BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1149| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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 CONTINUED SB 1149 Page 2 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 SB 1149 Page 3 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 SB 1149 Page 4 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 SB 1149 Page 5 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. SB 1149 Page 6 RJG:nl 4/7/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****