Court Denies Wells Fargo’s Attempt to Invalidate Lease

Court Denies Wells Fargo’s Attempt to Invalidate Lease

National lender Wells Fargo, N.A.’s (Wells Fargo) attempt to invalidate a residential lease following the foreclosure of a mortgage covering a Highland property was denied by the Fourth District Court in American Fork, Utah pursuant to the Protecting Tenants in Foreclosure Act of 2009.   In 2008, the landlord of the subject property defaulted on his mortgage precipitating foreclosure by Wells Fargo.  Wells Fargo immediately commenced eviction proceedings against the tenant occupying the home, who had approximately 6 years remaining on a 7-year residential lease.  With modern-day David versus Goliath certitude, the tenant refused to vacate the property citing his right to occupy the property during the remaining term of the lease pursuant to  The Protecting Tenants at Foreclosure Act of 2009 (“PTFA”), codified as 12 U.S.C. § 5220.  Through his attorney Russell B. Weekes with Weekes Law, PLLC, the Tenant initially prevailed on a motion to dismiss because Wells Fargo ignored the requirements of the PTFA when bringing its eviction action against the Tenant.  Wells Fargo immediately brought a second eviction action against the Tenant.

Wells Fargo’s second action ultimately when to trial where Wells Fargo argued that the PTFA shouldn’t handcuff lenders into long-term leases and the the Tenant’s lease couldn’t be an arms-length lease under the definition of the PTFA because the lease term was too long.  Experts on both sides agreed that they had never personally seen a 7-year residential lease.  Wells Fargo further argued that because the lease payment was reduced by a substantial prepayment of rent, that the lease was not a bona fide lease under the PTFA because the lease required substantially less than fair market rent to be paid for the remainder of the lease.  The Tenant argued that the lease the lease term does not invalidate a lease, the lease did not require substantially less than market rent, and the lease met all the requirements to be bona fide under the PTFA.

The court ultimately found in favor of the Tenant holding that the prepayment of rent was not unreasonable and that the rental rate required under the lease was not substantially less than fair market rent for the property.

“This is a great victory for tenants who are innocent victims of the foreclosure crisis.  Too many tenants have been forced to leave their homes simply because their landlords were unable to pay their mortgages,” said Mr. Weekes following the victory.  “Too many real estate agents and tenants are unaware of their federally protected right to remain in the property following foreclosure.  Hopefully this victory will help educate lenders, real estate agents and tenants that law was specifically enacted to protect tenants in this situation,” Mr. Weekes continued.

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