For a time, the Protecting Tenants in Foreclosure Act of 2009 (“the Act”) provided some protection for tenants against foreclosures on a landlord’s property. The law gave tenants in foreclosed properties protections against successors in interest of the property. The law was set to expire in 2012, but Congress extended the provisions to December 31, 2014. Efforts to re-extend the law failed, and it is now expired. This is bad news for tenants of residential real estate whose landlords face foreclosure, as now state law applies in absence of federal protections.

The protections afforded tenants under the Act were the ability to stay in a rented property until the end of the lease, unless either (a) the lease was terminable at will or there was no lease, or (B) the property was sold after the foreclosure to another purchaser who intended to use the dwelling as a primary residence. Even in this case where the property was sold, the tenant then had a full ninety days to vacate the premises. As these federal protections have expired, state law now governs.

Kentucky does not have a law analogous to the Act. In fact, Kentucky statutory law doesn’t speak to how foreclosure affects tenants at all. State common law, however, terminates a lease concurrently with a foreclosure if the mortgage was recorded prior to the lease. As the court stated in the 2014 case of McEwan v. EiA Properties, LLC, “Stated simply, the lessee’s right of possession is derived from and limited by the mortgagor/lessor’s right of possession.” In other words, because Kentucky is a race-notice jurisdiction, a mortgage duly recorded in the public record would serve as requisite notice to any tenant that the lease and the rights created thereunder are subject to the rights of the mortgagee and may thusly be foreclosed. If a mortgage were recorded after the date a lease was executed or recorded, however, circumstances might be different – the purchaser would become the new landlord, subject to the terms of the lease.