BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                  AB 2610|
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                                 THIRD READING


          Bill No:  AB 2610
          Author:   Skinner (D), et al.
          Amended:  8/20/12 in Senate
          Vote:     21

           
           SENATE JUDICIARY COMMITTEE  :  5-0, 7/3/12
          AYES:  Evans, Harman, Blakeslee, Corbett, Leno

          SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  56-14, 5/31/12 - See last page for vote


           SUBJECT  :    Tenants:  foreclosure and unlawful detainer

           SOURCE  :     Attorney General Kamala Harris


           DIGEST  :    This bill, which is part of the California 
          Homeowner Bill of Rights sponsored by Attorney General 
          Kamala Harris, is intended to provide additional 
          protections to tenants living in foreclosed homes.  This 
          bill revises the requirement of existing law providing 60 
          days' notice to instead provide, in the case of a 
          month-to-month lease or periodic tenancy, for 90 days' 
          notice for tenants in a foreclosed property.  This bill 
          provides that new owners of a foreclosed property must 
          honor a tenant's lease, except in certain cases such as if 
          the new owner will occupy the property as his/her primary 
          residence.  In those cases, the new owner must give the 
          tenant a 90 days' notice to vacate.  The bill revises the 
          notice that is sent to tenants when the property is noticed 
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          for a foreclosure sale to reflect these changes.  This bill 
          also permits a tenant in a foreclosed property to file a 
          post-judgment claim of right to possession, as specified.

           Senate Floor Amendments  of 8/20/12 add coauthors and make a 
          technical, non-substantive change.

           Senate Floor Amendments  of 8/8/12 reinsert the statutory 
          "Prejudgment Claim of Right of Possession" form which was 
          inadvertently stricken.  The amendments also remove Section 
          4 of the bill, which have extended the sunset date on 
          Section 1161c of the Code of Civil Procedure, because that 
          same section is being extended by SB 825 (Corbett).

           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 to the mortgage note remains in the property as a 
          tenant, subtenant, or occupant, sunsets on January 1, 2013. 
           (Code Civil Procedure (CCP) Section 1161b)

          Existing federal law requires a successor in interest in a 
          property subject to foreclosure to provide a bona fide 
          tenant in the property with a 90-days' 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/her primary residence.  In that case, the tenant must 
          be provided with a 90 days' 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)


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          This bill revises existing law's requirement of 60 days' 
          notice to instead provide, in the case of a month-to-month 
          lease, for 90 days' notice for these tenants.  

          This bill, in the case of a fixed-term lease, requires a 
          new owner of a foreclosed property, where the lease was 
          entered into prior to the transfer of title at the 
          foreclosure sale, to honor the remainder of the tenant's 
          lease unless any of the conditions described below apply, 
          in which case the tenant would be entitled to 90 days' 
          notice.  The new owner will bear the burden of proving that 
          one of these conditions apply:

           The new owner intends to live in the property as his/her 
            principal residence;

           The tenant is the mortgagor, or is the child, spouse, or 
            parent of the mortgagor;

           The lease was not the result of an arms' length 
            transaction; or

           The rent is substantially less than fair market rent for 
            the property except when the rent is reduced or 
            subsidized by a federal, state, or local subsidy or law. 

          This bill 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 provides that the changes in this notice 
          does not become operative until March 1, 2013 or 60 days 
          following the posting of a dated notice incorporating the 
          revisions on the Web site of the Department of Consumer 
          Affairs, whichever occurs later. 

          Existing law 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.  (CCP Section 
          1161a.) 

          Existing law provides that if an owner uses a prejudgment 
          claim of right of possession, no occupant of the premises, 
          whether or not that person is named in the judgment for 

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          possession, may object to the enforcement of the judgment.  
          (CCP Section 415.46.) 

          This bill specifies that, in an action for unlawful 
          detainer resulting from a foreclosure sale of a rental 
          housing unit, 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. 

           Background
           
           Additional time to relocate; recent amendments address 
          oppositions' concerns  .  Under SB 1137 (Perata, Corbett, 
          Machado), Chapter 69, Statutes of 2008, purchasers of 
          foreclosed homes at a foreclosure sale must 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.  
           
           As mentioned in the Background section above, 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 sunsets 
          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, 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). 
           The PTFA also made a conforming change to federal 
          provisions relating to Section 8 tenancies for which 
          California law already requires a 90-day notice. (See CIV 
          Section 1954.535.)  As a result, currently federal law 
          generally provides greater protection to tenants than state 
          law by providing additional time (90 vs. 60 days) and 

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          imposes a requirement that the lease be honored under 
          certain circumstances. 

          This bill makes the state law provisions described above 
          consistent  with federal law by providing that in a 
          month-to-month lease a tenant in a foreclosed property must 
          be given 90 days' notice before eviction.  In the case of a 
          fixed-term lease, the bill requires a new owner of a 
          foreclosed property, where the lease was entered into prior 
          to the transfer of title at the foreclosure sale, to honor 
          the remainder of the tenant's lease unless any of the 
          conditions described below apply, in which case the tenant 
          would be entitled to 90-days' notice.  The new owner will 
          bear the burden of proving that one of these conditions 
          apply:

           The new owner intends to live in the property as his/her 
            principal residence;

           The tenant is the mortgagor, or is the child, spouse, or 
            parent of the mortgagor;

           The lease was not the result of an arms' length 
            transaction; or

           The rent is substantially less than fair market rent for 
            the property except when the rent is reduced or 
            subsidized by a federal, state, or local subsidy or law.  


          The provisions described above were added to the bill in 
          the most recent set of amendments and, as a result, a 
          number of trade associations removed their opposition to 
          the measure and instead now support it.  Specifically, the 
          California Apartment Association, California Bankers 
          Association, California Chamber of Commerce, California 
          Credit Union League, California Financial Services 
          Association, California Independent Bankers, California 
          Mortgage Association, California Mortgage Bankers 
          Association, and United Trustees Association all now 
          support the measure.  In addition, the California 
          Association of Realtors has withdrawn its opposition to the 
          bill and is now neutral. 


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           Notice provisions  .  This bill contains two provisions which 
          act to protect tenants in foreclosed properties and give 
          them notice of what was occurring in their rental home.  
          The first provision revises a notice created by SB 1137 
          that is given to tenants at the time of a notice of sale, 
          and the second extends the sunset date on a provision of 
          law which requires a new property owner to attach a cover 
          sheet to any eviction notice that is served on a tenant 
          within one year of a foreclosure sale.

           Related/Prior Legislation
           
          SB 825 (Corbett, 2011), which would remove the sunset date 
          on the provisions of law requiring a form cover sheet to be 
          attached to eviction notices served within one year of 
          foreclosure sale, is on Senate Unfinished Business.

          SB 1473 (Hancock), which is identical to this bill, is on 
          the Assembly Floor.

          SB 1137 (Perata, Corbett, Machado), Chapter 69, Statutes of 
          2008) See Background.

          SB 1149 (Corbett), Chapter 641, Statutes of 2010, passed 
          the Senate on 8/26/10 with a vote of 22-14.

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

           SUPPORT  :   (Verified  8/20/12)

          Attorney General Kamala Harris (source)
          AFSCME, AFL-CIO
          California Apartment Association
          California Bankers Association
          California Chamber of Commerce
          California Conference Board of Amalgamated Transit Union
          California Conference of Machinists
          California Credit Union League
          California Federation of Teachers
          California Financial Services Association
          California Independent Bankers
          California Labor Federation
          California Mortgage Association

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          California Mortgage Bankers Association
          California Nurses Association
          California Professional Firefighters
          California Rural Legal Assistance Foundation
          California School Employees Association
          California State Building & Construction Trades Council
          California Teamsters Public Affairs Council
          Consumers Union
          County of Santa Cruz
          Engineers and Scientists of California
          International Longshore & Warehouse Union
          Los Angeles County Democratic Party
          National Housing Law Project
          National Nurses Organizing Committee
          PICO California
          Professional & Technical Engineers, Local 21
          Public Counsel
          Service Employees International Union, Local 1000
          UNITE HERE
          United Food and Commercial Workers Union, Western States 
          Council
          United Trustees Association
          Utility Works Union of America, Local 132
          Western Center on Law and Poverty

           ARGUMENTS IN SUPPORT  :    The author writes that "Ýa]s 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 with a notice to vacate 
          after a foreclosure sale."
          
          The sponsor, Attorney General Kamala Harris, notes that: 

            After acquiring property through foreclosure, many 
            banks and servicers routinely serve a single eviction 
            notice upon all occupants of the property, reciting 
            various timeframes, legal rights, and requirements that 
            apply differently depending on the type of occupant.  . 

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            . .  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.

          The National Housing Law Project supports the bill because 
          it "will help ensure that tenants, at a minimum, receive 
          adequate notice and time to make an orderly transition 
          after foreclosure.  Tenants are the innocent victims of the 
          foreclosure crisis, and this bill will directly protect 
          their housing from the jarring, and often devastating, 
          effects of foreclosure."


           ASSEMBLY FLOOR  :  56-14, 5/31/12
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, 
            Block, Blumenfield, Bonilla, Bradford, Brownley, 
            Buchanan, Butler, Charles Calderon, Campos, Carter, 
            Cedillo, Chesbro, Davis, Dickinson, Eng, Feuer, Fong, 
            Fuentes, Furutani, Galgiani, Gatto, Gordon, Gorell, 
            Halderman, Hall, Hayashi, Roger Hernández, Hill, Huber, 
            Hueso, Huffman, Lara, Bonnie Lowenthal, Ma, Mitchell, 
            Monning, Nestande, Pan, Perea, V. Manuel Pérez, 
            Portantino, Skinner, Smyth, Solorio, Swanson, Torres, 
            Wieckowski, Williams, Yamada, John A. Pérez
          NOES:  Bill Berryhill, Conway, Donnelly, Beth Gaines, 
            Garrick, Grove, Hagman, Jeffries, Jones, Knight, Logue, 
            Nielsen, Olsen, Wagner
          NO VOTE RECORDED:  Cook, Fletcher, Harkey, Mansoor, 
            Mendoza, Miller, Morrell, Norby, Silva, Valadao


          RJG:d  8/21/12   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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