BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  SB 1149|
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                                 THIRD READING


          Bill No:  SB 1149
          Author:   Corbett (D)
          Amended:  4/6/10
          Vote:     21

           
           SENATE JUDICIARY COMMITTEE  :  3-2, 3/23/10
          AYES:  Corbett, Hancock, Leno
          NOES:  Harman, Walters


          SUBJECT  :    Residential tenancies:  foreclosure

           SOURCE  :     Western Center on Law and Poverty
                      California Reinvestment Coalition
                      California Rural Legal Assistance Foundation


           DIGEST  :    This bill requires 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 also provides 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. 

           ANALYSIS  :    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  
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          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 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 requires 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 requires 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 specifies 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 provides 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  







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          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. 

          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;
          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 provides 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.  

           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  







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          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 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, Chapter  
          69, Statutes 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. 

           Prior Legislation  

          SB 1137 (Perata, Corbett, Machado) Chapter 69, Statutes of  







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          2008, which passed the Senate on 7/2/08 (32-8).

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No    
          Local:  No

           SUPPORT  :   (Verified  4/7/10)

          Western Center on Law and Poverty (co-source) 
          California Reinvestment Coalition (co-source) 
          California Rural Legal Assistance Foundation (co-source) 
          AARP
          Center for Responsible Lending


           ARGUMENTS IN SUPPORT  :    The Western Center on Law and  
          Poverty (WCLP) and the California Reinvestment Coalition  
          (CRC) state "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. 








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          RJG:nl  4/7/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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