BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1149|
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THIRD READING
Bill No: SB 1149
Author: Corbett (D)
Amended: 4/6/10
Vote: 21
SENATE JUDICIARY COMMITTEE : 3-2, 3/23/10
AYES: Corbett, Hancock, Leno
NOES: Harman, Walters
SUBJECT : Residential tenancies: foreclosure
SOURCE : Western Center on Law and Poverty
California Reinvestment Coalition
California Rural Legal Assistance Foundation
DIGEST : This bill requires a form cover sheet to be
attached to any eviction notice provided to tenants
whenever that notice is served within one year after a
foreclosure sale. Under the bill, the cover sheet would
contain information regarding the tenant's rights and
responsibilities. This bill also provides that the court
records in an eviction action in a foreclosure situation
may not be released unless, after 60 days have elapsed,
judgment is entered for the plaintiff landlord after a
trial.
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
CONTINUED
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to the mortgage note remains in the property as a tenant,
subtenant, or occupant, sunsets on January 1, 2013. (Code
of Civ. Proc. Sec. 1161b.)
Existing federal law requires a successor in interest in a
property subject to foreclosure to provide any tenants 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. These provisions of federal law
sunset on December 31, 2012. ("Protecting Tenants at
Foreclosure Act of 2009," Public Law 111-22.)
This bill requires a form cover sheet to be attached to any
eviction notice provided to tenants whenever the notice is
served within one year after a foreclosure sale. The form
cover sheet would be titled "Notice to Any Renters Living
At [street address of the unit]" and must be in at least
12-point type. Among other things, the sheet would state
that the tenants should respond to any court papers, even
if they are not named in them.
This bill requires the cover sheet to state that tenants
generally have the right to stay in the rental unit for 90
days and may have the right to stay longer if they have a
lease. The cover sheet would also provide information
regarding legal assistance.
This bill specifies that failing to attach the form cover
sheet subjects the owner to a $500 civil fine in addition
to any other fines, penalties, and remedies provided by
law.
This bill provides that the cover sheet does not need to be
attached to the eviction notice if all of the following
apply: (1) the tenancy sought to be terminated was created
after the foreclosure sale, by written agreement of the
parties; (2) the written agreement is attached to the
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notice; and (3) either: (a) the notice is served for a
cause specified in Civil Code Section 1161 (for example,
nonpayment of rent) or (b) the notice is served pursuant to
Civil Code Section 1946.1 (requiring 60-days notice if the
tenant and residents have lived in the unit for more than
one year) and at least 60 days have elapsed after the
foreclosure sale before notice is given.
Existing law provides that the court records in an eviction
action may be made available only to the following:
A.A party to the action, including the party's attorney;
B.Any person who provides the clerk with the names of at
least one plaintiff and one defendant and the address of
the premises;
C.A resident of the premises who provides the clerk with
the name of one of the parties or the case number and who
shows proof of residency;
D.Any person by order of the court on a showing of good
cause; or
E.Any other person 60 days after the filing of a complaint
unless the defendant tenant prevails in the action within
the 60 days. If the defendant prevails, the court
records may not be made available except to a person
specified in (a)-(d). (Civ. Code Sec. 1161.2(a).)
This bill provides that the court records in an eviction
action based on a foreclosure may not be released unless,
after 60 days have elapsed, judgment is entered for the
plaintiff landlord after a trial. If judgment is not
entered for the plaintiff, the clerk may not allow access
to any court records in the eviction action, except as
provided in (a)-(d), above.
Background
California leads the nation with one of the highest rates
of foreclosure. More than 1.2 million Californians have
received a notice of default from their lender over the
past three years, and more than 500,000 California homes
have been the subject of a foreclosure. Tenants living in
those homes have overwhelmingly been impacted. A New York
Times November 18, 2007 article, "As Owners Feel Mortgage
Pain, So Do Renters," noted "[i]n the foreclosure crisis of
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2007, 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." A March 2009 study by
Tenants Together entitled "Hidden Impact: California
Renters in the Foreclosure Crisis," found that
approximately one third of residential units in foreclosure
in 2008 were rentals. The study estimated that 250,000
California renters lived in homes that went into
foreclosure in 2008. Tenants Together further estimated
that these numbers, based on data from Foreclosure Radar
and drawn from county parcel tax records, likely undercount
the number of foreclosed homes that are in fact rentals.
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
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 upon. And, on
May 20, 2009, President Obama signed S. 896, Public Law
111-22, which included the "Protecting Tenants at
Foreclosure Act of 2009" (Act). That Act generally
requires a successor in interest in a property subject to
foreclosure to provide 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.
This bill seeks to ensure that tenants who are living in
foreclosed homes be given sufficient notice of their rights
and responsibilities under these state and federal laws by
requiring a form cover sheet be attached to any eviction
notice served within one year of a foreclosure sale. The
bill also seeks to help protect innocent tenants who would
otherwise have a negative mark on their rental history by
revising existing law regarding the "masking" of eviction
records in foreclosure situations.
Prior Legislation
SB 1137 (Perata, Corbett, Machado) Chapter 69, Statutes of
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2008, which passed the Senate on 7/2/08 (32-8).
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 4/7/10)
Western Center on Law and Poverty (co-source)
California Reinvestment Coalition (co-source)
California Rural Legal Assistance Foundation (co-source)
AARP
Center for Responsible Lending
ARGUMENTS IN SUPPORT : The Western Center on Law and
Poverty (WCLP) and the California Reinvestment Coalition
(CRC) state "Many tenants know their rights, but are afraid
to assert them. Merely standing up for one's rights in
court can put a negative mark on their rental history for 7
years. Tenant and credit reporting agencies scour court
filings as they become available to record any tenants
involved in an eviction action, whether or not the suit was
justified. Most tenants decide to surrender their rights
rather than being denied future housing because of a bad
credit report."
WCLP and CRC further state:
Under current law, eviction actions are "masked"
(i.e., not generally available to non-parties other
than the media) for 60 days. After that they are
unmasked, unless the tenant has "prevailed" in the
case. . . . In foreclosures, the equation is turned
upside down. The problem in the foreclosure context
is that because of factors beyond the innocent
tenant's control - the bank delays in taking the case
to trial, or the bank drops its lawsuit after the
issue of inadequate notice is raised - the tenant
never "prevails" and the case is unmasked, even though
the tenant is innocent. SB 1149 addresses this very
special situation by reversing the presumption: the
bank must prevail (i.e. show that it gave the correct
notice) for a case to be reported.
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RJG:nl 4/7/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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