We are looking into buying a bank owned property which has tenants on lease until November
2011. Once property is owned can we give the tenants notice or do we have to honor the lease and give them notice that they will have to leave once leaSE ENDS. PROPERTY HAS BEEN ON THE MARKET FOR 1.5 YEARS no buyers could there be a scam?

It is very weird that a bank owned property would have renters. Banks are not landlords and don't want to be landlords. If you are looking at bank owned or short sale properties get a real estate attorney to protect you BEFORE signing or paying for inspections or anything! On any bank owned or short sale property you need to protect yourself.

Yes you will have to honor the lease. Under recent legislation as part of the foreclosure crises, valid leases need to be honored with a foreclosure. And the law always was that a valid lease needs to be honored when property is purchased. So you would have to wait until the lease expires to force them to vacate. You could, of course, offer them incentives to move out earlier. Like paying moving expenses, etc.

Scott got any links where leases have to be honored though a foreclosure, I have not heard of any changes.

Also since most leases are a year, it is strange that a bank owned property would have someone still on a lease after a year and half.

But why the "scam" are you dealing with a licensed real estate broker ? Are you dealing with a bank ? Have you looked up the property at the property tax office ( often online) to see who the listed owner of the property is ?

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Originally Posted by Fr_Chuck

Scott got any links where leases have to be honored though a foreclosure, I have not heard of any changes.

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It was part of the Foreclosure act that Obama signed in May 2009. I have a link to it in the sticky on Foreclosures. But this site explains:
Renters in Foreclosure: What Are Their Rights? - Free Legal Information - Nolo

On the issue of the length of the lease, the OP said the property has been on the market for a year and a half, not that it was foreclosed that long ago. So the previous owner may have put in on the market, had trouble selling, took on a renter, then lost it to foreclosure only recently.

Foreclosures and short sales can be handled poorly many times, and it can border on scamming, but is usually just everyone dragging their feet, since they are taking a loss anyway, and other reasons. It is rare for the sale to finalize in a normal time span and they can fall through completely after long waits. Try to find out what happened when if you are suspicious.

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Originally Posted by ScottGem

... So you would have to wait until the lease expires to force them to vacate. ...

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Yes, as I read the PTFA, if the lease was entered into before the notice of foreclosure, the OP would have to wait until the expiration of the lease.