BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1473|
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THIRD READING
Bill No: SB 1473
Author: Hancock (D), et al.
Amended: 4/26/12
Vote: 21
SENATE JUDICIARY COMMITTEE : 3-2, 4/17/12
AYES: Evans, Corbett, Leno
NOES: Harman, Blakeslee
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Residential tenancies: foreclosure
SOURCE : Attorney General Kamala Harris
DIGEST : This bill, which is part of the six-bill package
sponsored by Attorney General Kamala Harris entitled the
"California Homeowner Bill of Rights," is intended to
provide additional protections to tenants living in
foreclosed homes. This bill revises the 60-day notice to
vacate and instead provides, in the case of a
month-to-month lease, for 90 days' notice for these
tenants. This bill also provides that new owners of a
foreclosed property must honor a tenant's lease, except in
certain cases, and unless the new owner will occupy the
property as his/her primary residence. In that case, the
new owner must give the tenant a 90-day notice to vacate.
This bill revises the notice that is sent to tenants when
the property is noticed for a foreclosure sale to reflect
these changes and also deletes the January 1, 2013 sunset
CONTINUED
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date that otherwise applies to these sections. This bill
also permits a tenant in a foreclosed property to file a
postjudgment claim of right to possession, as specified.
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 of 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-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/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)
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 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
will not apply if the new owner will occupy the property as
his/her primary residence or if the lease was entered into
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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.
This bill requires that a residential lease that is entered
into after the expiration of 75 days following a notice of
default must contain a notice in English and the languages
described in Section 1632 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.
This bill also 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 will 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.
This bill removes the January 1, 2013 sunset date that will
otherwise apply to these sections.
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
possession, may object to the enforcement of the judgment.
(CCP Section 415.46)
This bill specifies that CCP 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.
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Background
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 overwhelmingly been impacted. 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 percent 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 percent 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;
http://tenantstogether.org/)
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
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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. These
provisions sunset on January 1, 2013.
Federal lawmakers have also acted to protect tenants in
foreclosure situations. On May 20, 2009, President Obama
signed S. 896, Public Law 111-22, which included the
"Protecting Tenants at Foreclosure Act of 2009" (PTFA).
The PTFA generally requires a successor in interest in a
property subject to foreclosure to provide bona fide
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. In 2010, the President signed the
Dodd-Frank Wall Street Reform and Consumer Protection Act
(Public Law 111-203), which extended the PTFA until
December 31, 2014 and clarified that its protections extend
to tenants who have entered into leases before the date on
which complete title is transferred as the result of a
foreclosure.
Comments
This bill makes the state law provisions similar to federal
law by providing that a new owner of a foreclosed property
must honor a tenant's lease. Under this bill, this
provision will not apply if the new owner will occupy the
property as his/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.
Tenant advocates raise concerns that, despite the
protections envisioned by Congress under the PTFA,
landlords have taken advantage of the ambiguity of the
"bona fide" definition and have taken eviction action
against tenants despite the fact that they arguably are
entitled to additional time in the property. In many
cases, tenants do not challenge these actions because they
are unaware of their rights or they cannot afford legal
representation.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
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SUPPORT : (Verified 5/16/12)
Attorney General Kamala Harris (source)
California Nurses Association
Consumers Union
County of Santa Cruz
OPPOSITION : (Verified 5/16/12)
California Apartment Association
California Association of Realtors
ARGUMENTS IN SUPPORT : The bill's sponsor, Attorney
General Kamala Harris, notes that "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 ? ÝD]ue to inconsistency in state
law, and between state and federal law, tenants are often
confused, or misled, about their legal protections, and
about how much time they have to move when served with a
notice to vacate after a foreclosure sale.
Consumers Union writes that "Ýt]enants have been silent
victims in the foreclosure crisis, often kept in the dark
by their landlords and unsure as to who owns the property
they live in. This bill will help ensure that innocent
tenants receive adequate notice of the foreclosure status
impacting their residences, and will protect tenants across
the state from unjust eviction by new owners of foreclosed
properties."
CTW:mw 5/16/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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