February 13, 2009
IMMEDIATE ACTION NEEDED - SENATE BILL 225
February 13, 2009
IMMEDIATE ACTION NEEDED - SENATE BILL 225
Senate Bill No. 225 passed in the Senate by a 48-2 vote and is headed for the House.
The Legislative Services Agency describes the bill as follows: “Foreclosure and tenants. Requires the owner of commercial or residential real property containing a rental unit to notify the tenants if a judgment of foreclosure is entered concerning the property, and permits a tenant to terminate a rental agreement if a judgment of foreclosure is entered against the owner. Authorizes a tenant to bring a civil action if the owner does not comply with the notice provisions, and provides that a tenant who terminates a rental agreement early in compliance with the statute does not forfeit the damage deposit due to the early termination, but may still be liable for actual damages. Specifies that the notice provisions do not apply to: (1) commercial leases of more than three years; (2) commercial leases in which the tenant has been named as a defendant in the foreclosure action; and (3) real property where a receiver has been appointed.”
More details on the bill are available from the Legislative Services Agency at the following link: http://www.in.gov/apps/lsa/session/billwatch/billinfo?year=2009&session=1&request=getBill&docno=225
It is unclear whether the exclusion for leases over three years is intended to cover leases with original terms of more than three years or remaining term of more than three years.
The Bill provides that this right to terminate upon foreclosure is non-waivable and any attempt to waive it is unenforceable. Therefore, industry-standard subordination-non-disturbance and attornment agreements would be rendered unenforceable. This legislation would seem to seriously undermine the credit value of tenant leases for all residential leased properties and without some further cleanup would also substantially impair the credit value of commercial leases as collateral.
The Bankers Association, the Indiana Association of Realtors, MIBOR and other groups are mobilizing against this bill as currently crafted and the ICBR legislative committee would like your assistance in communicating our concerns to your legislators. If you need assistance in locating and contacting your legislator, please visit http://www.in.gov/legislative/legislators/.
Thank you for your assistance.
Stan Evans
ICBR Legislative Committee Chair
sevans@paragoncompanies.com
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