BILL ANALYSIS �
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 2610|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 2610
Author: Skinner (D)
Amended: 8/8/12 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
CONTINUED
AB 2610
Page
2
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 8/8/12 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)
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.
AB 2610
Page
3
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
possession, may object to the enforcement of the judgment.
(CCP Section 415.46.)
AB 2610
Page
4
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
imposes a requirement that the lease be honored under
certain circumstances.
AB 2610
Page
5
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.
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.
AB 2610
Page
6
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 the Senate Floor on 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 8/9/12)
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
California Mortgage Bankers Association
California Nurses Association
AB 2610
Page
7
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 "�a]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. .
. . AB 2610 would help alleviate the debilitating,
sudden upheaval of Californians who reside in
AB 2610
Page
8
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 Hern�ndez, Hill, Huber,
Hueso, Huffman, Lara, Bonnie Lowenthal, Ma, Mitchell,
Monning, Nestande, Pan, Perea, V. Manuel P�rez,
Portantino, Skinner, Smyth, Solorio, Swanson, Torres,
Wieckowski, Williams, Yamada, John A. P�rez
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 8/9/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****