California Foreclosure & Eviction Rights
When it comes to the foreclosure of rental properties in California, there's good news and bad news. The good news is that many California communities provide tenants with some of the strongest tenant protections in the country. The bad news is that even with these rules, many hardworking, stable, rent-paying California tenants lose their home to foreclosure.
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Foreclosures in California
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California state law allows lenders to choose between a judicial and nonjudicial foreclosure process. Most lenders choose the nonjudicial process because it is quicker and less costly. The nonjudicial process is composed of a series of notices written, mailed, recorded, posted and published by the foreclosing lender and/or mortgage trustee. It begins with the lender recording a notice of default with the county recorder and ends with a foreclosure auction, at which the property is sold. The property often transfers to the lender because the outstanding loan balance exceeds the property's value, making it an unattractive prospect for potential bidders. Although the process could be accomplished in about four months, according to RealtyTrac, the actual timeframe for a foreclosure in California averaged more than 500 days at the start of 2011.
Required Foreclosure Notices to Tenants
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If the tenant has recorded a copy of his lease with the county recorder, he will be sent a copy of the notice of default. California requires the foreclosing party to post the property and mail the tenants a copy of the notice regarding the foreclosure sale at least 20 days before the sale. This notice is only triggered when the billing address for the borrower is different from the property's address.
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Protecting Tenants at Foreclosure
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The "Protecting Tenants at Foreclosure Act" was passed by Congress in 2009 to address two of the issues surrounding the problem of tenant evictions on the heels of foreclosure. A legal precept, referred to as "first in time, first in right," resulted in the elimination of leases signed after a mortgage when foreclosure occurred. The Act changed this rule and mandates foreclosing lender and buyers to honor existing leases. The Act also requires the foreclosing lender or buyer to afford tenants a 90-day notice before terminating tenancies not protected by an unexpired term lease. In some parts of California, this law is the strongest protection tenants are afforded.
Local Eviction Laws
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About a dozen cities in California, including Los Angeles, San Francisco, Oakland and Berkeley, are subject to rent control; another two dozen have rent controls for mobile home parks. Rent control ordinances contain a prohibition against eviction without just cause, such as nonpayment of rent or some other lease violation. Another several cities have just cause eviction ordinances. In all these places, tenants are protected from eviction after a foreclosure so long as they continue paying rent and abiding by their lease requirements.
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References
- RealtyTrac; Foreclosure Laws and Procedures by State
- RealtyTrac; California Foreclosure Laws
- LPS Mortgage Monitor; February 2011 Mortgage Performance Observations
- National Housing Law Project; State and Local Tenant Protections; November 2010
- The Federal Reserve: Protecting Tenants at Foreclosure
- Nolo; Renters in Foreclosure: What Are Their Rights?; Janet Portman
Resources
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