Foreclosure of the Property

Once a property is foreclosed upon and a new owner has been awarded possession, the new owners have not traditionally been required to honor the leases signed by the old owner or to allow the tenants to sign new leases.  The new owner could go to court to force the tenants to leave. In the face of the national housing crisis, however, new laws were passed at the federal and state level effective May 20, 2009 to increase the protections for tenants in foreclosed properties.
Md. Real Prop. § 7-105.6

Under the federal Protecting Tenants at Foreclosure Act of 2009, bona fide tenants occupying a foreclosed residential property have the right to continue renting the property until the end of their lease term. If the foreclosed property has not been purchased by an owner-occupier, the new owner takes possession of the property subject to the tenancies on the property. That means that for a bona fide tenant who has a year–to-year lease, the new owner must allow the tenant to continue renting the property unless an owner-occupier purchases the property.  If an owner-occupier purchases, that person may provide the bona fide tenant a 90-day notice to terminate the tenancy. Tenants must submit rent payments to the new owner. For bona fide tenants who have at-will or month-to-month leases, the new property owner must give the tenant 90 days notice before the tenant has to leave. 

According to the act, a 'bona fide tenant' 1) is not the child, parent, or spouse of the original owner; 2) acted independently and without duress to become a tenant (the legal term for this is an "arms-length transaction"); and 3) pays rent that is not much less than the going market rate or pays rent that is subsidized by a federal, state, or local program like section 8.

For section 8 tenants, application of the new federal law is similar.  The foreclosure sale purchaser takes the property subject to the lease of a bona fide tenant and assumes any obligations of the old landlord under the Housing Assistance Payments contract. The purchaser may not terminate the lease or HAP contract of a bona fide tenant prematurely unless the purchaser is an owner-occupier, in which case the purchaser may give the tenant a 90-day notice to vacate.

If the tenant is not bona fide under federal law, Maryland courts have held that where the tenancy began after the mortgage was recorded, the tenant has no right of possession against the purchaser at the foreclosure sale.  If the lease pre-dates the mortgage, a foreclosure sale generally will not end the lease. To evict a tenant in possession, the purchaser must motion for the Court to enter a judgment awarding possession of the property. After judgment awarding possession has been entered, the purchaser may request the Court to issue a Writ of Possession.  If the purchaser accepts rent from the tenant, however, a tenancy is established.  The tenant is now entitled to proper notice to vacate.
Md. Rule 14-102

In an emergency law introduced as House Bill 776, the General Assembly introduced new notice requirements on purchasers of foreclosed properties. Under the law, purchasers must give notice to the tenants at least three times before attempting to evict. The letters must be in at least 12 point type, addressed to "all occupants" and sent by first-class mail. Notice must be sent when the foreclosure action has been filed, no earlier than 30 days and no later than 10 days prior to sale, and after judgment awarding possession.

The Maryland Code provides that the purchaser at a mortgage foreclosure sale has the same rights and remedies against the tenants of the mortgagor (tenants' original landlord) as the mortgagor had, and the tenants have the same rights and remedies against the purchaser as they had against their original landlord on the day the mortgage was recorded, except as modified for bona fide tenants under the new federal law.  
Md. Real Prop. § 7-105.6