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Foreclosure Lockout and Legal Rights Remedies in California

Foreclosure Lockout and Legal Rights Remedies in California thumbnail
Even after foreclosed houses are sold at auction, new owners can't simply change the locks.

California is a title-theory state, meaning that the lender — such as a bank — holds title to a property until the borrower’s loan obligation is fulfilled. When you buy a home in California, the deed of trust transfers from the previous homeowner to the bank. It’s ownership of the deed of trust that allows a lender to foreclose in the event that the borrower defaults on payments. However, both homeowners and tenants have rights even after foreclosure, and California is considered one the nation’s most consumer-friendly states in the country regarding foreclosures and related matters such as lockouts.

  1. California Foreclosure Process

    • California provides for both judicial and non-judicial foreclosures, although the vast majority of foreclosures are via the non-judicial method — no court action is involved. Judicial foreclosures occur only if the lender seeks a deficiency judgment, providing the borrower up to a year to redeem the property after a foreclosure sale. In California, in order to proceed with a foreclosure, a lender must contact the borrower and explore foreclosure options. A foreclosure proceeding cannot begin until 30 days after that initial contact. A borrower can request a second foreclosure-option meeting with the lender within 14 days of the first meeting. A notice of default must be served on the borrower and the lender then must wait at least three months to serve a notice of sale. At least 20 days must elapse before the home can be sold.

    California Eviction Process

    • Because most foreclosure cases in California are non-judicial proceedings, the eviction process is a separate process which must go through the courts. After a home is sold at auction, the homeowner — now technically a tenant — must be served a 90-day notice to quit or an eviction notice. The time period was upped from 30 days to 60 days in 2008 through Senate Bill 1137, then increased to 90 days in 2009 through the “Protecting Tenants at Foreclosure Act.'' Upon expiration of the notice to quit, the new owner may file an unlawful detainer suit to remove the occupant.

    Lockout Options

    • The simplest potential remedy at this point is asking for an extension. If the purchaser has no immediate plans for occupancy, and if you’ve taken good care of the house, this may be feasible. The new owner may even prefer having someone living in the home — cutting the lawn or perhaps painting and doing other maintenance — while he tries to sell it. A new owner cannot simply change the locks on your home and lock you out. Procedural steps must be taken. Once an unlawful detainer suit is filed, the debtor may choose to ignore the notice, in which case a default judgment will be ordered within 10 days and forwarded to the sheriff for eviction. The occupant also may respond and a trial is set within 20 days. Other delaying motions and actions — such as bankruptcy filings — may be employed, usually with the aid of an attorney, which can push a lockout back by a few months.

    Cash-for-Keys Agreements

    • A common way to avoid a foreclosure lockout is to reach a “cash-for-keys” agreement. Owners provide money — usually thousands of dollars — and other incentives in exchange for the occupant to vacate the premises in an agreed-upon period of time. Lengthy eviction proceedings are avoided and the occupant has money to help him find other accommodations. Differing arrangements can be negotiated, including such items as moving expenses, first and last month’s rent and security deposits for new dwellings, utility deposits and other considerations.

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