BILL ANALYSIS Ó AB 2610 Page 1 ASSEMBLY THIRD READING AB 2610 (Skinner) As Amended April 19, 2012 Majority vote JUDICIARY 7-3 HOUSING 5-2 ----------------------------------------------------------------- |Ayes:|Feuer, Atkins, Dickinson, |Ayes:|Torres, Atkins, Bradford, | | |Huber, Monning, | |Fong, Hueso | | |Wieckowski, Alejo | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Wagner, Gorell, Jones |Nays:|Beth Gaines, Jeffries | | | | | | ----------------------------------------------------------------- APPROPRIATIONS 11-5 ----------------------------------------------------------------- |Ayes:|Fuentes, Blumenfield, | | | | |Bradford, Charles | | | | |Calderon, Campos, Davis, | | | | |Gatto, Hall, Hill, Lara, | | | | |Mitchell | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Harkey, Donnelly, | | | | |Nielsen, Solorio, Wagner | | | | | | | | ----------------------------------------------------------------- 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 AB 2610 Page 2 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 law's notice 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. This bill would provide 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 (DCA), whichever occurs later. 5)Eliminates the January 1, 2013, sunset date that would otherwise apply to these sections and the related provisions 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. FISCAL EFFECT : According to the Assembly Appropriations Committee, minor absorbable costs to DCA for the required translations and postings on its Web site. COMMENTS : The author explains the reason for the bill as follows: "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 are usually the last to know of foreclosure, and many renters, including families with children, are ending up homeless due to foreclosure evictions. Due to inconsistency in state and federal law, tenants are often confused or misled about their legal protections, and how long they have to move when served AB 2610 Page 3 with a notice to vacate after a foreclosure sale. AB 2610 would help alleviate the debilitating, sudden upheaval of Californians who reside in foreclosed properties by eliminating the inconsistency, confusion and abuse of existing laws intended to protect them. AB 2610 would: Require purchasers of foreclosed homes to give tenants at least 90 days before commencing eviction proceedings; allow tenants in foreclosed homes under a residential lease to stay until the end of the lease term, except in cases where the new owner plans to use the property as their primary residence; and eliminate the existing sunset dates." California leads the nation with one of the highest rates of foreclosure. According to RealtyTrac, in California, one in every 303 housing units received a foreclosure filing in March 2012, and 48,422 houses received a foreclosure notice in February alone. Tenants living in those homes have been significantly affected. A November 18, 2007, New York Times article, "As Owners Feel Mortgage Pain, So Do Renters," noted ". . . 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." In January 2011, Tenants Together released its third annual report entitled "California Renters in the Foreclosure Crisis." The report estimated that at least 38% of homes in foreclosures were rentals and more than 200,000 California renters were directly affected by home foreclosures in 2010 alone. Tenants Together further estimated that these numbers, based on data from Foreclosure Radar, likely undercount the number of foreclosed homes that are in fact rentals. The report indicated that the counties with the highest foreclosed rental units (5,000 or more) were: Los Angeles, Riverside, Sacramento, and San Bernardino. In those counties, 45,860 renters were affected in Los Angeles; 18,823 in Riverside; 17,033 in Sacramento; and, 17,356 in San Bernardino. In San Francisco, 61% of foreclosed units were renter occupied. The report listed other counties with comparatively high percentages of renter-occupied foreclosed units including: Alameda (40%); Fresno (42%); Humboldt (42%); Mono (41%); Napa (40%); and, San Mateo (41%). (See "California Renters in the Foreclosure Crisis, Third Annual Report," January 2011, Tenants Together, available at http://tenantstogether.org/.) AB 2610 Page 4 California enacted important protections in SB 1137 (Perata, Corbett, and Machado), Chapter 69, Statutes of 2008, requiring purchasers of foreclosed homes at a foreclosure sale to give at least 60 days' notice before evicting tenants in those homes. To ensure that the extended time period cannot be exploited by a former owner who rents the property to another person but remains in the foreclosed home, SB 1137 provided that the extended time period does not apply if any party to the mortgage note remains in the property as a tenant, subtenant, or occupant. After the enactment of SB 1137, President Obama signed S. 896, P.L. 111-22, which included the "Protecting Tenants at Foreclosure Act of 2009" (PTFA). The PTFA, which is currently scheduled to sunset on December 31, 2014, generally requires the purchaser of a home at a foreclosure sale to honor a bona fide tenant's lease unless the purchaser intends to occupy the home as their primary residence. If there is no lease, if 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, currently federal law generally provides greater protection to tenants than state law by providing additional time (90 vs. 60 days) and imposes a requirement that the lease be honored under certain circumstances. This bill would make the state law provisions described above similar to federal law by providing that a new owner of a foreclosed property must honor a tenant's lease. Under the bill, 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 of those instances the new owner must give the tenant a 90-day notice to vacate. This bill would make changes to the notice that must be sent to tenants in foreclosed properties when the property is noticed for a foreclosure sale. The changes ensure that the notice is accurate and reflective of state and federal law. For example, the existing notice states that the new property owner may provide the tenant with a 60 days' eviction notice, however the bill would revise this provision to require that a tenant's lease be honored, except in certain cases, and tenants in AB 2610 Page 5 month-to-month leases be provided with 90 days' notice. As a result, the bill would then revise the notice accordingly so that tenants are accurately advised of state law. In order to address concerns raised by the business trade associations, the bill would delay the operation of this section until March 1, 2013, or 60 days following the issuance of a form by the Department of Consumer Affairs, whichever is later. This bill would specify that existing law which permits an owner to use a prejudgment claim of right of possession against a holdover former owner when the property has been sold at foreclosure 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. This change would permit a tenant in a foreclosed property to file a postjudgment claim of right to possession or a claim of right to possession pursuant to Code of Civil Procedure Section 1174.3. Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334 FN: 0003695