Welcome to the Kazi Law Firm! We are a boutique law firm steeped in Texas tradition personifying the warmth and congeniality consistent with southern hospitality. We believe in preserving integrity and professionalism with true Texan charm, staying true to our roots, while providing essential, affordable legal services to all. Located just north of Dallas, Texas in the rapidly growing suburb of Frisco; the Kazi Law Firm concentrates on contracts drafting and review, immigration law, will & estates, real estate law, landlord, tenant, mediation, and general business law needs.
The firm has been inundated with phone calls inquiring about renters’ rights during foreclosure proceedings. The most common scenario is where a tenant finds out the home they are currently renting is pending foreclosure and the landlord is nowhere to be found. Often times, landlords vanish into thin air without giving their tenants the next steps in the process. Tenants contact the firm, nervous and petrified as to what happens to their lease agreement and what this upheaval means for their family. I think now, more than ever, people are looking for consistency and stability in their lives.
Let’s start the discussion by examining what a foreclosure proceeding is and who becomes the new landlord in such a situation. When an owner defaults on a mortgage, the mortgage holder, often a bank, either becomes the new owner or sells the property at a public sale. If the bank becomes the owner, it may pay a servicing company to handle the property. However, keep in mind, these companies are focused on financial matters and not the mundane aspects of property ownership like maintenance.
Some renters find themselves with a new owner even before the foreclosure. We have seen an increase in new rental property owners that are actually investment trusts that specialize in purchasing troubled loans directly from banks, then foreclosing, evicting, and selling. As you can infer, this scenario does not bode well for tenants.

The silver lining in this situation comes from the “Protecting Tenants at Foreclosure Act of 2009.” This piece of legislation provides that leases survive a foreclosure and tenants no longer lose their lease agreements. The fundamental purpose of the Protecting Tenants at Foreclosure Act is to ensure that tenants facing eviction from a foreclosed property have adequate time to find alternative housing. To that end, the law establishes a minimum time period that a tenant can remain in a foreclosed property before eviction. The tenant could stay at least until the end of the lease, and month-to-month tenants would be entitled to 90 days’ notice before having to move out.
An exception was carved out for the buyer who intends to live on the property as this buyer may terminate a lease with 90 days’ notice. More importantly, the law provides that any state legislation that is more generous to tenants will not be preempted by federal law. These protections apply to Section 8 tenants, too.
The federal law came to an end on December 31, 2014, but was restored on June 23, 2018, as part of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Also, many states and municipalities continue to provide the same protection. As a result, if you are buying a home that you intend to use as a rental, if it was foreclosed on after May 19, 2009, and it comes with a lease-holding tenant, it’s likely that you’ll have to honor the lease.
Local laws may come into play, too. Tenants who live in cities with “just cause” eviction protection are also protected from terminations at the hands of an acquiring bank or new owner. These tenants can rely on their ordinance’s list of allowable, or “just causes,” for termination. Because a change of ownership, without more, does not justify a termination, the fact that the change occurred through foreclosure will not justify a termination.
Now consider the situation where a lease-holding tenant has to move out so that new owners may move in. Such a tenant might consider suing their former landlord in small claims court. After signing a lease, the landlord is legally bound to deliver the rental for the entire lease term. In legalese, this duty is known as the “covenant of quiet enjoyment.” A landlord who defaults on a mortgage, which sets in motion the loss of the lease, violates this covenant, and the tenant can sue for the damages it causes.
Small claims court is a perfect place to bring such a lawsuit. The tenant can sue the original landlord for moving and apartment-searching costs, application fees, and the difference, if any, between the new rent for a comparable rental and the rent under the old lease. Though the former owner is probably not flush with money, the awards in these cases won’t be very much, and the court judgment and award will stay on the books for many years. A persistent tenant can probably collect what’s owed eventually if they are patient and determined.
If you are a tenant in a similar situation where you’ve been notified of a looming foreclosure on your rental property, contact us to help guide you through this tumultuous and confusing time. The last thing you need is to find yourself in an urgent and dire predicament searching for new living accommodations.
I built my law practice on the premise of being a life raft in a sea of sharks. I want to be an advocate for those that have been wronged and are too intimidated to seek help. My firm is here to explore your options, guide you through your legal journey, and give you that safe space to ask questions! There’s no such thing as a stupid question… Only the ones you don’t ask. So, my question to my clients is not “do you have any questions?” But rather “what questions do you have?”
As always, the Kazi Law Firm is standing by to help you in your time of need. Don’t hesitate to contact us today. We specialize in real estate law, landlord-tenant disputes, immigration, and wills & estate planning. Family is at the core of our practice. Just as we treat our family with respect, we treat yours. Come join the Kazi Law Firm family today!
Why swim alone in shark infested waters when you don’t have/need to?