BILL ANALYSIS Ó
AB 2610
Page 1
Date of Hearing: April 25, 2012
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 2610 (Skinner) - As Amended: April 19, 2012
SUBJECT : Tenants: foreclosure and unlawful detainer
SUMMARY : Improves notice to tenants in foreclosed properties.
Specifically, this bill :
1)Revises the requirement of existing law providing 60 days'
notice to instead provide, in the case of a month-to-month
lease, for 90 days' notice for tenants in a foreclosed
property.
2)Specifies that a tenant holding possession under a residential
lease of a rental housing unit at the time the property is
sold in foreclosure shall have the right to possession until
the end of the lease term. This provision would not apply if
the new owner will occupy the property as his or her primary
residence or if the lease was entered into within 15 days
prior to the posting of the notice of sale. In either case,
however, the new owner must give the tenant a 90-day notice to
vacate.
3)Requires that a residential lease that is entered into after
the expiration of 75 days following a notice of default must
contain a notice that alerts the prospective tenant that the
foreclosure process has started on the property and the
property may be sold at foreclosure in as soon as 20 days,
which will terminate the lease. The notice also informs
tenants that if they rent the property, the new owner may
evict them after a 90 day eviction notice.
4)Revises existing notice law that is sent to tenants when a
notice of sale is posted on the property to ensure that it
accurately reflects the revisions proposed above. Provides
that the changes in this notice would not become operative
until March 1, 2013 or 60 days following the issuance of an
amended new translation by the Department of Consumer Affairs,
whichever occurs later.
5)Eliminates the January 1, 2013 sunset date that would
otherwise apply to these sections and the related provisions
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of existing law.
6)Specifies that Code of Civil Procedure Section 415.46 does not
limit the right of a tenant to file a prejudgment claim of
right of possession at any time before judgment or to object
to enforcement of a judgment for possession whether or not the
tenant was served with the claim of right to possession.
EXISTING LAW :
1)Provides under state law 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 Civil Procedure Section 1161b)
2)Provides under federal law that a successor in interest in a
property subject to foreclosure to provide a bona fide tenant
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. Federal
law provides that a lease or tenancy shall be "bona fide" only
if: (1) the tenant is not the mortgagor or the child, spouse,
or parent of the mortgagor; (2) the lease or tenancy is the
result of an arms-length transaction; and (3) the rent for the
lease or tenancy is not substantially less than fair market
rent for the property or the unit's rent is reduced or
subsidized by a federal, state, or local subsidy. These
provisions sunset on December 31, 2014. ("Protecting Tenants
at Foreclosure Act of 2009," Public Law 111-22.)
3)Provides that a former owner of a foreclosed property who
holds over and remains in the property after it has been sold
through foreclosure may be removed after a three-day notice to
quit has been served (Code Civil Procedure Section 1161a).
4)Provides that if an owner uses a prejudgment claim of right of
possession, no occupant of the premises, whether or not that
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person is named in the judgment for possession, may object to
the enforcement of the judgment (Code Civil Procedure Section
415.46).
FISCAL EFFECT : Unknown.
COMMENTS :
This bill is part of a package of bills sponsored by the
California Attorney General in response to the mortgage
foreclosure crisis. According to the author, "as more and more
homes are sold through foreclosure, tenants increasingly face
the specter of sudden dislocation of themselves, their families
and their belongings. Renters usually are the last to know of
foreclosure."
Under existing state law, tenants living in a property that is
sold at foreclosure are entitled to a 60-day written eviction
notice. Tenants must also be notified when the notice of sale
is recorded, that the foreclosure process has begun, including
specific language to inform a tenant that the new property owner
may provide either a new lease or a 60-day eviction notice.
These protections are set to sunset at the end of this year.
On May 20, 2009, President Obama signed the Protecting Tenants
at Foreclosure Act which requires a successor in interest to a
foreclosed property to provide tenants with at least a 90-day
eviction notice and with some exceptions to honor the tenants
existing lease for the remainder of its term. If there is no
lease, if the lease is month-to-month, or if the purchaser will
occupy the home as their primary residence, the tenant must be
provided with at least 90 days' notice to vacate. Purchasers
are required to honor a residential lease if it is "bona fide".
This Act will sunset on December 31, 2014.
According to those working with tenants living in foreclosed
properties, the inconsistencies in state and federal law have
created confusion for tenants. Additionally the standard for
determining whether a tenant's lease is "bona fide" and
therefore must be honored by a successor in interest is vague
and does not well defined. Federal law defines a "bona fide"
lease is one in which 1) the tenant is not the mortgagor or the
child, spouse, or parent of the mortgagor; (2) the lease or
tenancy is the result of an arms-length transaction; and (3) the
rent for the lease or tenancy is not substantially less than
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fair market rent for the property or the unit's rent is reduced
or subsidized by a federal, state, or local subsidy. There is
no standard defining an "arms-length transaction" or how to
determine the fair market rent for the property.
AB 2610 attempts to clarify the ambiguity between federal and
state law by giving all tenants in a foreclosed property with a
month -to-month lease 90-days eviction notice. Tenants with a
residential lease at the time of foreclosure have the right to
remain in the home for the duration of the lease. However, if
the home will be the occupied by a new owner as a primary
residence or if the lease was entered into within 15 days prior
to the notice of sale then the tenant is entitled to a 90-day
eviction notice.
Sunset Date: Opponents of this bill have raised concerns about
eliminating the sunset date on the provisions of the bill. The
sponsor and others argue that it is unclear when the foreclosure
crisis will level off and is hesitant to include a sunset date
without some degree of certainty. Recent news reports forecast
an increase in foreclosures in the next quarter but have not
provided any estimates on when the number of foreclosures will
significantly decline.
Support if amended: Trade groups representing lenders, credit
unions, and others state that they would support conformity
efforts in the bill if they were aligned with federal law. They
request that the bill include a cross reference within the Code
of Civil Procedure Section 1161b in conforming to the federal
definition of a bona fide lease or tenancy.
Staff Comments : Despite the efforts to replace the ambiguous
definition of "bona fide" lease under federal law, with bright
line standards for determining whether a lease is legitimate,
interested parties including the lenders, realtors and tenant
rights group have concerns about the exceptions in the bill that
permit a successor in interest to evict a tenant with a
residential lease.
The committee may wish to consider refining the definition
further to include the federal prohibition on renting to a
family member. Additionally, providing a standard for
determining the fair market value of a rental unit like the U.S.
Department of Housing and Urban Development's rental index.
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Double referred :
The bill as amended passed the Committee on Judiciary on April
17, 2012, by a vote of 7 to 3.
REGISTERED SUPPORT / OPPOSITION :
Support
California Attorney General's Office (sponsor)
Support, if amended :
California Bankers Association
California Credit Union League
California Financial Services Association
California Independent Bankers
California Mortgage Association
California Mortgage Bankers Association
United Trustees Association
Opposition
California Apartment Association
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085