BILL ANALYSIS Ó
SB 1473
Page 1
Date of Hearing: June 27, 2012
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
SB 1473 (Hancock) - As Amended: June 19, 2012
SENATE VOTE : 25-13
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 or periodic tenancy, 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, the lessee is the borrower or the child, spouse or
parent of the borrower, the lease was not the result of an
arm's-length transaction or the rent is substantially less
than the fair market rent for the property, unless reduced or
subsidized by federal, state or local law. In either case,
however, the new owner must give the tenant a 90-day notice to
vacate.
3)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.
4)Extends the January 1, 2013 sunset date that would otherwise
apply to these sections and the related provisions of existing
law for six years.
5)Specifies that Code of Civil Procedure Section 415.46 does not
limit the right of any tenant or subtenant of the property to
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file a prejudgment claim of right of possession pursuant to
Code of Civil Procedure Section 1174.25 (a) at any time before
judgment, or to object to enforcement of a judgment for
possession as prescribed in Code of Civil Procedure Section
1174.3 in an action for unlawful detainer resulting from a
foreclosure sale of a rental housing unit pursuant to Code of
Civil Procedure Section 1161a, whether or not the tenant or
subtenant was served with a prejudgment 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. ÝCode of Civil Procedure Section 1161(b)]
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 ÝCode Civil Procedure Section 1161(a)].
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4)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 (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, "SB 1473 addresses
the increasing hardship and confusion faced by tenants during
one of the worst foreclosure crises in decades. Too often,
tenants are the unwitting victims when a home they are renting
is foreclosed on. Tenants-usually the last to know of
foreclosure-often face the specter of sudden dislocation of
their homes, their families, and their belongings. In
particular, the inconsistency between state and federal law has
left tenants confused and, at times, misled about their legal
protections."
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
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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
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.
SB 1473 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. The bill
further, incorporates the federal definition of "bona fide"
lease as described above.
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
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
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foreclosed property to file a post-judgment claim of right to
possession or a claim of right to possession pursuant to Code of
Civil Procedure Section 1174.3.
Related legislation : This bill is identical to AB 2610 (Skinner)
which passed out of this committee, 5-2.
Double referred : If SB 1473 passes this committee, the bill
will be referred to the Committee on Judiciary.
REGISTERED SUPPORT / OPPOSITION :
Support
Attorney General Kamala Harris (sponsor)
Alameda County Board of Supervisors
California Apartment Association
California Bankers Association
California Chamber of Commerce
California Credit Union League
California Independent Bankers
California Mortgage Association
California Mortgage Bankers Association
California Nurses Association
Consumers Union
National Asian American Coalition
Public Counsel Law Center
Tenants Together, California's Statewide Organization for
Renters' Rights
United Trustees Association
Opposition
None on file.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085