Massachusetts Enacts Protections for Tenants in Foreclosed Buildings

With more than 7,000 homeowners there foreclosed so far this year, Massachusetts has enacted a law to protect renters in those buildings from being evicted.

The “Act to Stabilize Neighborhoods” was passed unanimously by both houses of the state legislature just before the session ended in July. Gov. Deval Patrick signed it on Aug. 7, and it goes into effect Nov. 7.

The law will prohibit a bank from evicting rent-paying tenants without “just cause” when it acquires property through foreclosure,  unless it has already signed a binding agreement to sell the building to a legitimate third party. It also requires the owner to post detailed contact information in the building, and imposes a $5,000 fine for illegal evictions.

A second provision requires banks to give homeowners facing foreclosure a reasonable offer to modify their mortgage loan. If they don’t, they will not be able to foreclose on the house for another 60 to 150 days. Supporters say this will give banks an incentive to negotiate in good faith.

The measure is important to renters, as many foreclosed properties in Massachusetts are “three-deckers”—three-story, three-family apartment buildings. Banks have often insisted on evicting tenants in those buildings even when they are willing and able to continue paying rent.

The act is believed to be the first “just cause” law in the country pertaining specifically to tenants in foreclosed properties, according to the Harvard Legal Aid Bureau. Students in the bureau, a project of Harvard Law School, wrote the original version of the law and have been working with local housing activists such as City Life/Vida Urbana.

“It provides rights to tenants that no law in Massachusetts has for years,” law professor David Grossman, the bureau’s director, said in a statement.