Texas Tenant Rights During Foreclosure or Sale of Rental Property

Under Texas law, if a landlord sells or transfers a rental property to a new owner, the new owner must honor all leases made with the previous owner. Since the leases were executed before the sale or transfer, the new owner assumes the property subject to the rights of all bona fide tenants.

This general rule also applies in situations where the new ownership is the result of a foreclosure. However, there are certain exceptions which allow new owners to terminate existing leases before their expiration date. These exceptions are set forth in the federal Protecting Tenant’s at Foreclosure Act of 2009.

Exception 1

If a tenant is in possession of the premises without a lease or with a lease which is“terminable at will”, the new owner may give the occupant 90 days notice to vacate.

Exception 2

If the new owner intends to use the property as their primary residence, the new owner may give the occupant 90 days notice to vacate.

If neither of these exceptions apply,then the new owner must honor all prior leases until the end of their term. In addition, tenants claiming protection under this federal law must not be in default.

The Protecting Tenants at Foreclosure Act has done much to protect the rights of tenants during foreclosure. Prior to passage the law, new owners did not have to honor existing leases. They were only required to give tenants 30 days notice to vacate. Now, new owners must honor existing leases unless one of the two exceptions apply. Furthermore, if an exception applies, the new owner must now give 90 days to vacate.