BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
SB 1149 (Corbett)
As Introduced
Hearing Date: March 23, 2010
Fiscal: No
Urgency: No
SK:jd
SUBJECT
Residential Tenancies: Foreclosure
DESCRIPTION
This bill would require a form cover sheet to be attached to any
eviction notice provided to tenants whenever that notice is
served within one year after a foreclosure sale. Under the
bill, the cover sheet would contain information regarding the
tenant's rights and responsibilities. This bill would also
provide that the court records in an eviction action in a
foreclosure situation may not be released unless, after 60 days
have elapsed, judgment is entered for the plaintiff landlord
after a trial.
BACKGROUND
California leads the nation with one of the highest rates of
foreclosure. More than 1.2 million Californians have received a
notice of default from their lender over the past three years,
and more than 500,000 California homes have been the subject of
a foreclosure. Tenants living in those homes have
overwhelmingly been impacted. A New York Times November 18,
2007 article, "As Owners Feel Mortgage Pain, So Do Renters,"
noted "[i]n the foreclosure crisis of 2007, thousands of
American families are losing their homes without ever missing a
payment. They are renters in houses whose owners default on
their mortgages - a large but little noticed class of
casualties." A March 2009 study by Tenants Together entitled
"Hidden Impact: California Renters in the Foreclosure Crisis,"
found that approximately one third of residential units in
foreclosure in 2008 were rentals. The study estimated that
(more)
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250,000 California renters lived in homes that went into
foreclosure in 2008. Tenants Together further estimated that
these numbers, based on data from Foreclosure Radar and drawn
from county parcel tax records, likely undercount the number of
foreclosed homes that are in fact rentals.
The impact of foreclosure on tenants has not gone unnoticed by
policymakers, and recent state and federal laws have been
enacted to provide tenants with additional time to move when the
home in which they are living is the subject of a foreclosure.
In 2008, the Legislature passed and the Governor signed SB 1137
(Perata, Corbett, Machado, Ch. 69, Stats. of 2008) which
requires that tenants receive 60-days notice before they may be
evicted after the rental unit in which they are living is
foreclosed upon. And, on May 20, 2009, President Obama signed
S. 896, Public Law 111-22, which included the "Protecting
Tenants at Foreclosure Act of 2009" (Act). That Act generally
requires a successor in interest in a property subject to
foreclosure to provide tenants with a 90-day notice to vacate
and, with limited exceptions, to honor the tenant's lease until
the end of the lease term.
This bill seeks to ensure that tenants who are living in
foreclosed homes be given sufficient notice of their rights and
responsibilities under these state and federal laws by requiring
a form cover sheet be attached to any eviction notice served
within one year of a foreclosure sale. The bill also seeks to
help protect innocent tenants who would otherwise have a
negative mark on their rental history by revising existing law
regarding the "masking" of eviction records in foreclosure
situations.
CHANGES TO EXISTING LAW
1.Existing state law provides that tenants living in a rental
unit at the time the property is sold in foreclosure must be
given 60-days notice before they may be evicted. This
provision, which does not apply if any party to the mortgage
note remains in the property as a tenant, subtenant, or
occupant, sunsets on January 1, 2013. (Code of Civ. Proc.
Sec. 1161b.)
Existing federal law requires a successor in interest in a
property subject to foreclosure to provide any tenants in the
property with a 90-day notice to vacate. The successor in
interest must also honor the tenant's lease until the end of
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the lease term unless the property is sold to a purchaser who
intends to occupy the home as his or her primary residence.
In that case, the tenant must be provided with a 90-day notice
to vacate (unless a longer period is required by state or
local law). In addition, tenants of foreclosed properties
must be provided with 90-days notice to vacate if there is no
lease or the lease is terminable at will. These provisions of
federal law sunset on December 31, 2012. ("Protecting Tenants
at Foreclosure Act of 2009," Public Law 111-22.)
This bill would require a form cover sheet to be attached to any
eviction notice provided to tenants whenever the notice is
served within one year after a foreclosure sale. The form
cover sheet would be titled "Notice to Any Renters Living At
[street address of the unit]" and must be in at least 12-point
type. Among other things, the sheet would state that the
tenants should respond to any court papers, even if they are
not named in them.
This bill would require the cover sheet to state that tenants
generally have the right to stay in the rental unit for 90
days and may have the right to stay longer if they have a
lease. The cover sheet would also provide information
regarding legal assistance.
This bill would specify that failing to attach the form cover
sheet subjects the owner to a $500 civil fine in addition to
any other fines, penalties, and remedies provided by law.
This bill would provide that the cover sheet does not need to be
attached to the eviction notice if all of the following apply:
(1) the tenancy sought to be terminated was created after the
foreclosure sale, by written agreement of the parties; (2) the
written agreement is attached to the notice; and (3) either:
(a) the notice is served for a cause specified in Civil Code
Section 1161 (for example, nonpayment of rent) or (b) the
notice is served pursuant to Civil Code Section 1946.1
(requiring 60-days notice if the tenant and residents have
lived in the unit for more than one year) and at least 60 days
have elapsed after the foreclosure sale before notice is
given.
2.Existing law provides that the court records in an eviction
action may be made available only to the following:
a. a party to the action, including the party's attorney;
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b. any person who provides the clerk with the names of at
least one plaintiff and one defendant and the address of
the premises;
c. a resident of the premises who provides the clerk with
the name of one of the parties or the case number and who
shows proof of residency;
d. any person by order of the court on a showing of good
cause; or
e. any other person 60 days after the filing of a complaint
unless the defendant tenant prevails in the action within
the 60 days. If the defendant prevails, the court records
may not be made available except to a person specified in
(a)-(d). (Civ. Code Sec. 1161.2(a).)
This bill would provide that the court records in an eviction
action based on a foreclosure may not be released unless,
after 60 days have elapsed, judgment is entered for the
plaintiff landlord after a trial. If judgment is not entered
for the plaintiff, the clerk may not allow access to any court
records in the eviction action, except as provided in (a)-(d),
above.
COMMENT
1. Stated need for the bill
The author writes:
California has recently enacted important tenant protections
which seek to give tenants additional time to search for a new
home and move when the unit in which they are living is
foreclosed upon. President Obama likewise recognized the
importance of additional time and signed the Protecting
Tenants at Foreclosure Act of 2009, requiring that tenants be
given 90-days notice and that fixed-term leases be honored.
Despite the establishment of these important protections, many
innocent tenants have received notices to vacate that are
unclear and contain different timeframes in which the tenant
must vacate the property. For example, some notices state
that the tenants must leave in three, 30, 60, or 90 days.
These multiple and conflicting timeframes - combined with
complex legalese - are confusing to tenants. In addition,
some tenants have received a three-day notice to quit that is
addressed to the homeowner, but not to the tenant. Innocent
tenants do not realize that they must take certain steps to
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protect their rights. In other cases, innocent tenants are
unaware of their rights under federal law and take the
three-day notice to quit at face value and assume that they
must leave within three days. SB 1149 will help to protect
tenants and ensure that they receive the full benefits of the
important protections that have been enacted over the last few
years.
Sponsors Western Center on Law and Poverty (WCLP) and the
California Reinvestment Coalition (CRC) write "Many tenants know
their rights, but are afraid to assert them. Merely standing up
for one's rights in court can put a negative mark on their
rental history for 7 years. Tenant and credit reporting
agencies scour court filings as they become available to record
any tenants involved in an eviction action, whether or not the
suit was justified. Most tenants decide to surrender their
rights rather than being denied future housing because of a bad
credit report." WCLP and CRC further state:
Under current law, eviction actions are "masked" (i.e., not
generally available to non-parties other than the media) for
60 days. After that they are unmasked, unless the tenant has
"prevailed" in the case. . . . In foreclosures, the equation
is turned upside down. The problem in the foreclosure context
is that because of factors beyond the innocent tenant's
control - the bank delays in taking the case to trial, or the
bank drops its lawsuit after the issue of inadequate notice is
raised - the tenant never "prevails" and the case is unmasked,
even though the tenant is innocent. SB 1149 addresses this
very special situation by reversing the presumption: the bank
must prevail (i.e. show that it gave the correct notice) for a
case to be reported.
2. Form cover sheet to be attached to eviction notices served
within one year of foreclosure sale
In order to provide tenants with accurate information regarding
their tenancies when the property in which they are living has
been sold due to foreclosure, this bill would require a form
cover sheet to be attached to any eviction notice provided to
tenants whenever the notice is served within one year after a
foreclosure sale. That sheet would let tenants know that they
generally have the right to stay in the rental unit for 90 days,
they may have the right to stay longer if they have a lease, and
in some cases and in some cities with a "just cause for eviction
law" they may not have to move at all. The cover sheet clearly
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tells tenants that they must take proper legal steps to protect
their rights. In addition, the sheet makes clear that tenants
must respond to any court papers, even if they do not contain
the tenant's name. These provisions are meant to address the
concern that innocent tenants do not realize that they must act
to protect their rights, even if the eviction notice and other
legal papers are addressed only to the homeowner/landlord and
not to the tenant. Because many of these situations are likely
to implicate important tenant protections that affect the
tenant's living situation and also involve the court process,
the cover sheet advises the tenant to seek legal assistance
immediately and contains suggestions regarding free legal
services if the tenant cannot afford an attorney.
The important information contained in the cover sheet is meant
to correspond to the recently enacted Protecting Tenants at
Foreclosure Act of 2009, a federal law which requires that
tenants in foreclosed properties be given 90-days notice and
that fixed-term leases be honored. This federal law sunsets on
December 31, 2012. State law requires 60-days notice for
tenants living in foreclosed rental units and sunsets on January
1, 2013. As a result, beginning January 1, 2013, the language
in the form cover sheet which states that tenants generally have
90-days notice and may be able to stay longer if they have a
lease will be inaccurate. To accommodate those sunset dates,
staff suggests the following amendment to ensure that tenants
receive accurate and important information:
Suggested amendment:
Add a duplicate section of 1161a, effective January 1, 2013
that revises the following language, "You usually have the
right to stay in your home for 90 days, regardless of any
deadlines stated on any attached papers. You may have the
right to stay even longer if you have a lease" to instead
read: "You may have the right to stay in your home for 30 days
or longer, regardless of any deadlines stated on any attached
papers."
3. Exceptions to requirement that cover sheet be attached
While this bill would generally require that a form cover sheet
be attached to eviction notices served within one year after
foreclosure sale, that cover sheet would not need to be attached
in all instances. The bill would specifically provide that the
cover sheet does not need to be attached to the eviction notice
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if all of the following apply: (1) the tenancy sought to be
terminated was created after the foreclosure sale, by written
agreement of the parties; (2) the written agreement is attached
to the notice; and (3) either: (a) the notice is served for a
cause specified in Civil Code Section 1161 or (b) the notice is
served pursuant to Civil Code Section 1946.1 (requiring 60-days
notice if the tenant and residents have lived in the unit for
more than one year) and at least 60 days have elapsed after the
foreclosure sale before notice is given.
The above exemptions are meant to cover instances where a notice
to quit is issued based on valid reasons. For example, Civil
Code Section 1161 governs situations when a tenant is guilty of
unlawful detainer and includes instances such as nonpayment of
rent, permitting a nuisance on the property, or using the
property for an unlawful purpose. In such situations, after a
new agreement has been signed, a cover sheet would not need to
be attached to the eviction notice.
4. Modification of "masking" law to address foreclosure
situations
Under existing law, court records in an eviction action are
"masked" or not made available in certain instances and for
specified timeframes. For example, court records in an eviction
action may be made available to any person 60 days after the
filing of a complaint unless the defendant tenant prevails in
the action within the 60 days. If the defendant prevails, the
court records may not be made available except to the persons
specified in Code of Civil Procedure Section 1161.2(a)(1)-(4).
(See Changes to Existing Law.) The sponsors of this bill note
that current law "represents a compromise between reporting
legitimate evictions - such as for non-payment of rent - and
protecting tenant's rights (e.g., substandard housing claims)."
This bill would "tailor" the masking law to address the
situation in which the eviction action is based on a
foreclosure. Under existing law, the court records of the
action are "masked" if the tenant prevails within 60 days. In
the foreclosure situation, however, a tenant may never "prevail"
because, as the sponsors point out, "the bank delays in taking
the case to trial, or the bank drops its lawsuit after the issue
of inadequate notice is raised." As a result, the court records
of the action are unmasked and made available even though the
tenant is innocent. In order to address this situation, this
bill would allow the records to be released after 60 days only
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if judgment has been entered against the defendant tenant in
favor of the plaintiff landlord, after a trial. If this does
not occur, then the records may not be released except to the
persons specified in Code of Civil Procedure Section
1161.2(a)(1)-(4) (for example, a party to the action, a resident
of the premises, or any person by order of the court for good
cause shown).
5. Concerns
The Judicial Council has expressed workability concerns
regarding the bill's masking provisions. The author and
sponsors have indicated a willingness to work with the Judicial
Council to address these concerns.
Support : Center for Responsible Lending
Opposition : None Known
HISTORY
Source : Western Center on Law and Poverty; California
Reinvestment Coalition; California Rural Legal Assistance
Foundation
Related Pending Legislation : None Known
Prior Legislation : SB 1137 (Perata, Corbett, Machado, Ch. 69,
Stats. of 2008) (See Background.)
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