California Residential Foreclosure – Changes to Process and Timing
CALIFORNIA RESIDENTIAL FORECLOSURES
CHANGES TO PROCESS AND TIMING
On September 28th, Governor Newsom signed into law Senate Bill 1079[1], which alters the process for how foreclosed homes are sold at trustee’s auction, requiring notice and preferred opportunities to tenants, local governments, and nonprofit/low income housing entities to buy foreclosed homes over larger private investors. This affects foreclosures of 1 to 4 unit single-family residences. And now, the banging of the gavel by the trustee at the courthouse steps signaling the end of foreclosure sale bidding and ‘sale’ of the property will not be the end of the foreclosure buying opportunity for preferred buyers such as:
An eligible tenant buyer, which is a natural person who at the time of the trustee’s sale:
- Is occupying the real property as their primary residence;
- Is occupying the real property under a rental or lease agreement entered into as the result of an arm’s length transaction with the mortgagor or trustor on a date prior to the recording of the Notice of Default against the property; and
- Is not the mortgagor or trustor, or the child, spouse, or parent of the mortgagor or trustor.
And an eligible bidder:
- Prospective owner occupants
- Eligible tenant buyers
- Non-profits and business entities with a primary activity of developing and preserving affordable housing
Foreclosure Trustee Duties
The intention is to get more owner occupant buyers, including the existing tenants, and to increase low income housing. The trustee is required to post on the front door of the residence to be foreclosed the notice of sale. And as for bidders at the sale itself, the trustee must now require a bidder to provide certain written information confirming the buyer’s status, including whether the buyer is an ‘eligible tenant,’ which would allow the sale to conclude as normal. But if the buyer is not, there are new rights for eligible bidders.
Tenant buyer rights
If the highest bidder was not an eligible tenant, the law now grants eligible bidders certain rights and priorities to make bids on the property after the trustee sale and potentially to purchase it as the last and highest bidder, subject to certain requirements and timelines. In order to entice eligible bidders, the foreclosure trustee must now:
- Maintain an internet website and telephone number free of charge to provide property/foreclosure information;
- Use a new statutory form Notices of Sale – requiring notice to a tenant regarding the tenant’s potential right to purchase the property; and
- Prohibit bundling of properties for a sale;
And an eligible bidder has a right of first refusal of 15 days after a trustee’s sale to give a bid or nonbinding written notice of intent to place a bid. Then, the eligible bidder can pay the bid funds to the trustee up to 45 days after the trustee’s sale. In the case of multiple eligible bidders, the highest bid as of 5:00 p.m. on the 45th day after the trustee’s sale shall be deemed the last and highest bidder pursuant to the power of sale.
When is the Foreclosure Sale Final Now
A trustee’s sale shall be deemed final as of the actual date of sale if the Trustee’s Deed Upon Sale (“TDUS”) is recorded within 18 calendar days after sale. However, where an eligible bidder timely submits a written notice of intent to bid after sale (within the 15 days), the trustee’s sale shall be deemed perfected on the actual date of sale if the TDUS is recorded within 48 calendar days after the sale.
Post-Foreclosure Evictions and Maintaining Property Requirements:
Provisions related to mortgages and deeds of trust do not relieve a person who is deemed the legal owner (successful bidder) of property when a trustee’s deed is recorded from complying with applicable law regarding the eviction or displacement of tenants, including requirements for the provision of relocation assistance and just cause eviction. And, we have discussed in other updates the status of residential evictions and moratoriums.
The new owner of vacant residential property purchased at a foreclosure sale must maintain that property and now, after a 30 day notice to cure, a governmental entity can impose a heftier civil fine of up to $2,000 for each day for 30 days and then up to a maximum of $5,000 per day, that the new owner fails to maintain the property.
If you need help or for more information feel free to contact Dawn: dcoulson@eppscoulson.com.
EPPS & COULSON, LLP
Attorneys admitted to practice in
California, New York, Colorado, Texas, Oregon and Hawaii
Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney. While intended as informational and educational, it is considered advertising under applicable laws of some states, and as such, Epps & Coulson, LLP encourages you to call us to discuss these matters as they apply to you or your business.
[1] https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200SB1079 This new law goes into effect on January 1, 2021 and remains until January 1, 2026.