BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
SB 120 S
Senator Lowenthal B
As Introduced
Hearing Date: March 31, 2009 1
Civil Code; Public Utilities Code 2
BCP:jd 0
SUBJECT
Residential Tenancies
DESCRIPTION
This bill would extend certain tenant protections to apply after
a foreclosure sale. For example, existing law prohibits a
landlord, with the intent to terminate the tenancy, from
interrupting or terminating a tenant's utility service, changing
the locks, or removing a tenant's personal property from the
premises. This bill would include a successor in interest who
acquired the property through foreclosure in the definition of
"landlord" subject to these prohibitions.
Existing law permits tenants in multifamily dwellings to deduct
utility payments from their rent when they pay for utilities as
part of their rent and the owner's account is in arrears and
scheduled to be terminated. This bill would extend these
protections to tenants in single-family dwellings and would
enhance the notice sent to tenants notifying them of an
impending utility shutoff so that it is also mailed (existing
law requires only posting) and is provided in English, Spanish,
Chinese, Tagalog, Vietnamese, and Korean.
This bill would provide that provisions of existing law
regarding the collection and return of security deposits apply
whether the termination of the landlord's interest was voluntary
or involuntary and in the case of a trustee's sale.
This bill would extend current law's protections requiring
utilities, public utilities, and districts to notify tenants of
multifamily dwellings of an impending shut-off of utility
(more)
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service to also include tenants living in single-family homes.
This bill would also strengthen current law by requiring that
the notice be mailed (existing law requires only posting) and
that the notice be provided in English, Spanish, Chinese,
Tagalog, Vietnamese, and Korean.
BACKGROUND
California, as well as the nation, is facing an unprecedented
threat to the economy and housing market due to increasing
numbers of foreclosures caused by mortgage payment defaults.
Often, tenants have become the innocent victims of the crisis; a
November 2007 New York Times article noted: "In the foreclosure
crisis of 2007, thousands of American families are losing their
homes without ever missing a payment." A recent study by the
National Low Income Housing Coalition found that more than 20%
of the properties facing foreclosure nationwide are rentals, and
"[b]ecause rental properties often are home to multiple
families, renters make up roughly 40% of the families facing
eviction."
For tenants of foreclosed properties, existing law generally
requires those tenants to receive a 60-day notice after the
foreclosed home is sold before the tenants may be evicted
(although some jurisdictions require evictions to be for just
cause). During the time frame where the tenant is looking for
new housing, some tenants have complained about the subsequent
owner shutting off necessary utilities in order to encourage the
tenant to prematurely leave the home. On March 12, 2008, the
Los Angeles Times' article entitled Renters Tell of Harassment
in Foreclosure Proceedings reported:
They shut off the water at Ida Hancox's duplex just before
Christmas, when she was doing her holiday cooking. The
utility man who did the job brusquely told her to pay her
bills. But Hancox and her fellow building tenant had done
so. Utilities were included in their rent, which was up to
date. Such costs had been the responsibility of the
landlord, who had skipped town after the lender foreclosed
on his loan. Hancox and her neighbor Kim Isaac-Ray, a
mother of eight, told a Bay Area utility committee Tuesday
that they believe that the lender stopped paying the utility
bill knowing the water would be turned off - as a way of
trying to push them out of the building despite local laws
preventing their eviction. Area activists agree, and say
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low-income renters who have the right to remain in their
homes are increasingly being harassed in foreclosure
proceedings by lenders eager to be rid of them.
To respond to the problem of limited tenant protections after a
foreclosure sale, this bill would extend certain tenant
protections to apply after a foreclosure sale and extend
existing protections regarding utility shut-offs to tenants of
single-family dwellings. An identical bill, AB 2586 (Torrico,
2008), was vetoed by the Governor after being approved by this
committee on June 24, 2008.
CHANGES TO EXISTING LAW
1.Existing law prohibits a landlord-with intent to terminate the
tenancy-from willfully causing the interruption or termination
of any utility service provided to a tenant, whether or not
the service is under the control of the landlord. (Civ. Code
Sec. 789.3(a).)
Existing law prohibits a landlord from willfully engaging in the
following acts with intent to terminate a tenancy:
a) Preventing a tenant from gaining reasonable access to
the property by changing the locks;
b) Removing outside doors or windows; or
c) Removing from the premises the tenant's personal
property, furnishings, or any other items without the prior
written consent of the tenant, except as specified. (Civ.
Code Sec. 789.3(b).)
Existing law provides that a landlord who violates the
above-described provisions shall be liable to the tenant for
actual damages and other damages, as specified. (Civ. Code
Sec. 789.3(c).)
This bill would define "landlord" and "tenant" for purposes of
these provisions to mean the following:
a) "Landlord" would include a fee simple owner or owners of
the property and any successor or successor in interest to
the landlord's interest in the property, including
interests acquired through foreclosure; and
b) "Tenant" would include a tenant occupying the property
pursuant to a fixed-term tenancy, periodic tenancy, tenancy
at will, and a tenancy at sufferance. The term would also
include a subtenant, a lawful occupant, and any of the
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above persons who occupied the property immediately prior
to the owner's acquisition of the property.
1.Existing law governs the collection and return of security
deposits including that upon termination of a landlord's
interest in the premises, whether by sale, assignment, death,
appointment of a receiver or otherwise, the landlord shall
either transfer the remaining portion of the tenant's security
deposit, after lawful deductions are made, to the landlord's
successor in interest or return the remaining portion, after
lawful deductions, to the tenant along with an accounting.
(Civ. Code Sec. 1950.5(h).)
This bill would revise these provisions to specify that they
apply: (a) whether the termination of the landlord's interest
was voluntary or involuntary; and (b) in the case of a
trustee's sale. This bill would also provide that "successor
in interest" for purposes of existing law regarding the
collection and return of security deposits includes a fee
simple owner or owners of the property and any successor or
successor in interest to the landlord's interest in the
property, including interests acquired through foreclosure.
If a successor in interest has acquired the property through
foreclosure, this bill creates a rebuttable presumption that
the amount of the deposit is equal to one month's rent.
2.Existing law requires an owner of a dwelling structure to give
notice in a rental agreement of specified information,
including the name, phone number, and address of the property
manager and the owner and the contact information for the
person to whom rent payments are to be made. Existing law
provides that these provisions may be extended to, and are
enforceable against, any successor owner. (Civ. Code Sec.
1962.)
This bill would provide that, for purposes of these provisions,
"successor owner" includes all successor owners, including a
fee simple owner or owners of the property and any successor
or successor in interest to the landlord's interest in the
property, including interests acquired through foreclosure.
This bill would provide that a successor owner whose interest
was acquired through foreclosure does not need to comply with
these provisions if the owner serves a notice to quit, as
specified, within 15 days of acquiring the property.
3.Existing law provides that whenever an electrical, gas, heat,
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or water corporation provides residential service to occupants
through a master meter in a multiunit residential structure
where the owner, manager, or operator is listed as the
customer of record, the corporation must make every good faith
effort to inform the occupants, by means of a written notice
posted on the door of each residential unit at least 15 days
prior to termination, when the account is in arrears, that
service will be terminated on a date specified in the notice.
Existing law provides that if it is not reasonable or
practicable to post the notice on the door of each residential
unit, the corporation must post two copies of the notice in
each accessible common area and at each point of access.
Existing law specifies procedures and the right of tenants in
multifamily units to begin utility service and permits them to
deduct payments from the rent in these cases. (Pub. Util. Code
Sec. 777.1.) Existing law provides similar provisions for
public utilities and districts. (Pub. Util. Code Secs.
10009.1, 12822.1, and 16481.1.)
This bill would extend existing law which allows tenants in
multifamily units to deduct utility payments from their rent
to also include tenants in single-family dwellings when they
have made a payment to a utility or district pursuant to
existing law described above.
This bill would extend these provisions to tenants living in
single-family homes and condominiums. This bill would revise
these provisions to also require the corporation, utility, or
district to mail the notice to all affected service addresses
known to it or available through reasonable and practical
methods, unless the service address is the same as the billing
address. This bill would require that the notice be in
English, Spanish, Chinese, Tagalog, Vietnamese, and Korean
(English plus the five languages described in Civil Code
Section 1632), and that the outside of the envelope of the
mailed notice state "Utility service to this address may be
cut off soon" in those six languages.
4.Existing law provides that whenever an electrical, gas, heat,
or water corporation provides individually metered residential
service to occupants in a multiunit residential structure
where the owner, manager, or operator is listed as the
customer of record, the corporation must make every good faith
effort to inform the occupants, by means of a notice, when the
account is in arrears, that service will be terminated at
least 10 days prior to termination. (Pub. Util. Code Sec.
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777.) Existing law provides similar provisions for public
utilities and districts. (Pub. Util. Code Secs. 10009, 12822,
and 16481.)
This bill would repeal these provisions.
COMMENT
1.Stated need for the bill
According to the author,"SB 120 addresses an often overlooked
aspect of the current mortgage crisis: an increase in the number
of innocent renters who face eviction or other adverse effects
as a result of foreclosure on a rented property."
2.Public policy supporting application of certain important
tenant protections after a foreclosure sale
This bill would extend certain tenant protections to apply after
a foreclosure sale. For example, this bill would apply existing
law's restrictions prohibiting a landlord from terminating a
tenant's utility service or changing the locks to force an
eviction to a successor in interest who acquired the property
through foreclosure. The bill would also make clear that
existing law's protections concerning the collection and return
of security deposits extend to lenders or other successors in
interest after a foreclosure sale, and create a rebuttable
presumption that the amount of the deposit was equal to one
month's rent. The Western Center on Law and Poverty, sponsor,
notes that the presumption reflects the common amount for a
security deposit, but "[a]s with all rebuttable presumptions,
either party can show evidence to the contrary, such as a
written lease." The sponsor further maintains that "[m]ost
renters desperately need the deposit - to use as a deposit
before they can rent a new place."
The California Bankers Association and California Financial
Services Association (trade associations), in opposition,
contend that the former landlord would be unlikely to transfer
the remaining security deposit to the successor in interest,
thus "requir[ing] the successor in interest to return the
security deposit even if they have not received those funds from
the landlord thereby exposing the new successor in interest to
new financial and legal burdens." The trade associations
express further concern that "existing law would then expose the
successor in interest to joint and several liability with the
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landlord for non-compliance in the repayment of the security
deposit."
It should be noted that this bill would not require a lender, as
a successor in interest, to assume all of the obligations of a
landlord. Instead, it ensures that a successor in interest
would have to assume certain vital tenant protections that
protect, among other things, their security deposit and
statutory right to remain in their home for a period of time
after a foreclosure sale.
Specifically, unless a more restrictive local ordinance applies,
existing law generally requires a 60-day notice prior to
evicting these tenants after a foreclosure sale. (See Code Civ.
Proc. Sec. 1161b.) As noted in the above Los Angeles Times
article, some unscrupulous landlords use leverage to force
tenants to move out of their units. From a public policy
standpoint, allowing tenants to remain in their home for a
period of time after a foreclosure is relatively meaningless if
tenants are prematurely forced out of their home because the
landlord has terminated their utility services or changed the
locks in order to force an eviction. Furthermore, existing
protections which give a tenant time to locate a new home
following a sometimes unexpected foreclosure would be
meaningless if the tenant were forced out for these reasons.
These provisions of the bill further the intent of those
protections and reaffirm the Legislature's policy choice to
protect those tenants.
3. Extension of tenant protections when owner fails to pay
utility bill and shut-off is
threatened
Western Center on Law and Poverty asserts that sometimes
landlords of distressed properties are unable to pay utility
bills and shut-offs may occur. Existing law requires utilities,
public utilities, and districts to notify residents of
multifamily dwellings of an impending shut-off when the owner's
account is in arrears and service is scheduled to be terminated.
Current law also allows these tenants to begin service in their
own names and deduct payments from the rent. This bill would
extend these protections to tenants living in single-family
homes and condominiums, and would enhance the notice so that it
is also mailed (existing law requires only posting) and is
provided in English, Spanish, Chinese, Tagalog, Vietnamese, and
Korean. The sponsor contends that those "modest requirements
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are calculated to give the greatest number of tenants actual
notice [and are] appropriate given the drastic deleterious
effect of a utility termination of a family's health and
safety."
Those proposed changes are further supported by press reports
that indicate that as many as a quarter of all foreclosed
single-family residences are occupied by renters (this number
does not include tenants in duplexes or multiunit buildings).
From a public policy standpoint, those tenants in single-family
residences deserve the same protections as those in multifamily
dwellings.
4. Veto of AB 2586
The Governor's veto message for AB 2586 (Torrico, 2008),
identical to this bill, stated:
I believe this bill is inequitable and fundamentally changes
existing provisions in law because it would sign liability
to the successor in interest for money never received and
for actions not under its control. New owners who acquire
property through foreclosure, who never signed an agreement
with the tenant, should not be required to take over the
legal obligations of the previous owner, including an
obligation to return security deposits. As a result, this
bill may increase costs and discourage purchases of
foreclosed properties, and thus delay economic recovery in
California.
Additionally this year, I have signed several other measures
to strengthen tenant notifications and rights during
foreclosure proceedings, including SB 1137, which, among
other things, doubled the amount of time that tenants have
to find a new home before they must vacate foreclosed
property.
Support : Asian Americans for Civil Rights & Equality (AACRE);
California Alliance for Retired Americans (CARA); California
Rural Legal Assistance Foundation; FamiliesFirst; StoneSoup;
Tenants Together
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Opposition : California Bankers Association; California
Financial Services Association
HISTORY
Source : Western Center on Law and Poverty
Related Pending Legislation : None Known
Prior Legislation :
AB 2586 (Torrico, 2008), would have enacted a substantially
similar set of tenant protections. This bill was vetoed.
AB 1333 (Hancock, 2008), would have provided that the legal
owner of real property must pay the utilities provided to a
property or its tenants following a foreclosure under specified
circumstances. This bill was vetoed.
SB 1137 (Perata, Corbett, Machado, Chapter 69, Statutes of
2008), provided, among other things, that tenants of foreclosed
properties receive notice that their home is in foreclosure, and
receive a 60-day notice to quit, as specified.
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