What are the rights of a tenant after foreclosure? -- (Posted by several readers on the Forum Chat Room.)
 
I found an excellent discussion of this issue at the MassLegalHelp.Org website:  http://www.masslegalhelp.org/housing/landlord-tenant-relationship-after-foreclosure There is some debate about whether a tenancy at will is terminated by a foreclosure (a lease is not). However, the author of this article argues (correctly, I believe) that a tenant should not leave his or her unit unless ordered to do so by a judge. In other words, whether you have a lease or are merely a tenant at will, the bank cannot force you to move unless a judge issues an eviction order. Note, however, that if you are a tenant at will, the bank or other new owner can still evict you through the ordinary eviction process (thirty day notice to quit, or fourteen day notice to quit for non-payment of rent). Also, if asked to leave, you may decide you want to go. According to an article in the Boston Globe, some banks and new owners sweeten their request to vacate with cash, offering tenants $500 to $1,500 to pack and go.
 
On a related issue, the prior owner of a building is responsible for returning all security deposits after a foreclosure. If the landlord failed to keep the deposits in a separate account that is protected from his creditors (as required by MA law), the money may be long gone. Massachusetts law allows you to sue for treble damages (three times the deposit), but if the landlord files bankruptcy, it may be difficult to collect even with the assistance of an attorney familiar with bankruptcy law.
 
UPDATE:
Under a new Federal law known as the "Protecting Tenants at Foreclosure Act of 2009" Leases should now survive a foreclosure, allowing the tenant to remain in the unit until the end of the lease.  There is one exception to this new rule: If the property is sold to a person who intends to live in the unit, then the new owner may terminate a lease with 90 days’ notice.
 
Those with month to month or tenancy at will agreements are also protected and are now entitled 90 day's notice from the new owner before moving out.  Of course even after the notice period expires, no tenant must move until the new owner obtains a court order entitling him to possession of the premises.