BILL ANALYSIS �
SB 1191
Page 1
SENATE THIRD READING
SB 1191 (Simitian)
As Amended August 7, 2012
Majority vote
SENATE VOTE :23-13
JUDICIARY 7-3
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|Ayes:|Feuer, Atkins, Dickinson, | | |
| |Huber, Monning, | | |
| |Wieckowski, | | |
| |Bonnie Lowenthal | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Wagner, Gorell, Jones | | |
| | | | |
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SUMMARY : Requires disclosure to prospective tenants when the
owner of certain residential property receives a notice of
default (NOD). Specifically, this bill :
1)Requires specified landlords who have received a NOD that has
not been rescinded to notify a prospective tenant of that
default in writing prior to executing a lease agreement for
the property.
2)Provides that a violation of the bill would void the lease at
the election of the tenant and entitle the tenant to recovery
of twice the monthly rent or twice the actual damages,
whichever is greater if the tenancy is terminated, and all
prepaid rent, in addition to any other legal remedy available
to the tenant.
FISCAL EFFECT : None
COMMENTS : The author explains the reason for the bill as
follows:
Senate Bill 1191 helps ensure that Californians make rental
decisions with full and accurate information about the
property that may become their home. While it seems like
common courtesy to tell someone that the apartment they're
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considering is in foreclosure, it's not legally required.
As a result, tenants often sign leases only to find out
that in just a few days or weeks, the property will be up
for auction. There are several risks associated with
leasing a property in foreclosure.
First, in advance of the foreclosure sale, tenants often
experience decreased services from landlords facing
financial difficulties. For example, owners may fail to
pay utilities, or ignore requests for maintenance or
repairs.
Second, after the foreclosure sale, tenants face a
tremendous amount of uncertainty. Tenants may not know to
whom they should send rent, or direct requests regarding
the property. Similarly, tenants may not be aware of the
protections guaranteed to them under federal and state law,
and so may feel pressured to vacate or to terminate leases
through "cash for keys" offers. Third, there are several
circumstances where a tenant's lease may be invalidated by
the foreclosure sale. For example, if the new owner intends
to move into the property the tenant will have only 90 days
to vacate, regardless of the terms of the lease. In
addition, the federal Protecting Tenants at Foreclosure Act
- and pending legislation in California - do not apply to
certain leases, meaning that tenants may face eviction
before their lease concludes.
Fourth, in practice it is especially difficult for tenants
to recover security deposits during or after a foreclosure.
The defaulting landlord may lack the financial resources
to return it, and the new owner - though legally obligated
to return the deposit - is often reluctant to do so.
Finally, tenants in recently foreclosed properties often
face exposure to bad actors. Tenant advocates report that
their clients are frequently subject to harassment and
misinformation from individuals seeking to remove tenants
from recently foreclosed properties.
Tenants Together writes in support, "This is an important tenant
protection bill. The fact that the foreclosure process is
underway is a material fact that should be disclosed to renters.
A landlord's foreclosure has significant impacts on tenants and
their rights. Foreclosure may affect the length of the tenancy,
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the housing conditions experienced by tenants, and the
likelihood that tenants get back their security deposits after
vacating. It is only fair that tenants be notified of
foreclosure activity so they can make an informed choice about
their housing."
The federal Protecting Tenants at Foreclosure Act of 2009 (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 legislation extending the PTFA until December 31, 2014,
and clarifying 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.
The PTFA fundamentally changed the obligations of subsequent
owners of foreclosed properties (usually the foreclosing entity)
by modifying the general rule that foreclosure extinguishes the
lease of any tenant in the property. While the notice provided
by this bill responds to the situation where a tenant signs a
lease after an NOD has been recorded and before the sale of a
foreclosed property - a sale that previously would have
extinguished the lease - the recent protection of those leases
under federal law changes the effect of this bill from one that
warns tenants of a situation that would extinguish their lease
to one that informs tenants of information about the property
they are renting.
This bill seeks to increase tenant protections by requiring a
landlord to give prospective tenants a written notice of the
existence of an outstanding notice of default. Unlike the
notice required under existing state law for a notice of sale,
this notification would be provided to prospective - not
existing - tenants, and the notice would inform prospective
tenants of the first step in the non-judicial foreclosure
process as opposed to the notice of sale, which tenants are
notified of under existing law and is provided at a minimum of
three to six months after the NOD.
A number of landlord associations oppose the bill, arguing that
it unfairly targets owners of smaller properties, is unduly
punitive, will inappropriately discourage tenants from renting
available properties, and provides money damages without a
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showing of harm.
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334
FN: 0004596