BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 1953 (Ammiano)
As Amended May 9, 2012
Hearing Date: July 3, 2012
Fiscal: No
Urgency: No
BCP
SUBJECT
Rental Housing: Tenant Notice
DESCRIPTION
This bill would prohibit a subsequent owner or manager from
seeking to evict a tenant for a nonpayment of rent that accrued
during the period in which the owner or manager was out of
compliance with existing law's requirement to provide updated
contact information.
BACKGROUND
When a rental property is sold or transferred, existing law
requires the successor owner or manager to inform the tenant of
the person to whom rent must be paid. That information must be
provided to the tenants within 15 days of succeeding the prior
owner or manager. Failure to provide that information creates a
situation where the tenant arguably cannot pay rent to the new
owner, thus, leaving them to either mistakenly pay rent to the
prior owner or to simply hold onto their rent money. Since the
tenant is technically not paying their rent, concerns have
arisen that the new owner could then seek to evict the tenant by
providing a 3-day notice to quit for failure to pay rent.
The above situation may also occur in properties that have been
foreclosed. In that situation, the property may have
transferred back to the bank or have been purchased at the
trustee sale by a bidder who may be unaware that tenants are in
the property or is unwilling to become a landlord. With respect
to the number of foreclosed homes that had tenants, Tenants
Together's January 2011 report entitled "California Renters in
(more)
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the Foreclosure Crisis" estimated that at least 38 percent of
homes in foreclosures were rentals and more than 200,000
California renters were directly affected by home foreclosures
in 2010 alone. In response to concerns about the potential for
a tenant to be served with an eviction notice for non-payment of
rent even though the tenant was not aware of the address to send
the rent money to a new owner, this bill would prohibit a
subsequent owner or manager from seeking to evict a tenant for a
non-payment of rent that accrued during the period in which the
owner or manager was out of compliance with the requirement to
provide updated contact information.
CHANGES TO EXISTING LAW
Existing law requires an owner of residential rental property or
a party signing a rental agreement or lease on behalf of the
owner to disclose in the rental agreement or lease all of the
following:
the name, telephone number, and usual street address at which
personal service may be effected of each person who is
authorized to manage the premises or act for and on behalf of
the owner for the purpose of service of process and for the
purpose of receiving and receipting for all notices and
demands;
the name, telephone number, and address of the person or
entity to whom rent payments shall be made;
if rent payments may be made personally, the usual days and
hours that the person will be available to receive the
payments;
at the owner's option, either the number of an account in a
financial institution into which rent payments may be made,
and the name and street address of the institution, provided
that the institution is located within five miles of the
rental property, or, the information necessary to establish an
electronic funds transfer procedure to pay the rent; and
the form or forms in which rent payments are to be made.
(Civ. Code Sec. 1962(a).)
Existing law provides that the above information required to be
disclosed shall be kept current and this obligation shall extend
to and be enforceable against any successor owner or manager,
who shall comply with this section within 15 days of succeeding
the previous owner or manager. (Civ. Code Sec. 1962(c).)
Existing law states that a tenant is guilty of unlawful detainer
when he or she continues in possession without the permission of
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his or her landlord after default in the payment of rent, and
three days' notice has been provided, as specified. (Code Civ.
Proc. Sec. 1161(2).)
This bill would prohibit a successor owner or manager from
evicting a tenant for nonpayment of rent that accrued during the
period when the owner or manager was not in compliance with the
requirement to provide updated information to the tenant.
This bill would provide that nothing in the above prohibition
shall relieve the tenant of any liability for unpaid rent.
COMMENT
1. Stated need for the bill
According to the author:
In California, when a property changes hands, current law
requires that within 15 days the new owner must notify the
tenant to whom to pay rent. However, current law is silent
on what happens if the new owner fails to provide this
notice. . . . A new owner is typically incentivized to
provide the tenants with this information in order to
receive timely rent payments, but in some situations where
the new owner is reluctant to embrace the landlord role,
such as after foreclosure, new owners do not timely notify
tenants where to pay rent. In rent control jurisdictions,
advocates report that new owners in some cases delay
notifying tenants where to send rent, allow rent to build
up, and then after many months evict for nonpayment in order
to vacate homes of low-rent tenants. In addition, the
failure of new owners to timely notify tenants where to pay
rent can lead to particular problems for tenants who receive
benefits such as SSI, as these tenants risk losing their
benefits if they accumulate too much money in their bank
accounts.
Noncompliance with the current notification requirement has
also provided an opportunity for scammers to defraud tenants
out of rent money. Without any notice of a change in
ownership, tenants can either continue to pay rent to the
old owner Ýor] fall victim to scammers that have no interest
in the property but are demanding rent. Unfortunately, in
the foreclosure crisis, these scams have become increasingly
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common.
This bill addresses the situations where new owners are more
focused on displacing tenants than collecting rent and
therefore fail to notify tenants where to pay rent. If new
owners do not want to play by the rules and inform tenants
where to pay rent, it is unfair to allow them to violate
current law with no consequences, later change their mind
and demand rent, and then have tenants lose their homes.
2. Increasing tenant protections
Under existing law, a successor owner or manager is required
to inform tenants as to the name, telephone, number and
address of the person or entity to whom rent payments are to
be made within 15 days of succeeding the prior owner or
manager. (Civ. Code Sec. 1962.) If the new owner or manager
fails to do so, the tenant is likely in a situation where he
or she knows that rent is due but does not know where to send
the money. That situation is exacerbated if the successor
owner then attempts to evict the tenant by serving a three-day
notice to pay or vacate.
This bill seeks to address those issues by prohibiting a
landlord from attempting to evict a tenant for nonpayment of
rent that accrued during the time in which the landlord was
not in compliance with the requirement to provide updated
contact information. The author notes:
Noncompliance with the notification requirement provides an
opportunity for scammers to defraud tenants out of rent money.
With no notice of the change of ownership, tenants often
continue to pay rent to the old owner or fall victim to
scammers that have no interest in the property but demand
rent. These scams have been increasingly common during the
foreclosure crisis. By encouraging owners to comply with
current law, this bill will increase the likelihood that
tenants promptly learn who the new owner is, where to pay
rent, and who is responsible for repairs.
It should be noted that while this bill would prohibit
landlords from seeking to evict a tenant for nonpayment of
rent during the time in which they were out of compliance (the
period of time between the 15-day time period and the actual
disclosure of where to send the rent money), this bill would
not relieve the tenant of any liability for unpaid rent. As a
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result, while the landlord may not evict the tenant for
failing to pay the rent money owed, the tenant still
technically owes that amount.
Furthermore, the proposed prohibition on eviction for
nonpayment of rent during any period of noncompliance would
arguably provide an incentive for purchasers of these
properties to comply with the requirements of existing law.
That compliance would appear to be in the best interests of
all parties because it allows the owner to get paid, and
prevents the tenant from mistakenly sending a rent check to
the prior owner or a scammer.
3. Problems related to foreclosure
Unlike traditional sales, the subsequent owners of foreclosed
properties generally do not have an opportunity to inspect the
house, or receive disclosures that would inform them about
potential tenants living in the property. Although historically
the foreclosure of a property generally extinguished any lease
between the former owner and a tenant, the federal Protecting
Tenants at Foreclosure Act of 2009 (S. 896, P.L. 111-22) changed
that rule by requiring the purchaser of a home at a foreclosure
sale to honor the tenant's lease unless the purchaser intends to
occupy the home as their primary residence. If there is no
lease, the lease is terminable at will (a month-to-month
tenancy), or if the purchaser will occupy the home as their
primary residence, the tenant must be provided with a 90-day
notice to vacate (unless a longer period is required by state or
local law). As a result, subsequent owners of foreclosed
properties must assume the role of a landlord when required to
do so under federal law.
With respect to problems encountered by tenants after a
foreclosure sale, the San Jose Mercury News reported:
The two-story home in the East San Jose foothills could
belong to any well-to-do family, but step through the door
and you're inside a million-dollar suburban foreclosure
quagmire.
More than a dozen adults and their pets have been living in
a warren of rented rooms in the foreclosed house, turning a
tranquil cul-de-sac into what one upset neighbor called "a
nightmare for all of us living on that block."
According to attorneys for the tenants, the former owner was
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renting out rooms -- including the laundry room and a
living room split in two -- in the months after the home was
foreclosed by the bank. They claim she never told tenants
about the foreclosure. Now the tenants face eviction in a
hearing to be held Thursday in Santa Clara County Superior
Court. . . . The case is an extreme example of a phenomenon
that has occurred around the country amid the foreclosure
crisis, with individuals renting out foreclosed houses they
may not have the right to rent. It also underscores how the
foreclosure process can hurt neighborhoods and how difficult
it is for lower-income people to find affordable places to
rent in Silicon Valley. (Carey, Foreclosure Rattles Upscale
San Jose Neighborhood, San Jose Mercury News (Mar. 14,
2012).)
4. Opposition's concerns
The opposition, a coalition of apartment and rental housing
associations, expresses concern about a prior version of this
bill that would have provided that failure of a subsequent
owner to notify the tenant of the updated contact information
acts to waive any rent accrued prior to giving that notice.
The May 9, 2012 amendments removed that waiver provision and,
instead, provided that the landlord may not seek to evict a
tenant for nonpayment of rent during that same period.
Staff notes that since no letter has been submitted to the
Committee removing that opposition, it is unclear whether
those associations have concerns with other portions of the
bill.
Support : Asian Law Caucus; Bet Tzedek; California Apartment
Association; Eviction Defense Collaborative; Law Foundation of
Silicon Valley; Legal Aid Society of San Mateo County; National
Housing Law Project; Public Interest Law Project; Santa Monicans
for Renters' Rights; Senior Action Network
Opposition : Apartment Association, California Southern Cities;
Apartment Association of Orange County; East Bay Rental Housing
Association; NORCAL Rental Property Association
HISTORY
Source : Tenants Together
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Related Pending Legislation :
SB 1473 (Hancock, 2012) would provide a 90-day eviction notice
to all tenants after foreclosure, and provide that specified
leases would survive foreclosure under state law. This bill is
in the Assembly Judiciary Committee.
AB 2610 (Skinner, 2012) would similarly provide a 90-day
eviction notice to all tenants after foreclosure, and provide
that specified leases would survive foreclosure under state law.
This bill is set for hearing in this Committee on July 3, 2012.
Prior Legislation : None Known
Prior Vote :
Assembly Judiciary Committee (Ayes 7, Noes 0)
Assembly Floor (Ayes 45, Noes 18)
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