then, I expect we will see some unusual appeals coming out of use to be ordinary landlord tenant disputes.

Hugh Wood
Atlanta, GA


[1]

Georgia does not refer to it as a Notice to Quit, but by whatever name, it is still a Notice to Surrender the Premises.

[2]

http://hughwood.blogspot.com/2009/08/coming-attractions-predatory-leasing.html

[3]

TITLE VII-PROTECTING TENANTS AT FORECLOSURE ACT

SEC. 701. SHORT TITLE.

This title may be cited as the "Protecting Tenants at Foreclosure Act of 2009".

SEC. 702. EFFECT OF FORECLOSURE ON PREEXISTING TENANCY.

(a) IN GENERAL.-In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this title, any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to-
(1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice; and
(2) the rights of any bona fide tenant, as of the date of such notice of foreclosure-
(A) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90 day notice under paragraph (1); or
(B) without a lease or with a lease terminable at will under State law, subject to the receipt by the tenant of the 90 day notice under subsection (1),
except that nothing under this section shall affect the requirements for termination of any Federal- or State-subsidized tenancy or of any State or local law that provides longer time periods or other additional protections for tenants.
(b) BONA FIDE LEASE OR TENANCY.-For purposes of this section, a lease or tenancy shall be considered bona fide only if-
(1) the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant;
(2) the lease or tenancy was the result of an arms-length transaction; and
(3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit's rent is reduced or subsidized due to a Federal, State, or local subsidy.
(c) DEFINITION.-For purposes of this section, the term "federally-related mortgage loan" has the same meaning as in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).

SEC. 703. EFFECT OF FORECLOSURE ON SECTION 8 TENANCIES.

Section 8(o)(7) of the United States Housing Act of 1937 (42 U.S.C. 1437f(o)(7)) is amended-
(1) by inserting before the semicolon in subparagraph (C) the following: "and in the case of an owner who is an immediate successor in interest pursuant to foreclosure during the term of the lease vacating the property prior to sale shall not constitute other good cause, except that the owner may terminate the tenancy effective on the date of transfer of the unit to the owner if the owner-
"(i) will occupy the unit as a primary residence; and
"(ii) has provided the tenant a notice to vacate at least 90 days before the effective date of such notice."; and
(2) by inserting at the end of subparagraph (F) the following: "In the case of any foreclosure on any federally-related mortgage loan (as that term is defined in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602)) or on any residential real property in which a recipient of assistance under this subsection resides, the immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to the lease between the prior owner and the tenant and to the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit, except that this provision and the provisions related to foreclosure in subparagraph (C) shall not shall not affect any State or local law that provides longer time periods or other additional protections for tenants.".

SEC. 704. SUNSET.

This title, and any amendments made by this title are repealed, and the requirements under this title shall terminate, on December 31, 2012.

[4]

Its just an analogy. Don’t get all politically correct. It has to be “residential,” and I use the English convention, “he,” because it simplifies the sentences.

[5]

This is going to make it more difficult for Banks to sell REO properties because not only are the homeowners going to negotiate on price and terms they now know that they will be required to wait in excess of 90 days (perhaps six months) to simply take possession of the residential home. This delay is not going to encourage the sale of REO property.

[6]

OCGA § 44-7-50. Demand For Possession; Procedure Upon A Tenant's Refusal; Concurrent Issuance Of Federal Lease Termination Notice.
(a) In all cases where a tenant holds possession of lands or tenements over and beyond the term for which they were rented or leased to the tenant or fails to pay the rent when it becomes due and in all cases where lands or tenements are held and occupied by any tenant at will or sufferance, whether under contract of rent or not, when the owner of the lands or tenements desires possession of the lands or tenements, the owner may, individually or by an agent, attorney in fact, or attorney at law, demand the possession of the property so rented, leased, held, or occupied. If the tenant refuses or fails to deliver possession when so demanded, the owner or the agent, attorney at law, or attorney in fact of the owner may immediately go before the judge of the superior court, the judge of the state court, or the clerk or deputy clerk of either court, or the judge or the clerk or deputy clerk of any other court with jurisdiction over the subject matter, or a magistrate in the district where the land lies and make an affidavit under oath to the facts. The affidavit may likewise be made before a notary public, subject to the same requirements for judicial approval specified in Code Section 18-4-61, relating to garnishment affidavits.

[7]

Although the defense of lack of landlord-tenant relationship is a
proper defense to a dispossessory action, Thomas v. Wells Fargo Credit Corp., 200 Ga.App. 592, 594(3), 409 S.E.2d 71 (1991), "[c]laimed defects in the landlord's title to premises cannot be raised as a defense to a proceeding for possession under [OCGA § 44-7-50 et seq.]." McKinney v. South Boston Savings Bank, 156 Ga.App. 114(2), 274 S.E.2d 34 (1980).

In a joint answer to the petition, Truett admitted that he leased the property from CSX in 1977, and Bridges admitted that CSX attempted to transfer the property to the city. Bridges now asserts that the assignment was not made in accordance with law and disputes [210 Ga.App. 699] CSX's title and its authority to convey anything to plaintiff city. His challenge to the existence of a landlord-tenant relationship is predicated on an attack of the validity of CSX's original title to the land, but the law precludes him from disputing his landlord's title "while he is in actual physical occupation, while he is performing any active or passive act or taking any position whereby he expressly or impliedly recognizes his landlord's title, or while he is taking any position that is inconsistent with the position that the landlord's title is defective." OCGA § 44-7-9. "[A] landlord is authorized to file a complaint for the ejectment of his tenant alleging, not that the landlord has a presently enforceable legal title to the land, but, that the landlord has a presently enforceable lease contract with the tenant, and, that the tenant has breached said contract so as to entitle the landlord to possession." Ingold, Inc. v. Adair, 247 Ga. 155, 156, 274 S.E.2d 560 (1981). Since Bridges may not do indirectly what the law prohibits him from doing directly, he cannot defend the dispossessory action by challenging plaintiff's title. Bridges v. City of Moultrie, 210 Ga.App. 697, 437 S.E.2d 368, 370 (1993).

Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084

www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
twitter: USALawyer_
Phone: 404-633-4100
Fax: 404-633-0068

How to Remove a Nonconforming Lien

Atlanta, GA. The current foreclosure surge has (for some reason) brought with it a renewal of questions about “militia liens,” and “common law liens.” I thought that these liens had gone the way of diphtheria vaccinations and the Woody station wagon, but perhaps not.

One of the more interesting fake liens was a lien for “Specific Performance.” Hey, if you are upset over a real estate contract that does not close, why retain a lawyer? Why challenge the Seller for not closing? Just jam his property with a “Lien for Specific Performance.” The Seller will come around to your offer when he realizes that he can’t sell it to another buyer.

Since the issue of nonconforming liens continues to arise, let us cover it again: 1) the only liens recognized in Georgia are listed at O.C.G.A. § 44-14-320(a) and 2) the removal of non-conforming liens is provided for at O.C.G.A. § 44-14-320(c).

If a lien in Georgia does not fit into the statutory definition of a lien at O.C.G.A. § 44-14-320, its NOT A LIEN. Here are the only liens against real property recognized in Georgia.

O.C.G.A. § 44-14-320. Certain Liens Established; Removal Of Nonconforming Liens.
(a) The following liens are established in this state:
(1) Liens for taxes in favor of the state, the counties, and the municipal corporations;
(2) Liens in favor of creditors by judgment and decree;
(3) Liens in favor of laborers;
(4) Liens in favor of landlords;
(5) Liens in favor of mortgagees;
(6) Liens in favor of landlords furnishing supplies;
(7) Liens in favor of mechanics on real and personal property;
(8) Liens in favor of contractors, materialmen, subcontractors, materialmen furnishing material to subcontractors, and laborers furnishing labor to subcontractors, machinists, and manufacturers of machinery. As used in this paragraph, the term "subcontractor" includes, but is not limited to, subcontractors having privity of contract with the prime contractor;
(9) Liens in favor of certain creditors against steamboats and other watercraft;
(10) Liens in favor of the proprietors of sawmills and the proprietors of planing mills and other similar establishments;
(11) Liens in favor of innkeepers, boardinghouse keepers, carriers, livery stable keepers, pawnbrokers, depositories, bailees, factors, acceptors, and attorneys at law;
(12) Liens in favor of owners of stallions, jacks, bulls, and boars;
(13) Liens in favor of railroad employees, owners of stock killed, and persons furnishing supplies to railroads;
(14) Liens in favor of laundrymen;
(15) Liens in favor of jewelers; and
(16) Liens in favor of the state for expenditures from the hazardous waste trust fund pursuant to subsection (e) of Code Section 12-8-96. Such liens shall be superior to all other liens except liens for taxes and other prior perfected recorded liens or claims of record.
(b)(1) All liens provided for in this chapter or specifically established by federal or state statute, county, municipal, or consolidated government ordinance or specifically established in a written declaration or covenant which runs with the land shall be exempt from subsection (c) of this Code section. All other liens shall be defined as nonconforming liens and shall not be eligible for filing and recording.
(2) Each nonconforming lien shall be a nullity with no force or effect whatsoever, even if said nonconforming lien is filed, recorded, and indexed in the land records of one or more counties in this state.

And, this one other statute:

O.C.G.A. § 44-14-322. Vendor's Equitable Lien Abolished.

The vendor's equitable lien for the purchase money of lands is abolished.

& & &

REMOVAL OF NONCONFORMING LIENS

& & &

If you do find a “Lien For Specific Performance,” or a “Lien for Songs Downloaded onto your IPOD for which you did not pay” on your real property, it can be removed without a lawsuit.

Simply have your lawyer draw up A PETITION TO REMOVE A NONCONFORMING LIEN according to the pattern described below and file it with the Clerk of the Superior Court. You will have to follow the petition to see that it is signed by the Judge to whom it is assigned or the Presiding Judge. Once signed, it needs to be filed and cross referenced in the real estate records. And, volia, the lien is removed.

& & &

O.C.G.A. § 44-14-320 (c)(1) Any person, corporation, or other entity against whose property a nonconforming lien is filed or recorded may, without notice to any party, file an ex parte petition for an order to remove a nonconforming lien from the record in the superior court of the county in which said lien is filed or recorded and obtain an order from said superior court directing the clerk of the superior court to record the order and mark the recorded nonconforming lien: "CANCELED OF RECORD PURSUANT TO ORDER DATED ______________, RECORDED AT DEED BOOK _______, PAGE _______. THIS ______ DAY OF ______________, ____." The petition shall set forth that:
(A) The movant is a party against whose property a nonconforming lien is filed;
(B) The lien in question is a nonconforming lien as defined under this Code section; and
(C) A certified copy of the nonconforming lien is attached as an exhibit.
The petition must be executed by the movant or movant's attorney.
The order may be entered as early as the date of filing of the petition and shall set forth that, upon review of the petition and the certified copy of the recorded instrument attached thereto, it is the order of the court that said lien is a nonconforming lien under this Code section and that the clerk of the court is ordered to record the order and mark the nonconforming lien canceled of record.
(2) Any official or employee of the government of this state or any branch thereof, any political subdivision of this state, or the government of the United States or any branch thereof against whose property a nonconforming lien is filed or recorded may, without notice to any party and in lieu of the procedure provided by paragraph (1) of this subsection, file an ex parte affidavit of nonconforming lien in the superior court of the county in which said lien is filed or recorded. The affidavit shall set forth that:
(A) Such person against whose property a nonconforming lien is filed is an official or employee of the government of this state or a branch thereof, a political subdivision of this state, or the government of the United States or a branch thereof;
(B) The lien in question is a nonconforming lien as defined under this Code section and was filed against the government official or employee based upon the performance or nonperformance of his or her official duties; and
(C) A certified copy of the nonconforming lien is attached as an exhibit.
The affidavit filed for such government official or employee must be executed by the Attorney General or a deputy or assistant attorney general in the case of an official or employee of the government of this state or a branch thereof, the attorney representing a political subdivision of this state in the case of an official or employee of such political subdivision, or a United States attorney or an assistant United States attorney in the case of an official or employee of the government of the United States or a branch thereof. The lien shall be conclusively presumed to be nonconforming upon the filing of such affidavit, and the clerk of the court shall instanter mark the recorded nonconforming lien: "CANCELED OF RECORD PURSUANT TO AFFIDAVIT DATED ______________, RECORDED AT DEED BOOK ______, PAGE ______. THIS ______ DAY OF ______________, ____.”


& & &

The Removal Statute does not contain any monetary penalty against the individual (or entity) who filed the wrongful lien. There does not seem to be any quick statute that grants recovery. For example, it is not a civil proceeding, so O.C.G.A. § 9-15-14 and O.C.G.A. § 9-7-80 do not seem to apply. It could be “bad faith,” under O.C.G.A. § 13-6-11, however there is no suit pending under which you could recover damages.

It would appear, unless someone has an answer I have overlooked, that the individual filing the lien does so with monetary impunity. The landowner (wrongfully liened) must pay for the Petition to Remover the Non Conforming Lien, pay all of the Certified Copies necessary to prepare and file the Non Conforming Petition, pay for the trouble and expense chasing the Petition through the Superior Court system for a Judge’s Signature, pay the filing fees for the Real Estate Desk to Process the filing and in indexing ($10 for the first page and $2 for each page thereafter) and pay the $2 for each cross reference back to the original base title.

& & &

Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084

www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
Phone: 404-633-4100
Fax: 404-633-0068

Legal Newspapers: Dinosaurs of the Digital Age

The time has come for the General Assembly of the State of Georgia to rethink the monopoly granted to legal newspapers in the 159 Georgia Counties [1]. The State of Georgia needs to create one centralized state database for all statewide legal notices (including all individual county notices) and completely eliminate county based legal advertising notices. This database should be available to the public on the internet and compatible with Boolean searches.

This article will show that the Legal Newspapers printed in 159 Georgia Counties fail to accomplish their stated purpose in the modern digital age. That is:

1) Legal Newspapers do Not Provide Effective Notice;

2) A Centralized State Electronic Database Will Provide Notice; and,

3) Legal Newspapers presently exist not to provide Notice, but to capture monopoly profits.

The fundamental goal of any legal advertisement is to provide Notice. However, the current patchwork quilt of 159 independent newspapers all printing legal advertisements on any day at any time they choose, does not provide adequate Notice in this modern digital, blackberry® driven age.

I. The Entire Purpose of Notice is “Notice.”

In an age when citizens obtain sports scores, news headings, and download songs onto their I-Pod, they find themselves locked out of the most basic legal notices affecting their lives. There is no searchable cost effective public database that presently contains legal notices.

Notice in a Civil Action is codified at OCGA Code § 9-11-4. [2] The entire purpose of that statutory scheme is to provide Notice of a legal proceeding to a defendant or an interested party. That statute requires an interested party be notified of an action within five days of the filing of an action, unless some excuse is made for due diligence. If a party cannot be located after a diligent search, OCGA 9-11-4(f)(1)(C) [summons or other service] provides for service on the defendant or interested party by publication. Publication subsequent to the court order is made as follows: "The clerk shall cause publication to be made in the paper in which the sheriff's advertisements are printed, four times within the ensuing 60 days." Id.

While a defendant residing in Atlanta might, per chance, search the Legal Organ of Fulton County, the Fulton County Daily Reporter, It is highly unlikely (absurd, actually) that a defendant residing in Atlanta would search the Legal Organ in Liberty County, Ben Hill County, Mitchell County, Toombs County or some other county hundreds of miles from Atlanta.

It is not only the distance that impacts a defendant's ability to receive Notice, but the fact that the Notices are owned and published by 159 disjointed publishing houses. Those publishing houses charge to view that information that fundamentally “public.”

In this digital age, it cannot be accepted as a matter of common sense (to be distinguished from legal sense) that actual Notice is provided by an obscure publication in some distant county that is not available and searchable on the internet.

There is no question that the legal information contained inside the publication itself is a matter of public domain. While it is not a perfect analogy, the General Assembly indicted some years ago that “public records,” should be open to the public. OCGA § 50-18-70. While Legal ads are “open,” they are not accessible and/or available to the public in any useful format.

For those of us who are required to search the legal advertisements, we know that if you don’t take a subscription to some legal newspaper in an outlying county – then when that legal paper is gone [meaning its many weeks old] it is gone. You have to either ask for an archive search or pay an additional fee for that newspaper’s online database to search an historical legal ad. The information, while public, is not accessible. It hides behind that monopolistic paid wall of the local Legal Organ.

II. A Centralized State Electronic Database Will Provide Notice

A centralized electronic state database will provide Georgians with actual Notice. The current 159 paper publications (some are electronic, but they are not centralized) in the 159 counties do not provide any centralized form of Notice for the citizens of the State of Georgia.

There are three (3) empirical reasons why a statewide database will work as opposed to the 159 paper printings. The historical experience with the GSCCCA, the centralized UCC filings and the Georgia Secretary of State’s Office, provide clear reasons why the Georgia should move to centralize all county legal advertising.

GSCCCA. The Georgia Superior Court Clerks Cooperative Authority (GSCCCA) provides online access to 123 million legal documents filed in the 159 counties in Georgia. The electronic database or GSCCCA has received over 1 billion hits since the initiation of its online searchable database. It is difficult to imagine the world as it existed prior to 1995 with regard to land records in Georgia.

With the GSCCCA, anyone at any computer terminal in Georgia with the proper passcode can access any one of the 123 million deeds, security deeds and other land instruments presently on file in Georgia.

The UCC. The Uniform Commercial Code was first published in 1952 and has been enacted by all states. It has been a long term joint project of the National Conference of Commissioners on Uniform State Laws. While Georgia did not enact the UCC until some years after its initial introduction in 1952, it was clear both from the drafting of the UCC and its implementation that a dual filing system was necessary to provide actual “Notice.” A uniform financing statement may be filed in the local county courthouse, but it may also be centrally filed in Atlanta. Thus, in the days before the internet, the wisdom of the drafters of the UCC knew that a UCC filed in some outlying distant county many hundreds of miles from the state capitol provided no Notice and no real method for determining whether a financing statement existed on a fleet of trucks in a distant county. A hand search of the same financing statement made in Atlanta would show whether the fleet of trucks in the outlying county was, in fact, subject to a prior financing agreement.

The Georgia Secretary of State. The entire e‑filing revolution associated with the Georgia Secretary of State's office shows the power of statewide centralization of records. In the early 1990s, many law firm’s had one employ designated to dial 404‑656‑2817 and reach a live person at the Georgia Secretary of State's, Corporations Division. Sometimes, if our employee ever got through on the phone, we might be able to determine the “Register Agent,” for a Corporation. When the Governor set out to revolutionize the Georgia Secretary to State's office under the "e‑revolution," the Secretary of State's databases moved online as one of the first databases in the nation. Attorneys were suddenly able to research very substantial amounts of data at the Secretary’s Office without a physical visit to Atlanta.

Notwithstanding the clear teachings of the centralization of the GSCCCA, the UCC and the Secretary of State’s Office, the General Assembly continues to allow legal advertisements in Georgia to be published in an incomprehensible maze of 159 legal publications scattered throughout the state.

III. OCGA § 9-13-142 Provides Legal Newspapers With A Monopoly that Impedes Centralization.

Legal newspapers in all 159 counties have a monopoly with respect to the publication of legal advertisements pursuant to OCGA § 9‑13‑142. [3] That statute provides that one official newspaper or official organ of the county shall be designated for the publication of sheriff sales, citations of the probate court judges, or any other advertising commonly known in terms of "official or legal advertising.”

Other than owning and maintaining a monopoly over the publication of legal information, it is clear that the newspapers provide no "service," in their delivery or dissemination of the legal advertisements. The Governor's Office of Consumer Affairs in 2009 published "[I]nformation in the official Notices [the legal advertisements] comes directly from the lenders [and the public] with no independent verification." Thus, the legal newspapers provide no additional value added other than the raw assembly of and dissemination of legal advertisements to the public.

The two recent Georgia Supreme Court decisions on the Legal Newspapers reveal fights not designed to improve service to the community or to provide a better system of Notice to the general population, but rather reveal a fight over the ownership of the monopoly to publish in a particular county. Crescent Newspapers, LP., et al. v. Dorsey, et al., 269 Ga. 41, 497 S.E.2d 360 (1998) (revealing a fight over ownership of the Legal Organ in DeKalb County) and Henry County Record, Inc. v. Community Newspapers Holding, Inc., 274 Ga. 353, 554 S.E.2d 150 (Ga. 2001). (resolving a Dispute over the qualifications to be the Legal Organ in Henry County).

IV. Conclusion

The General Assembly should consider the purpose of legal Notice and eliminate the arcane and byzantine method of Notice presently provided by a 159 profit-motivated entities that do not work together for the common good of Georgians.

A centralized searchable database will achieve the goal of providing “Actual Notice.” A centralized database will allow citizens to search Notice on the internet on a Centralize Database. And, a centralized Database will end the costly and inefficient monopoly of Legal Newspapers in Georgia.

Hugh Wood
Atlanta, GA


[1]

Georgia has 159 Counties. "By 1800, Georgia consisted of 24 counties. An explosion in the number soon followed, with 53 new counties creating during the following 27 years. In Dec. 1831, Georgia claimed authority over all Cherokee and Creek lands in Georgia. Twelve months later, the legislature designated all Cherokee lands within the state as "Cherokee County" (see map). This was a huge area that never really functioned as a county, so In Dec. 1832 the legislature created ten counties out of Cherokee County - including a much smaller county by the same name. Georgia now had a total of 89 counties.

A new era in the history of Georgia counties followed. As no Indian territory remained in Georgia, the only way to create new counties was by dividing existing ones. Organizing a new county simply required passage of an act in the General Assembly. It was an easy process, and during the decade of the 1850s, 39 new counties were created by the legislature.

By 1875, the number of counties had grown to 137, with no end in sight. To stop this explosion, a new state constitution in 1877 prohibited the legislature from creating any more counties in Georgia (see provision). For 16 years, the number of counties was frozen at 137. But state lawmakers were pressured for more. In 1904, the General Assembly proposed amending Georgia's constitution to allow 145 counties. Voters approved the change, meaning the 1905 General Assembly would have the chance to create 8 new counties. The House of Representatives created a New County Committee, which was busy the entire session considering 23 petitions to form new counties. Late in the session, legislators approved 8 new counties - the maximum allowed after the 1904 constitutional amendment. But the pressure to create new counties continued." Jackson, Ed, A Brief History of Georgia Counties, Carl Vinson institute of Government, University of Georgia (2000).

[2]

O.C.G.A. § 9-11-4. Process.
(a) Summons -- Issuance. Upon the filing of the complaint, the clerk shall forthwith issue a summons and deliver it for service. Upon request of the plaintiff, separate or additional summons shall issue against any defendants.
(b) Summons -- Form. The summons shall be signed by the clerk; contain the name of the court and county and the names of the parties; be directed to the defendant; state the name and address of the plaintiff's attorney, if any, otherwise the plaintiff's address; and state the time within which this chapter requires the defendant to appear and file appropriate defensive pleadings with the clerk of the court, and shall notify the defendant that in case of the defendant's failure to do so judgment by default will be rendered against him or her for the relief demanded in the complaint.
(c) Summons -- By whom served. Process shall be served by the sheriff of the county where the action is brought or where the defendant is found, or by such sheriff's deputy, or by the marshal or sheriff of the court, or by such official's deputy, or by any citizen of the United States specially appointed by the court for that purpose, or by someone who is not a party and is not younger than 18 years of age and has been appointed as a permanent process server by the court in which the action is brought. Where the service of process is made outside of the United States, after an order of publication, it may be served either by any citizen of the United States or by any resident of the country, territory, colony, or province who is specially appointed by the court for that purpose. When service is to be made within this state, the person making such service shall make the service within five days from the time of receiving the summons and complaint; but failure to make service within the five-day period will not invalidate a later service.
(d) Waiver of service.
(1) A defendant who waives service of a summons does not thereby waive any objection to the venue or to the jurisdiction of the court over the person of the defendant.
(2) Upon receipt of notice of an action in the manner provided in this subsection, the following defendants have a duty to avoid unnecessary costs of serving the summons:
(A) A corporation or association that:
(i) Is subject to service under paragraph (1) or (2) of subsection (e) of this Code section; and
(ii) Receives notice of such action by an agent other than the Secretary of State; and
(B) A natural person who:
(i) Is not a minor; and
(ii) Has not been judicially declared to be of unsound mind or incapable of conducting his or her own affairs.
(3) To avoid costs, the plaintiff may notify such a defendant of the commencement of the action and request that the defendant waive service of a summons. The notice and request shall:
(A) Be in writing and shall be addressed directly to the defendant, if an individual, or else to an officer or managing or general agent or other agent authorized by appointment to receive service of process for a defendant subject to service under paragraph (1) or (2) of subsection (e) of this Code section;
(B) Be dispatched through first-class mail or other reliable means;
(C) Be accompanied by a copy of the complaint and shall identify the court in which it has been filed;
(D) Make reference to this Code section and shall inform the defendant, by means of the text prescribed in subsection (l) of this Code section, of the consequences of compliance and of failure to comply with the request;
(E) Set forth the date on which the request is sent;
(F) Allow the defendant a reasonable time to return the waiver, which shall be at least 30 days from the date on which the request is sent, or 60 days from that date if the defendant is addressed outside any judicial district of the United States; and
(G) Provide the defendant with an extra copy of the notice and request, as well as a prepaid means of compliance in writing.
(4) If a defendant located within the United States that is subject to service inside or outside the state under this Code section fails to comply with a request for a waiver made by a plaintiff located within the United States, the court shall impose the costs subsequently incurred in effecting service on the defendant unless good cause for the failure is shown.
(5) A defendant that, before being served with process, returns a waiver so requested in a timely manner is not required to serve an answer to the complaint until 60 days after the date on which the request for waiver of service was sent, or 90 days after that date if the defendant was addressed outside any judicial district of the United States.
(6) When the plaintiff files a waiver of service with the court, the action shall proceed, except as provided in paragraph (5) of this subsection, as if a summons and complaint had been served at the time of filing the waiver, and no proof of service shall be required.
(7) The costs to be imposed on a defendant under paragraph (4) of this subsection for failure to comply with a request to waive service of summons shall include the costs subsequently incurred in effecting service, together with the costs, including a reasonable attorney's fee, of any motion required to collect the costs of service.
(e) Summons -- Personal service. Except for cases in which the defendant has waived service, the summons and complaint shall be served together. The plaintiff shall furnish the clerk of the court with such copies as are necessary. Service shall be made by delivering a copy of the summons attached to a copy of the complaint as follows:
(1) If the action is against a corporation incorporated or domesticated under the laws of this state or a foreign corporation authorized to transact business in this state, to the president or other officer of the corporation, secretary, cashier, managing agent, or other agent thereof, provided that when for any reason service cannot be had in such manner, the Secretary of State shall be an agent of such corporation upon whom any process, notice, or demand may be served. Service on the Secretary of State of any such process, notice, or demand shall be made by delivering to and leaving with him or her or with any other person or persons designated by the Secretary of State to receive such service a copy of such process, notice, or demand, along with a copy of the affidavit to be submitted to the court pursuant to this Code section. The plaintiff or the plaintiff's attorney shall certify in writing to the Secretary of State that he or she has forwarded by registered mail or statutory overnight delivery such process, service, or demand to the last registered office or agent listed on the records of the Secretary of State, that service cannot be effected at such office, and that it therefore appears that the corporation has failed either to maintain a registered office or to appoint a registered agent in this state. Further, if it shall appear from such certification that there is a last known address of a known officer of the corporation outside the state, the plaintiff shall, in addition to and after such service upon the Secretary of State, mail or cause to be mailed to the known officer at the address by registered or certified mail or statutory overnight delivery a copy of the summons and a copy of the complaint. Any such service by certification to the Secretary of State shall be answerable not more than 30 days from the date the Secretary of State receives such certification;
(2) If the action is against a foreign corporation or a nonresident individual, partnership, joint-stock company, or association, doing business and having a managing or other agent, cashier, or secretary within this state, to such agent, cashier, or secretary or to an agent designated for service of process;
(3) If against a minor, to the minor, personally, and also to such minor's father, mother, guardian, or duly appointed guardian ad litem unless the minor is married, in which case service shall not be made on the minor's father, mother, or guardian;
(4) If against a person residing within this state who has been judicially declared to be of unsound mind or incapable of conducting his or her own affairs and for whom a guardian has been appointed, to the person and also to such person's guardian and, if there is no guardian appointed, then to his or her duly appointed guardian ad litem;
(5) If against a county, municipality, city, or town, to the chairman of the board of commissioners, president of the council of trustees, mayor or city manager of the city or to an agent authorized by appointment to receive service of process. If against any other public body or organization subject to an action, to the chief executive officer or clerk thereof;
(6) If the principal sum involved is less than $200.00 and if reasonable efforts have been made to obtain personal service by attempting to find some person residing at the most notorious place of abode of the defendant, then by securely attaching the service copy of the complaint in a conspicuously marked and waterproof packet to the upper part of the door of the abode and on the same day mailing by certified or registered mail or statutory overnight delivery an additional copy to the defendant at his or her last known address, if any, and making an entry of this action on the return of service; or
(7) In all other cases to the defendant personally, or by leaving copies thereof at the defendant's dwelling house or usual place of abode with some person of suitable age and discretion then residing therein, or by delivering a copy of the summons and complaint to an agent authorized by appointment or by law to receive service of process.
(f) Summons -- Other service.
(1) Service by publication.
(A) General. When the person on whom service is to be made resides outside the state, or has departed from the state, or cannot, after due diligence, be found within the state, or conceals himself or herself to avoid the service of the summons, and the fact shall appear, by affidavit, to the satisfaction of the judge or clerk of the court, and it shall appear, either by affidavit or by a verified complaint on file, that a claim exists against the defendant in respect to whom the service is to be made, and that he or she is a necessary or proper party to the action, the judge or clerk may grant an order that the service be made by the publication of summons, provided that when the affidavit is based on the fact that the party on whom service is to be made resides outside the state, and the present address of the party is unknown, it shall be a sufficient showing of such fact if the affiant shall state generally in the affidavit that at a previous time such person resided outside this state in a certain place (naming the place and stating the latest date known to affiant when the party so resided there); that such place is the last place in which the party resided to the knowledge of affiant; that the party no longer resides at the place; that affiant does not know the present place of residence of the party or where the party can be found; and that affiant does not know and has never been informed and has no reason to believe that the party now resides in this state; and, in such case, it shall be presumed that the party still resides and remains outside the state, and the affidavit shall be deemed to be a sufficient showing of due diligence to find the defendant. This Code section shall apply to all manner of civil actions, including those for divorce.
(B) Property. In any action which relates to, or the subject of which is, real or personal property in this state in which any defendant, corporate or otherwise, has or claims a lien or interest, actual or contingent, or in which the relief demanded consists wholly or in part of excluding such defendant from any interest therein, where the defendant resides outside the state or has departed from the state, or cannot, after due diligence, be found within the state, or conceals himself or herself to avoid the service of summons, the judge or clerk may make an order that the service be made by publication of summons. The service by publication shall be made in the same manner as provided in all cases of service by publication.
(C) Publication. When the court orders service by publication, the clerk shall cause the publication to be made in the paper in which sheriff's advertisements are printed, four times within the ensuing 60 days, publications to be at least seven days apart. The party obtaining the order shall, at the time of filing, deposit the cost of publication. The published notice shall contain the name of the parties plaintiff and defendant, with a caption setting forth the court, the character of the action, the date the action was filed, the date of the order for service by publication, and a notice directed and addressed to the party to be thus served, commanding him or her to file with the clerk and serve upon the plaintiff's attorney an answer within 60 days of the date of the order for service by publication and shall bear teste in the name of the judge and shall be signed by the clerk of the court. Where the residence or abiding place of the absent or nonresident party is known, the party obtaining the order shall advise the clerk thereof; and it shall be the duty of the clerk, within 15 days after filing of the order for service by publication, to enclose, direct, stamp, and mail a copy of the notice, together with a copy of the order for service by publication and complaint, if any, to the party named in the order at his or her last known address, if any, and make an entry of this action on the complaint or other pleadings filed in the case. The copy of the notice to be mailed to the nonresident shall be a duplicate of the one published in the newspaper but need not necessarily be a copy of the newspaper itself. When service by publication is ordered, personal service of a copy of the summons, complaint, and order of publication outside the state in lieu of publication shall be equivalent to serving notice by publication and to mailing when proved to the satisfaction of the judge or otherwise. The defendant shall have 30 days from the date of such personal service outside the state in which to file defensive pleadings.

[3]

OCGA § 9-13-142. Requirements For Official Organ Of Publication; How Official Organ Changed; Notice To Secretary Of State.
(a) No journal or newspaper published in this state shall be declared, made, or maintained as the official organ of any county for the publication of sheriff's sales, citations of probate court judges, or any other advertising commonly known in terms of "official or legal advertising" and required by law to be published in such county official newspaper unless the newspaper shall meet and maintain the following qualifications:
(1) "Newspaper" as used in this Code section means a printed product of multiple pages containing not greater than 75 percent advertising content in no more than one-half of its issues during the previous 12 months, excluding separate advertising supplements inserted into but separately identifiable from any regular issue or issues of the newspaper;
(2) The newspaper shall be published within the county and continuously at least weekly for a period of two years or is the direct successor of such a newspaper. Failure to publish for not more than two weeks in any calendar year shall not disqualify a newspaper otherwise qualified;
(3) For a period of two years prior to designation and thereafter, the newspaper shall have and maintain at least 75 percent paid circulation as established by an independent audit. Paid circulation shall not include newspapers that are distributed free or in connection with a service or promotion at no additional charge to the ultimate recipient. For circulation to be considered paid, the recipient of the newspaper or such recipient's employer or household must pay reasonable and adequate consideration for the newspaper. No rules of circulation of audit companies, the United States Postal Service, or accounting principles may be considered in determining paid circulation if they are inconsistent with the provisions of this subsection;
(4) Based on the published results of the 1990 United States decennial census or any future such census, the newspaper shall have and maintain at least the following paid circulation within the county for which it is designated as the legal organ newspaper:
(A) Five hundred copies per issue in counties having a population of less than 20,000;
(B) Seven hundred fifty copies per issue in counties having a population of at least 20,000 but less than 100,000; or
(C) One thousand five hundred copies per issue in counties having a population of 100,000 or greater; and
(5) For purposes of this Code section, paid circulation shall include home or mail delivery subscription sales, counter, vendor and newsrack sales, and sales to independent newspaper contract carriers for resale. Paid circulation shall not include multiple copies purchased by one entity unless the multiple copies are purchased for and distributed to the purchaser's officers, employees, or agents, or within the purchaser's household.
(b) However, in counties where no journal or newspaper meets the qualifications set forth in subsection (a) of this Code section, the official organ may be designated by the judge of the probate court, the sheriff, and the clerk of the superior court, a majority of these officers governing from among newspapers otherwise qualified to be a legal organ that meet the minimum circulation in the preceding subsection for the county, or if there is no such newspaper, then the newspaper having the greatest general paid circulation in the county.
(c) Any selection or change in the official organ of any county shall be made upon the concurrent action of the judge of the probate court, the sheriff, and the clerk of the superior court of the county or a majority of the officers. No change in the official legal organ shall be effective without the publication for four weeks of notice of the decision to make a change in the newspaper in which legal advertisements have previously been published. All changes in the official legal organ shall be made effective on January 1 unless a change has to be made where there is no other qualified newspaper.
(d) Notwithstanding the other provisions of this Code section, an official organ of any county meeting the qualifications under the statute in force at the time of its appointment and which was appointed prior to July 1, 1999, may remain the official organ of that county until a majority of the judge of the probate court, the sheriff, and the clerk of the superior court determine to appoint a new official organ for the county.
(e) During the month of December in each year, the judge of the probate court of each county shall notify the Secretary of State, on a form supplied by the Secretary of State, of the name and mailing address of the journal or newspaper currently serving as the official organ of the county. The judge of the probate court shall also likewise notify the Secretary of State of any change in the official organ of the county at the time that such change is made.
The Secretary of State shall maintain at all times a current listing of the names and addresses of all county organs and shall make such list available to any person upon request.


Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
twitter: USALawyer_
Phone: 404-633-4100
Fax: 404-633-0068

Coming Attractions: Predatory Leasing

Under the new federal protections for tenants, foreclosure will no longer be "final," in Georgia.

Foreclosures in Georgia used to eliminate second mortgages, all junior liens and all leases. A property after foreclosure had a title about as clean as a title could be without a subsequent quiet title action ("QTA").

Under the new Helping Families Save Their Homes Act, and [``Protecting Tenants at Foreclosure Act of 2009''], leases will survive a Georgia foreclosure. This is a significant change in Georgia foreclosure law and unlike most changes to this area of property law did not come from the Georgia General Assembly but from Washington, DC.

The imposition of a post in time lease will have a significant impact on lending under Georgia law. The purpose of the law is to protect the innocent tenant who legitimately and properly entered into a year lease on a house with a landlord, unaware that the landlord is close to foreclosure. In the early 1990s we used to see this type of abuse with "wrap around mortgages," which have since fallen into disfavor. While wrap-around foreclosure concerned ownership by the second mortgagor/owner, it had the same effect on possession. The foreclosure of the first mortgage wiped out the "owner in possession," many times without notice to the owner. [Georgia does not require Notice of Foreclosure be given to the second mortgage holder.]

Under this new law, Institutional lenders will now be forced to recognize existing leases after foreclosures in Georgia.

While this will accomplish the intent of Congress, to prevent tenants from improperly losing possession of their homes for no fault of their own, it will have significant consequences on lending in Georgia.

The institutional lender will no longer look at a foreclosure title in Georgia as a completely clean title. The foreclosure will continue to wipe out second mortgages, mechanics liens, junior liens but will now be viewed as an event that will not terminate residential leases. In all likelihood, this event will be factored into the pricing of obtaining a first mortgage in Georgia and other states.

The terms of the new law contain the following significant provisions:

1) The tenant must be given a 90-day notice to quit (this is different than current Georgia law in that the longest notice in Georgia is a 60-day notice to quit);

2) The tenant will be allowed to occupy the premises until the end of the stated term of the lease, with some exception);

3) The rent stated in the term of the lease remains the same and the lender may not arbitrarily raise the rent after the foreclosure;

4) If the tenant has a month-to-month lease, or the tenant is a holdover tenant, the 90-day notice is still required. In Georgia, a tenant at sufferance may be evicted summarily. While the provisions of this new law remain somewhat murky, it would appear that a tenant at sufferance may now take advantage of the new 90-day right of notice post-foreclosure. This is a very significant change under Georgia law.

There are some significant limitations stated in the law. They are, the rent stated in the pre-foreclosure lease must be a market based rent. That is, the rent cannot be an absurdly low figure of say $200.00 and have that lease survive foreclosure. The rent must be close to the acceptable market value for rents in the local area. The tenant in lease must be a "bona fide" tenant under the terms of the lease. That is, the owner may not rent the property to his spouse, child, parents or a close relative and then assert the lease post-foreclosure. The lease is contemplated to be an arms-length transaction for a fair market rent to survive post-foreclosure.

Notice how this market rent may be used to manipulate the ability of tenants to be evicted in a post-foreclosure setting. Assume that the debt due under the first and second mortgage pre-foreclosure is $3,500.00 a month. If an investor transferred the ownership (perhaps improperly) to a new investor both the first and the second mortgage would need to be serviced at $3,500.00 a month. If however, a bona fide lease is entered into at market rates for $1,500.00 a month for the same property, the lender will be stuck with that fair market lease at $1,500.00 per month post-foreclosure. That is, the institutional lender will be forced to accept $1,500.00 a month as opposed to the true institutional value of the home which is in the range of $3,500.00 a month. This is a significant change in the economic holding of post-foreclosure properties for institutional lenders.

The new law does contain an exit clause for the institutional lender. If the lender has a contract for sale, the lender can give the tenant 90-day notice and break the post-foreclosure lease and sell the property. In the world of realty, most REO purchasers are not going to wait idly by while they spend two or three months examining and qualifying for the property and then spend another three or four months while the institutional lender evicts the tenant. Thus, the reality of marginally valued residential homes is that the institutional lender will be "stuck" with the tenant until the lease expires.

There are a number of anomalies that seem not to be discussed in this new legislation. In Georgia, a lease for a term less than five years does pass an estate in land. Thus, it would appear that the lease could be written with a mandatory option clause which would allow the tenant to extend from year to year under the terms of the original lease. Thus, an institutional lender may be stuck with a tenant for as much as 4 years and 11 months under Georgia law. No doubt this provision will be litigated. However, I am unable to determine a restriction upon lease extensions by "bona fide" tenants who enter into these leases pre-foreclosure.

No doubt, this new bill will spawn an entire industry called "predatory leasing." In predatory leasing, a "bona fide" tenant will attempt to capture a residential property at the lowest range of acceptable market rental and ride that property post-foreclosure to the end of REO process. Thus, under predatory leasing a tenant will be able to acquire a very high dollar mortgage property for the low end of the residential rental spectrum. It will take two or three years for the industry to determine how this new law impacts both its bottom line and its lending practices. However, I am convinced upon reading this bill that the lending industry will be significantly manipulated by tenants in the near future.

Welcome to coming attractions: Predatory Leasing.

Hugh Wood

Atlanta, Georgia

& & &

TITLE VII-- PROTECTING TENANTS AT FORECLOSURE ACT
SEC. 701. 12 USC 5201 SHORT TITLE.

This title may be cited as the ``Protecting Tenants at Foreclosure
Act of 2009''.

SEC. 702. 12 USC 5220 EFFECT OF FORECLOSURE ON
PREEXISTING TENANCY.

(a) In General.--In the case of any foreclosure on a federally-
related mortgage loan or on any dwelling or residential real property

[[Page 123 STAT. 1661]]

after the date of enactment of this title, any immediate successor in
interest in such property pursuant to the foreclosure shall assume such
interest subject to--
(1) Notice. Deadline. the provision, by such
successor in interest of a notice to vacate to any bona fide
tenant at least 90 days before the effective date of such
notice; and
(2) the rights of any bona fide tenant, as of the date of
such notice of foreclosure--
(A) under any bona fide lease entered into before
the notice of foreclosure to occupy the premises until
the end of the remaining term of the lease, except that
a successor in interest may terminate a lease effective
on the date of sale of the unit to a purchaser who will
occupy the unit as a primary residence, subject to the
receipt by the tenant of the 90 day notice under
paragraph (1); or
(B) without a lease or with a lease terminable at
will under State law, subject to the receipt by the
tenant of the 90 day notice under subsection (1),
except that nothing under this section shall affect the
requirements for termination of any Federal- or State-subsidized
tenancy or of any State or local law that provides longer time
periods or other additional protections for tenants.

(b) Bona Fide Lease or Tenancy.--For purposes of this section, a
lease or tenancy shall be considered bona fide only if--
(1) the mortgagor or the child, spouse, or parent of the
mortgagor under the contract is not the tenant;
(2) the lease or tenancy was the result of an arms-length
transaction; and
(3) the lease or tenancy requires the receipt of rent that
is not substantially less than fair market rent for the property
or the unit's rent is reduced or subsidized due to a Federal,
State, or local subsidy.

(c) Definition.--For purposes of this section, the term ``federally-
related mortgage loan'' has the same meaning as in section 3 of the Real
Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).

SEC. 703. EFFECT OF FORECLOSURE ON SECTION 8 TENANCIES.

Section 8(o)(7) of the United States Housing Act of 1937 (42 U.S.C.
1437f(o)(7)) is amended--
(1) by inserting before the semicolon in subparagraph (C)
the following: ``and in the case of an owner who is an immediate
successor in interest pursuant to foreclosure during the term of
the lease vacating the property prior to sale shall not
constitute other good cause, except that the owner may terminate
the tenancy effective on the date of transfer of the unit to the
owner if the owner--
``(i) will occupy the unit as a primary
residence; and
``(ii) <> has
provided the tenant a notice to vacate at least 90
days before the effective date of such notice.'';
and
(2) by inserting at the end of subparagraph (F) the
following: ``In the case of any foreclosure on any federally-
related mortgage loan (as that term is defined in section 3 of
the Real Estate Settlement Procedures Act of 1974 (12 U.S.C.
2602)) or on any residential real property in which a recipient
of

[[Page 123 STAT. 1662]]

assistance under this subsection resides, the immediate
successor in interest in such property pursuant to the
foreclosure shall assume such interest subject to the lease
between the prior owner and the tenant and to the housing
assistance payments contract between the prior owner and the
public housing agency for the occupied unit, except that this
provision and the provisions related to foreclosure in
subparagraph (C) shall not shall not affect any State or local
law that provides longer time periods or other additional
protections for tenants.''.
SEC. 704. 12 USC 5201 note. 12 USC 5220 note. 42 USC 1437f
SUNSET.
This title, and any amendments made by this title are repealed,

and the requirements under this title shall terminate, on December 31, 2012.

Hugh Wood, Esq.

Wood & Meredith, LLP

3756 LaVista Road

Suite 250

Atlanta (Tucker), GA 30084

www.woodandmeredith.com

hwood@woodandmeredith.com

Phone: 404-633-4100

Fax: 404-633-0068