I'll be revising the blog over the next few weeks (beginning along about Halloween), so if you have any comments, suggestions, requests or whatever, you can send me an email. The blog gets messy as laws change and I gather more information; once a year I have to go through and clean it up. So now is your chance to let me know what doesn't work, what isn't helpful etc.
The title says it all: this blog is for tenants whose landlords have allowed their rental property to go into foreclosure. Here you'll find most of the information you need to cope. It won't save your home; foreclosure law is of, by, and for the owning class. It won't make you less angry; you should be angry. What it will do is explain the foreclosure process in California, so that you'll know how much time you have to relocate.
If you don't live in California, much of the information here won't help you. However, I've included a new section on the tenants' rights legislation passed by Congress, and signed into law by President Obama on May 20, 2009. This legislation applies to all tenants in the United States.
If you are a renter in California, please read the entire blog, as doing so will give you an understanding of the whole process. If you are a tenant in a state other than California, read the first sections, skip the parts about California foreclosure procedures and landlord-tenant law, then pick up again when I discuss protecting yourself from scams and such at the end.
I am a long-ago tenant activist, but I am not a lawyer and there are times when I will tell you that you really, really need to talk to a lawyer. But for most tenants in California communities without rent control or "just cause" eviction, a lawyer will not be able to do any more for you than you can do for yourself. If you do live in a community with rent control or "just cause" eviction, please read my entry on rent control carefully. Foreclosing lenders have been very badly behaved in evicting tenants protected by rent control and "just cause" eviction, so you will need to take action to protect your rights.
I also encourage you to let me know if you run across a problem--or a solution--that I haven't mentioned here. Many of the warnings and strategies that I discuss here have their roots in emails I received from other tenants. So if you run across a new scam or have successfully negotiated your landlord's foreclosure, let me know. My email address is on the right side of the blog. If you want to ask a question, please send me an email. If you leave questions in the comments section, I will only answer those of general interest. Otherwise it clutters up the blog with Q&A that are too specific to be helpful to most people.
I redate the blog every month, so that you will know that your are getting the most current information. If the blog isn't dated with the current month and year, you may be reading an old version. There are a bunch of them populating the Internet.
And in general I will refrain from feeding my ego here. But I did get mentioned by a guest editorialist in the Modesto Bee and wanted to note it. I will remove this note when I redate the blog in August, no, maybe September. Hmm, October.
And never believe everything your read in the newspaper. This article contains information that is just plain wrong. Incorrect. Inaccurate. And presented by an investigator from the local Fair Housing group. Barstow may be in the outback, but the tenants who live there have the right to accurate information.
Thursday, October 1, 2009
New Legislation Signed
This information is for California tenants only. Governor Schwarzenegger signed two pieces (yes, two!) pieces of legislation benefiting California tenants. The first, SB 290 (sponsored by Mark Leno) makes the 60-days' notice requirement for tenant evictions permanent. This means that any tenant in the state who has lived in her rental for one year or more cannot be evicted with less than 60-days' notice in "no cause" evictions. And it means that tenant groups don't have to mobilize every couple of years to renew the legislation. However, this does not affect tenants protected by local "just cause" ordinances; those tenants cannot be evicted without cause.
The second bill, SB 120, sponsored by Alan Lowenthal, protects tenants in foreclosed or soon-to-be-foreclosed properties against utility shutoffs when the landlord or lender fails to pay utility bills. In particular, tenants in single-family homes now have the same protection as tenants in multi-family units. Utility companies (gas, electric, water, heat) are now required to give tenants notice that the utility is to be cut off for nonpayment, and to provide a procedure for the tenant or tenants to establish a payment account without having to pay the former landlord's arrearages. Tenants in single-family homes in outlying communities were often forced to pay the former landlord's water bill to keep the water on. (Sacramento Suburban Water was notorious for this.) No longer.
It also allows tenants who pay the bills, when these costs have been included in the rent, to either deduct the cost from their rent payments or sue the landlord for the cost of establishing service or paying the bills. And it prohibits utility companies from requiring large deposits if the tenant can show that she pays her rent on time. (Utility companies were frequently requiring both payment of the arrearages and a large deposit to keep utility service.) Utility services are required to establish and publicize procedures for tenants to deal with these situations; notice of those procedures should be delivered along with any shutoff notice. We would hope that they also publicize them in their newsletters and on their websites as well.
You can read SB 290 here and SB 120 here. And you can read more at the Tenants Together blog. Posted October 13, 2009.
The second bill, SB 120, sponsored by Alan Lowenthal, protects tenants in foreclosed or soon-to-be-foreclosed properties against utility shutoffs when the landlord or lender fails to pay utility bills. In particular, tenants in single-family homes now have the same protection as tenants in multi-family units. Utility companies (gas, electric, water, heat) are now required to give tenants notice that the utility is to be cut off for nonpayment, and to provide a procedure for the tenant or tenants to establish a payment account without having to pay the former landlord's arrearages. Tenants in single-family homes in outlying communities were often forced to pay the former landlord's water bill to keep the water on. (Sacramento Suburban Water was notorious for this.) No longer.
It also allows tenants who pay the bills, when these costs have been included in the rent, to either deduct the cost from their rent payments or sue the landlord for the cost of establishing service or paying the bills. And it prohibits utility companies from requiring large deposits if the tenant can show that she pays her rent on time. (Utility companies were frequently requiring both payment of the arrearages and a large deposit to keep utility service.) Utility services are required to establish and publicize procedures for tenants to deal with these situations; notice of those procedures should be delivered along with any shutoff notice. We would hope that they also publicize them in their newsletters and on their websites as well.
You can read SB 290 here and SB 120 here. And you can read more at the Tenants Together blog. Posted October 13, 2009.
Questions & Answers
I hope that most of you will email me with any questions, information and appreciations. (My husband believes that appreciations should be limited to one a week, as more will make me insufferable.) For questions, which are the most critical, I try to respond within 24 hours, at which point you'll have your answer or know that you need more help than I can give.
One question: If the foreclosure sale is on the second of the month, should the tenant pay on the first? Well, technically the rent is due on the first but, if the landlord loses the building on the second, he can't demand that you pay or quit, as he doesn't own the building. However, you shouldn't spend the money, as the foreclosure sale might be canceled and then you'd have to pay the rent. And of course, if he issues a notice to pay rent or quit after he's lost the building, you need genuine legal help.
Second question: The landlord no longer owns the building after the foreclosure sale, whether it's sold to an auction buyer or "sold" back to the lender. Landlords sometimes come round for months after the foreclosure demanding rent, and some tenants pay it. Don't pay rent to someone who doesn't own the building. Unfortunately if you find that you've paid rent to a landlord who doesn't own the building, you have to sue in Small Claims Court to recover the rent.
Third question: Sometimes both the landlord and agents for the lender come round demanding rent, serving notices and, occasionally, screaming at tenants in foreclosed properties. And while some lenders operate in a professional manner, others come on like the loan sharks of yore, showing up on the doorstep to demand payment. To find out who owns the building, call your county assessor or recorder and ask. If your landlord has lost the building, inform him of that fact in writing, making clear that you no longer owe him rent. Be sure, of course, to keep a copy of the letter.
Now as to the realtor sent round by the lender. First, I don't know why lenders don't understand that most people don't hand over checks for large sums of money to total strangers who show up on the doorstep demanding it. Again call the assessor or recorder and ask for the name and address of the lender. Then pen a polite letter to the lender, explaining that you are a tenant residing at the property (give the address), and giving them your contact information. Then ask that the lender notify you in writing of the name and contact information of the lender's authorized representative, as the person who showed up on your doorstep demanding the rent had no documentation indicating that he had the right to it.
If you really can't figure out what's going on, and sometimes it is complicated, pen letters to both the lender and the landlord informing both that you will pay the rent once they communicate with one another and determine who has the right to the rent. It's not your job to figure out disputes between the lender and the landlord. If anyone serves you with a notice to pay or quit, though, you need real legal help.
Fourth question: If you have a lease and the building has been sold back to the lender in a foreclosure sale, you probably won't have much trouble getting out of the lease if you don't want to stay. Many lenders want tenants to move, and would probably give you a fairly good cash for keys payment if your agree to leave early. I remind you that all cash for keys agreements should be in writing and signed by an authorized representative of the lender. And if the cash is not forthcoming when you arrive to hand over the keys, don't hand over the keys. Tenants have been much abused in this process, and people who made shady loans to landlords aren't likely to suddenly become well-behaved because they're dealing with tenants.
Fifth question: Once you've paid rent for the month, you do not owe rent for that month again. So if the foreclosure sale is mid-month and you paid the rent for the month, the lender cannot ask you for rent for that month, or for a portion of it, again. In ordinary sales, this is handled at the property closing, where the selling landlord turns over the remainder of the rent for the month and, theoretically, the security deposits on the property. And that's why very occasionally, you'll be asked by the purchaser to send a copy of your rental agreement. The purchaser wants to confirm the landlord's numbers.
Sixth question: If you live with roommates and your home suffers foreclosure, you need to sit down together and decide what you want to do before negotiating with the lender. You need to decide whether you want to stay, whether you want cash for keys, and how much you want. If one of you wants cash for keys and the other wants to stay, you have a real problem, as the lender is negotiating with everyone in the unit and is not likely to offer cash for keys if one of the tenants want to stay. And if you've agreed to a cash for keys offer, it's probably written to apply to all the tenants living at the property.
One question: If the foreclosure sale is on the second of the month, should the tenant pay on the first? Well, technically the rent is due on the first but, if the landlord loses the building on the second, he can't demand that you pay or quit, as he doesn't own the building. However, you shouldn't spend the money, as the foreclosure sale might be canceled and then you'd have to pay the rent. And of course, if he issues a notice to pay rent or quit after he's lost the building, you need genuine legal help.
Second question: The landlord no longer owns the building after the foreclosure sale, whether it's sold to an auction buyer or "sold" back to the lender. Landlords sometimes come round for months after the foreclosure demanding rent, and some tenants pay it. Don't pay rent to someone who doesn't own the building. Unfortunately if you find that you've paid rent to a landlord who doesn't own the building, you have to sue in Small Claims Court to recover the rent.
Third question: Sometimes both the landlord and agents for the lender come round demanding rent, serving notices and, occasionally, screaming at tenants in foreclosed properties. And while some lenders operate in a professional manner, others come on like the loan sharks of yore, showing up on the doorstep to demand payment. To find out who owns the building, call your county assessor or recorder and ask. If your landlord has lost the building, inform him of that fact in writing, making clear that you no longer owe him rent. Be sure, of course, to keep a copy of the letter.
Now as to the realtor sent round by the lender. First, I don't know why lenders don't understand that most people don't hand over checks for large sums of money to total strangers who show up on the doorstep demanding it. Again call the assessor or recorder and ask for the name and address of the lender. Then pen a polite letter to the lender, explaining that you are a tenant residing at the property (give the address), and giving them your contact information. Then ask that the lender notify you in writing of the name and contact information of the lender's authorized representative, as the person who showed up on your doorstep demanding the rent had no documentation indicating that he had the right to it.
If you really can't figure out what's going on, and sometimes it is complicated, pen letters to both the lender and the landlord informing both that you will pay the rent once they communicate with one another and determine who has the right to the rent. It's not your job to figure out disputes between the lender and the landlord. If anyone serves you with a notice to pay or quit, though, you need real legal help.
Fourth question: If you have a lease and the building has been sold back to the lender in a foreclosure sale, you probably won't have much trouble getting out of the lease if you don't want to stay. Many lenders want tenants to move, and would probably give you a fairly good cash for keys payment if your agree to leave early. I remind you that all cash for keys agreements should be in writing and signed by an authorized representative of the lender. And if the cash is not forthcoming when you arrive to hand over the keys, don't hand over the keys. Tenants have been much abused in this process, and people who made shady loans to landlords aren't likely to suddenly become well-behaved because they're dealing with tenants.
Fifth question: Once you've paid rent for the month, you do not owe rent for that month again. So if the foreclosure sale is mid-month and you paid the rent for the month, the lender cannot ask you for rent for that month, or for a portion of it, again. In ordinary sales, this is handled at the property closing, where the selling landlord turns over the remainder of the rent for the month and, theoretically, the security deposits on the property. And that's why very occasionally, you'll be asked by the purchaser to send a copy of your rental agreement. The purchaser wants to confirm the landlord's numbers.
Sixth question: If you live with roommates and your home suffers foreclosure, you need to sit down together and decide what you want to do before negotiating with the lender. You need to decide whether you want to stay, whether you want cash for keys, and how much you want. If one of you wants cash for keys and the other wants to stay, you have a real problem, as the lender is negotiating with everyone in the unit and is not likely to offer cash for keys if one of the tenants want to stay. And if you've agreed to a cash for keys offer, it's probably written to apply to all the tenants living at the property.
What's Happening? And Why?
So why are we having a crisis that may cost me my home?
It's not really the foreclosure problem that the President and Congress are worried about. When the fear was that people who couldn't pay their mortgages would be evicted, the powers what be didn't pay much attention. Neither Republicans nor Democrats have ever been much concerned about that. The problem is that the mortgages that couldn't be paid had been sold to investors all over the world and the investors are in danger of losing lots and lots of money. These folks are the banks, investment houses and very rich folk that politicians respond to.
Further the problem is spreading. Because housing prices have fallen rapidly in many parts of the country, homeowners and landlords can't refinance their adjustable rate mortgages (ARMs) and can't sell the building for what they owe on it. In some cases they're being forced to give up the building, while a few are just walking away. And landlords really have an incentive to abandon the property, as it doesn't threaten their homes, just yours.
The broader economic problem is that the credit system has become the substitute for decent wages for two-thirds of the population, as the powers what be sought to end stagflation and increase corporate profits by crashing worker pay. Having spent 30 years on this program, we're now back to the same place, but with a much more precarious population.
I pay my rent. Isn't the landlord supposed to use the money to pay the mortgage?
There's nothing in the law that requires that your landlord use your rent money to pay the mortgage. Landlord groups have been very successful in tying rent payments to the cost of maintaining rental units, but there's no necessary connection. A landlord can use the money to pay the mortgage, buy a Hummer, send his kids to college, or go on a really expensive vacation. Your obligation to pay rent has nothing to do with his obligation to pay the mortgage. It's not fair but, as you'll discover, the real estate interests buy lots of access and don't have to be fair.
And your landlord may have owned the building for a few months, or for many years, and still be facing foreclosure. Some landlords took out loans on their properties to deal with problems any of us could face (job loss, medical expenses, divorce, and the like), but it's more likely that he took out a new loan on your home to pay other expenses (vacation, new car, child's college tuition) or to purchase more property.
Many landlords, seeing their property values increase to astronomical levels, didn't realize that (a) what went up could come down and (b) that they shouldn't buy a building where the rent payments required that they put in a couple thousand dollars a month to pay the mortgage. Some were assuming that they'd be able to sell the building purchased with the proceeds of refinancing your home for a handsome profit, while others believed that rents would rise sufficiently, and sufficiently quickly, to cover their costs. When neither of these things happened, they either decided, or were forced, to let your home go into foreclosure.
It's not really the foreclosure problem that the President and Congress are worried about. When the fear was that people who couldn't pay their mortgages would be evicted, the powers what be didn't pay much attention. Neither Republicans nor Democrats have ever been much concerned about that. The problem is that the mortgages that couldn't be paid had been sold to investors all over the world and the investors are in danger of losing lots and lots of money. These folks are the banks, investment houses and very rich folk that politicians respond to.
Further the problem is spreading. Because housing prices have fallen rapidly in many parts of the country, homeowners and landlords can't refinance their adjustable rate mortgages (ARMs) and can't sell the building for what they owe on it. In some cases they're being forced to give up the building, while a few are just walking away. And landlords really have an incentive to abandon the property, as it doesn't threaten their homes, just yours.
The broader economic problem is that the credit system has become the substitute for decent wages for two-thirds of the population, as the powers what be sought to end stagflation and increase corporate profits by crashing worker pay. Having spent 30 years on this program, we're now back to the same place, but with a much more precarious population.
I pay my rent. Isn't the landlord supposed to use the money to pay the mortgage?
There's nothing in the law that requires that your landlord use your rent money to pay the mortgage. Landlord groups have been very successful in tying rent payments to the cost of maintaining rental units, but there's no necessary connection. A landlord can use the money to pay the mortgage, buy a Hummer, send his kids to college, or go on a really expensive vacation. Your obligation to pay rent has nothing to do with his obligation to pay the mortgage. It's not fair but, as you'll discover, the real estate interests buy lots of access and don't have to be fair.
And your landlord may have owned the building for a few months, or for many years, and still be facing foreclosure. Some landlords took out loans on their properties to deal with problems any of us could face (job loss, medical expenses, divorce, and the like), but it's more likely that he took out a new loan on your home to pay other expenses (vacation, new car, child's college tuition) or to purchase more property.
Many landlords, seeing their property values increase to astronomical levels, didn't realize that (a) what went up could come down and (b) that they shouldn't buy a building where the rent payments required that they put in a couple thousand dollars a month to pay the mortgage. Some were assuming that they'd be able to sell the building purchased with the proceeds of refinancing your home for a handsome profit, while others believed that rents would rise sufficiently, and sufficiently quickly, to cover their costs. When neither of these things happened, they either decided, or were forced, to let your home go into foreclosure.
New Federal Legislation
You mentioned new federal legislation. What's that about?
It's a new law (signed into law by President Obama on May 20, 2009) that protects almost all tenants in foreclosed properties, requiring that they be given at least 90-days' notice to vacate their homes. Now it's likely that we'll hear lots of whining from lenders and loan servicers about the difficulties inherent in managing rental properties. But bank trust departments manage rental property all the time. And if it's too onerous a burden to hire someone to call a plumber to deal with a stopped drain, property management firms would be only too willing to, for a fee, call the plumber for them. (I'm actually amazed that more realtors, suffering from lack of business, haven't hung out their shingles as property managers.)
So what IS this new federal legislation?
Tenants in California weren't as bad off in foreclosed properties as tenants in some other states. In some states the lender could just show up on the doorstep and order the tenants out of the property. Many states provided that tenants need be given only a few days to vacate the property.
But with the passage of SB 896 tenants, no matter where they live in the United States, are given at least 90-days' notice, or the duration of their lease, before they have to vacate the property. This means that if you signed a one year lease in January, you will not have to move until the expiration of that lease at the end of December, no matter when the foreclosure sale takes place. If, however, your lease expires less than 90 days after the foreclosure sale, or you have a month-to-month tenancy, you will have at least 90 days to move. And while that's wonderful news for California tenants, it's even better news for the many tenants throughout the country who face instant eviction after a foreclosure sale.
There are, of course, a few exceptions. The foreclosing lender wouldn't have to give you this notice if you were being housed free or for a much below market rent by a relative. Another exception to the rule is that if the building is sold to an owner who intends to occupy the premises, the lease may be voided. However, tenants in these properties will then receive 90-days notice.
Tenants who live in communities that provide for more notice, or have just cause eviction and do not allow eviction in event of foreclosure, will not be affected by the federal legislation. In other words, the federal law doesn't preempt better state and local laws. So the just cause protections and the Los Angeles foreclosure moratorium will remain in effect.
You can read the law here and the Tenants Together press release here. And you can read the National Low Income Housing Coalition's letter here.
I have a Section 8 voucher. Am I protected?
Yes. A tenant who has a Section 8 voucher is protected much as unsubsidized tenants are. If this is the first year of your lease, you are protected for the term of that lease, unless the building is sold to an owner who intends to occupy your unit, in which case you will get the same 90-days' notice to vacate that unsubsidized tenants receive. And if your community has rent control/just cause eviction protections that prohibit evictions after foreclosure or limit the causes for eviction, you are protected under those regulations too.
If you do receive a 90-days' notice to vacate as a Section 8 tenant, you should immediately contact your local housing agency for information and assistance in transferring your voucher to another property. And be very careful in dealing with the lender, as lenders and their agents often make a special effort to part Section 8 tenants from their homes, and will often engage in dishonest (and sometimes criminal) behavior to entice Section 8 tenants to move.
It's a new law (signed into law by President Obama on May 20, 2009) that protects almost all tenants in foreclosed properties, requiring that they be given at least 90-days' notice to vacate their homes. Now it's likely that we'll hear lots of whining from lenders and loan servicers about the difficulties inherent in managing rental properties. But bank trust departments manage rental property all the time. And if it's too onerous a burden to hire someone to call a plumber to deal with a stopped drain, property management firms would be only too willing to, for a fee, call the plumber for them. (I'm actually amazed that more realtors, suffering from lack of business, haven't hung out their shingles as property managers.)
So what IS this new federal legislation?
Tenants in California weren't as bad off in foreclosed properties as tenants in some other states. In some states the lender could just show up on the doorstep and order the tenants out of the property. Many states provided that tenants need be given only a few days to vacate the property.
But with the passage of SB 896 tenants, no matter where they live in the United States, are given at least 90-days' notice, or the duration of their lease, before they have to vacate the property. This means that if you signed a one year lease in January, you will not have to move until the expiration of that lease at the end of December, no matter when the foreclosure sale takes place. If, however, your lease expires less than 90 days after the foreclosure sale, or you have a month-to-month tenancy, you will have at least 90 days to move. And while that's wonderful news for California tenants, it's even better news for the many tenants throughout the country who face instant eviction after a foreclosure sale.
There are, of course, a few exceptions. The foreclosing lender wouldn't have to give you this notice if you were being housed free or for a much below market rent by a relative. Another exception to the rule is that if the building is sold to an owner who intends to occupy the premises, the lease may be voided. However, tenants in these properties will then receive 90-days notice.
Tenants who live in communities that provide for more notice, or have just cause eviction and do not allow eviction in event of foreclosure, will not be affected by the federal legislation. In other words, the federal law doesn't preempt better state and local laws. So the just cause protections and the Los Angeles foreclosure moratorium will remain in effect.
You can read the law here and the Tenants Together press release here. And you can read the National Low Income Housing Coalition's letter here.
I have a Section 8 voucher. Am I protected?
Yes. A tenant who has a Section 8 voucher is protected much as unsubsidized tenants are. If this is the first year of your lease, you are protected for the term of that lease, unless the building is sold to an owner who intends to occupy your unit, in which case you will get the same 90-days' notice to vacate that unsubsidized tenants receive. And if your community has rent control/just cause eviction protections that prohibit evictions after foreclosure or limit the causes for eviction, you are protected under those regulations too.
If you do receive a 90-days' notice to vacate as a Section 8 tenant, you should immediately contact your local housing agency for information and assistance in transferring your voucher to another property. And be very careful in dealing with the lender, as lenders and their agents often make a special effort to part Section 8 tenants from their homes, and will often engage in dishonest (and sometimes criminal) behavior to entice Section 8 tenants to move.
Tenants in Other States
I mean, it's okay that you're California-centric, but do you have any other helpful information for those of us who live outside your charmed state?
Haha. Bits and pieces. I came to this as a tenant activist from long ago who, because she mercifully lives in a state with nonjudicial foreclosure, was able to quickly digest most of the rules on tenants and foreclosure. I don't know the rules for other states--either landlord-tenant or foreclosure. I did run across this nifty little chart from the National Low Income Housing Coalition. It provides very basic information on foreclosures, where they have been able to glean that information. And they've now come out with a new report that includes more information for tenants facing foreclosure, including timelines for many states. But you should still contact a local tenant organization or legal aid group, as you'll need more help than this provides to negotiate the process. If you live in a small town, try searching for a tenants' assistance line in a major city in your state. The rules may not be the same, as some large cities provide more protections for tenants that the state government allows, but the tenants' organization will at least know what the state law provides.
And if you live in a state that required no notice, or very little, before the passage of the federal legislation, you should read below on the possible bad behaviors of lenders and their agents, as they will use all sorts of nefarious tricks to part you from your home without having to give you the required notice.
I will also remind you to get any agreement with the lender with respect to "cash for keys," additional time to move, return of your security deposit etc. IN WRITING. Any cash settlement should be paid by cashier's check or money order.
Oregon tenants have new rights in foreclosure. Tenants there now have the right to 120-days notice that their homes are under threat of foreclosure. And tenants may withhold rent prior to the foreclosure sale to recover their security deposits. More information is here.
Haha. Bits and pieces. I came to this as a tenant activist from long ago who, because she mercifully lives in a state with nonjudicial foreclosure, was able to quickly digest most of the rules on tenants and foreclosure. I don't know the rules for other states--either landlord-tenant or foreclosure. I did run across this nifty little chart from the National Low Income Housing Coalition. It provides very basic information on foreclosures, where they have been able to glean that information. And they've now come out with a new report that includes more information for tenants facing foreclosure, including timelines for many states. But you should still contact a local tenant organization or legal aid group, as you'll need more help than this provides to negotiate the process. If you live in a small town, try searching for a tenants' assistance line in a major city in your state. The rules may not be the same, as some large cities provide more protections for tenants that the state government allows, but the tenants' organization will at least know what the state law provides.
And if you live in a state that required no notice, or very little, before the passage of the federal legislation, you should read below on the possible bad behaviors of lenders and their agents, as they will use all sorts of nefarious tricks to part you from your home without having to give you the required notice.
I will also remind you to get any agreement with the lender with respect to "cash for keys," additional time to move, return of your security deposit etc. IN WRITING. Any cash settlement should be paid by cashier's check or money order.
Oregon tenants have new rights in foreclosure. Tenants there now have the right to 120-days notice that their homes are under threat of foreclosure. And tenants may withhold rent prior to the foreclosure sale to recover their security deposits. More information is here.
On the Various Moratoriums
How will the various state and federal foreclosure moratoriums affect me?
There are so many moratoriums on foreclosures now that it's almost impossible to keep track of them. With the exception of loans held be Fannie Mae and Freddie Mac though, most of them have no direct impact on tenants. In some cases lenders may negotiate with landlords, particularly if the landlord lives in another unit in your building, but most of the negotiation requirements are directed at owner-occupied housing. However, tenants may get a short reprieve because some landlords bought properties claiming to be owner-occupiers, and it may take the lenders some time to find out that the landlord doesn't live at the property.
Now this raises and interesting issue. In California, until the Notice of Trustee Sale is posted, you're better off if the lender thinks the owner lives at the property. That's because the various moratoriums apply only to owner-occupied properties. So if the lender thinks the landlord lives there, it takes more time for the lender to move to the auction.
BUT, once the Notice of Trustee Sale has been posted, you want the lender to know that you are a tenant residing at the property. First, tenants receive 90-days' notice after the foreclosure sale, while owners can be evicted on a 3-days' notice. And if you live in a community with rent control/just cause eviction protections, you want to make sure that they know a tenant resides at the property. Notifying the lender of your status will make it less likely that the lender will try to "evict" the landlord, sidestepping the laws protecting tenants in foreclosed properties.
There are so many moratoriums on foreclosures now that it's almost impossible to keep track of them. With the exception of loans held be Fannie Mae and Freddie Mac though, most of them have no direct impact on tenants. In some cases lenders may negotiate with landlords, particularly if the landlord lives in another unit in your building, but most of the negotiation requirements are directed at owner-occupied housing. However, tenants may get a short reprieve because some landlords bought properties claiming to be owner-occupiers, and it may take the lenders some time to find out that the landlord doesn't live at the property.
Now this raises and interesting issue. In California, until the Notice of Trustee Sale is posted, you're better off if the lender thinks the owner lives at the property. That's because the various moratoriums apply only to owner-occupied properties. So if the lender thinks the landlord lives there, it takes more time for the lender to move to the auction.
BUT, once the Notice of Trustee Sale has been posted, you want the lender to know that you are a tenant residing at the property. First, tenants receive 90-days' notice after the foreclosure sale, while owners can be evicted on a 3-days' notice. And if you live in a community with rent control/just cause eviction protections, you want to make sure that they know a tenant resides at the property. Notifying the lender of your status will make it less likely that the lender will try to "evict" the landlord, sidestepping the laws protecting tenants in foreclosed properties.
Fannie Mae and Freddie Mac
What if my house is owned by Fannie Mae or Freddie Mac?
Both Fannie Mae and Freddie Mac have developed procedures to allow tenants to stay in Fannie and Freddie-owned houses while the GSEs tried to sell them. Fannie has announced its policy, which will allow those tenants who choose to stay to remain on month-to-month leases and will provide assistance to tenants who want to move. The press release is here; the FAQ is here; and the toll-free number (oh, glory be) for Fannie tenants is 1-800-7FANNIE (1-800-732-6643).
Freddie Mac also has information for tenants in Freddie-owned buildings, although it took me several minutes to find it. You can read up on Freddie-owned properties here, and there is an email address for tenants with questions. Be sure that you indicate that you're a tenant at the property.
Robert Doggett at Texas Rio Grande Legal Aid reports that neither the Fannie Mae and Freddie Mac websites has been updated to note the requirement that tenant leases be maintained. Fannie and Freddie tenants have the same rights under the federal legislation passed in May 2009, so tenants should not be offered month-to-month agreements until their leases have expired. (Ht Tenants Together.)
Both Fannie Mae and Freddie Mac have developed procedures to allow tenants to stay in Fannie and Freddie-owned houses while the GSEs tried to sell them. Fannie has announced its policy, which will allow those tenants who choose to stay to remain on month-to-month leases and will provide assistance to tenants who want to move. The press release is here; the FAQ is here; and the toll-free number (oh, glory be) for Fannie tenants is 1-800-7FANNIE (1-800-732-6643).
Freddie Mac also has information for tenants in Freddie-owned buildings, although it took me several minutes to find it. You can read up on Freddie-owned properties here, and there is an email address for tenants with questions. Be sure that you indicate that you're a tenant at the property.
Robert Doggett at Texas Rio Grande Legal Aid reports that neither the Fannie Mae and Freddie Mac websites has been updated to note the requirement that tenant leases be maintained. Fannie and Freddie tenants have the same rights under the federal legislation passed in May 2009, so tenants should not be offered month-to-month agreements until their leases have expired. (Ht Tenants Together.)
Foreclosure Procedure in California
Okay, so give me the procedure, in an easy list form.
[Please note that this procedure is specific to nonjudicial foreclosure in California. Other states with nonjudicial foreclosure have different procedures, and judicial foreclosure is a court action against the landlord.]
Here's what happens:
1. Your landlord doesn't pay the mortgage.
2. After a few months, the lender files a Notice of Default.
3. Your landlord has three months to cure the default. That's legalese for paying the mortgage or, if possible, negotiating new mortgage terms with the lender.
4. If your landlord doesn't pay or can't work out an agreement with the lender within the three months, the lender can file a Notice of Trustee Sale and put the building up for auction. The Trustee Sale will be at least 20 days from the filing of the Notice of Trustee Sale, but it can be longer.
5. Once the building has been sold, and the vast majority are "sold" back to the lender these days, the lender can, if your aren't protected by rent control or "just cause" eviction protections, serve you with a 90-days' Notice to Quit (quit is legalese for move and give up possession) or to the end of your lease if your lease expires more than 90 days after the date you receive notice from the lender.
So now for the long version, please.
Most foreclosures in California are nonjudicial for a variety of reasons I won't get into here. That means that the lender doesn't have to got to court to foreclose when the borrower doesn't pay. After your landlord has missed several payments, the lender files a Notice of Default with the County Recorder. If your landlord doesn't either pay the arrears or negotiate a deal with the lender within three months, the lender can file a Notice of Trustee Sale and and try to sell the building at a courthouse auction. Sometimes it will take lenders more than three months to get around to filing the Notice of Trustee Sale and selling the building, but it will be at least three months from the filing of the Notice of Default.
It may take more than three months because the lender and your landlord are negotiating a settlement, or the lender maybe overwhelmed with foreclosures and can't process them quickly. If you live in a house or condominium, the lender may not want to file the Notice of Trustee Sale because the lender would have to pay the condominium or homeowner association dues. (That leaves the tenant in limbo, in that no one is responsible for the building, but that's not necessarily a bad thing, as no one will be asking for rent either.)
In California, the Notice of Trustee Sale should be posted at the property. This is often the first notice that tenants have that there is a problem. Most buildings don't sell at auction and the lender ends up taking the building back. The lender then enters the default with the County Recorder, and takes possession of the building. This process can take from six months to a year, depending on how quickly your landlord's lender moves.
So tenants don't find out about the foreclosure until some notice gets posted on the garage door?
Well, not always. Very occasionally a landlord will tell the tenants that he's abandoning the property. Sometimes tenants find out that the building is in foreclosure when realtors who specialize in foreclosure sales start circling the building. Some landlords lied to their lenders, claiming to live at the property, and the tenants find themselves deluged with mail from the loan servicer or lender. And if you live in San Francisco, you should receive a warning from the County Assessor if a Notice of Default is filed on the property where you live.
For many tenants, though, the first notice is the Notice of Trustee Sale. But since the passage of SB 1137 in July 2008, a copy of the Notice of Trustee Sale should be mailed to properties where tax bills and the like are sent to another address, with the following additional notice:
Foreclosure process has begun on this property, which may affect your right to continue to live in this property. Twenty days or more after the date of this notice, this property may be sold at foreclosure. If you are renting this property, the new property owner may either give you a new lease or provide you with a 60-day eviction notice. However, other laws may prohibit an eviction in this circumstance or provide you with a longer notice before eviction. You may wish to contact a lawyer or your local legal aid or housing counseling agency to discuss any rights you may have.
Even though this is, for many tenants, the first warning that anything is amiss, it at least notifies tenants that the lender is required to give them a 60-days' notice. (Please note that this notice is now incorrect, in that it provides only a 60-days' notice, and federal law now requires a notice of at least 90 days.) However, as I noted above, if your landlord took out the mortgage on your house as an owner-occupier, you will not receive this notice. The lender is required to send it only to those addresses where the mortgage and tax notices are sent to another address. So if your landlord's tax bills come to you, you should pay attention if you're suddenly receiving lots of official-looking mail from mortgage service firms and the local tax collectors.
Unfortunately, the Legislature dumped a provision that would have required that tenants receive a copy of the Notice of Default. Had tenants won the right to a copy of the Notice of Default, that would have given them an extra three months notice. The Legislature, though, was swayed by the argument of the mortgage bankers--that sending a copy of the Notice of Default would violate the landlord's privacy. Uh, the Notice of Default is a public record. (Oh, how I wish I could get away with making dumb arguments like that!) Many tenants, in fact, find out that a Notice of Default has been filed when realtors who handle foreclosure sales start nosing 'round the house.
My landlord's lender has filed a notice of default. Can I move?
If you have a month-to-month rental agreement, you can move at any time. Just send your landlord a letter stating that you'll be moving in 30 days. If you have a lease, you'll have to negotiate with your landlord to leave early, and there's not much you can do if he won't let you out of the lease. And your landlord may well want to continue collecting rent from you until the foreclosure. But your landlord cannot collect rent from you for periods after the foreclosure sale. (Some landlords have managed to collect rent for months after the building was taken back by the lender, and the tenants then have to sue the former landlord to recover the money.)
I have a year's lease. Can the lender evict me if it hasn't expired?
In most cases, no. Under federal law tenants may remain in their homes until their leases expire, or for 90 days, whichever is later. The exception is that if your home is sold to an owner-occupier, your lease may be voided. However, you are still entitled to 90-days' notice to vacate. So if you have more than 90 days left on your lease, you'll generally get to stay for the term of the lease. If you have less than 90 days left on your lease, you'll receive 90-days' notice.
[Please note that this procedure is specific to nonjudicial foreclosure in California. Other states with nonjudicial foreclosure have different procedures, and judicial foreclosure is a court action against the landlord.]
Here's what happens:
1. Your landlord doesn't pay the mortgage.
2. After a few months, the lender files a Notice of Default.
3. Your landlord has three months to cure the default. That's legalese for paying the mortgage or, if possible, negotiating new mortgage terms with the lender.
4. If your landlord doesn't pay or can't work out an agreement with the lender within the three months, the lender can file a Notice of Trustee Sale and put the building up for auction. The Trustee Sale will be at least 20 days from the filing of the Notice of Trustee Sale, but it can be longer.
5. Once the building has been sold, and the vast majority are "sold" back to the lender these days, the lender can, if your aren't protected by rent control or "just cause" eviction protections, serve you with a 90-days' Notice to Quit (quit is legalese for move and give up possession) or to the end of your lease if your lease expires more than 90 days after the date you receive notice from the lender.
So now for the long version, please.
Most foreclosures in California are nonjudicial for a variety of reasons I won't get into here. That means that the lender doesn't have to got to court to foreclose when the borrower doesn't pay. After your landlord has missed several payments, the lender files a Notice of Default with the County Recorder. If your landlord doesn't either pay the arrears or negotiate a deal with the lender within three months, the lender can file a Notice of Trustee Sale and and try to sell the building at a courthouse auction. Sometimes it will take lenders more than three months to get around to filing the Notice of Trustee Sale and selling the building, but it will be at least three months from the filing of the Notice of Default.
It may take more than three months because the lender and your landlord are negotiating a settlement, or the lender maybe overwhelmed with foreclosures and can't process them quickly. If you live in a house or condominium, the lender may not want to file the Notice of Trustee Sale because the lender would have to pay the condominium or homeowner association dues. (That leaves the tenant in limbo, in that no one is responsible for the building, but that's not necessarily a bad thing, as no one will be asking for rent either.)
In California, the Notice of Trustee Sale should be posted at the property. This is often the first notice that tenants have that there is a problem. Most buildings don't sell at auction and the lender ends up taking the building back. The lender then enters the default with the County Recorder, and takes possession of the building. This process can take from six months to a year, depending on how quickly your landlord's lender moves.
So tenants don't find out about the foreclosure until some notice gets posted on the garage door?
Well, not always. Very occasionally a landlord will tell the tenants that he's abandoning the property. Sometimes tenants find out that the building is in foreclosure when realtors who specialize in foreclosure sales start circling the building. Some landlords lied to their lenders, claiming to live at the property, and the tenants find themselves deluged with mail from the loan servicer or lender. And if you live in San Francisco, you should receive a warning from the County Assessor if a Notice of Default is filed on the property where you live.
For many tenants, though, the first notice is the Notice of Trustee Sale. But since the passage of SB 1137 in July 2008, a copy of the Notice of Trustee Sale should be mailed to properties where tax bills and the like are sent to another address, with the following additional notice:
Foreclosure process has begun on this property, which may affect your right to continue to live in this property. Twenty days or more after the date of this notice, this property may be sold at foreclosure. If you are renting this property, the new property owner may either give you a new lease or provide you with a 60-day eviction notice. However, other laws may prohibit an eviction in this circumstance or provide you with a longer notice before eviction. You may wish to contact a lawyer or your local legal aid or housing counseling agency to discuss any rights you may have.
Even though this is, for many tenants, the first warning that anything is amiss, it at least notifies tenants that the lender is required to give them a 60-days' notice. (Please note that this notice is now incorrect, in that it provides only a 60-days' notice, and federal law now requires a notice of at least 90 days.) However, as I noted above, if your landlord took out the mortgage on your house as an owner-occupier, you will not receive this notice. The lender is required to send it only to those addresses where the mortgage and tax notices are sent to another address. So if your landlord's tax bills come to you, you should pay attention if you're suddenly receiving lots of official-looking mail from mortgage service firms and the local tax collectors.
Unfortunately, the Legislature dumped a provision that would have required that tenants receive a copy of the Notice of Default. Had tenants won the right to a copy of the Notice of Default, that would have given them an extra three months notice. The Legislature, though, was swayed by the argument of the mortgage bankers--that sending a copy of the Notice of Default would violate the landlord's privacy. Uh, the Notice of Default is a public record. (Oh, how I wish I could get away with making dumb arguments like that!) Many tenants, in fact, find out that a Notice of Default has been filed when realtors who handle foreclosure sales start nosing 'round the house.
My landlord's lender has filed a notice of default. Can I move?
If you have a month-to-month rental agreement, you can move at any time. Just send your landlord a letter stating that you'll be moving in 30 days. If you have a lease, you'll have to negotiate with your landlord to leave early, and there's not much you can do if he won't let you out of the lease. And your landlord may well want to continue collecting rent from you until the foreclosure. But your landlord cannot collect rent from you for periods after the foreclosure sale. (Some landlords have managed to collect rent for months after the building was taken back by the lender, and the tenants then have to sue the former landlord to recover the money.)
I have a year's lease. Can the lender evict me if it hasn't expired?
In most cases, no. Under federal law tenants may remain in their homes until their leases expire, or for 90 days, whichever is later. The exception is that if your home is sold to an owner-occupier, your lease may be voided. However, you are still entitled to 90-days' notice to vacate. So if you have more than 90 days left on your lease, you'll generally get to stay for the term of the lease. If you have less than 90 days left on your lease, you'll receive 90-days' notice.
What is Cash for Keys?
The realtor who is working for my former landlord's lender came by yesterday and offered us money if we'd move out within 30 days. Should we take it?
That depends. Your first consideration should, of course, be whether you can find a new place within the 30 days. It may be that you've seen a better place 'round the corner for less rent than you're paying now. (I know, dreaming, but it can happen.) If that's true, you might want to tote up the cost of moving and your security deposit, with a percentage for the hassle of it all, and see if the lender is willing to agree to that sum. If the lender agrees to that sum, you'll need to prepare a written agreement, detailing your moving date, the amount of the payment and how that payment is to be made. In ALL circumstances, that agreement should be in writing and signed by an authorized representative of the lender. In the event that the lender reneges and, when you turn in the keys, no cash is forthcoming, you can sue the lender in Small Claims Court to recover the funds.
But if you have children or pets or are disabled, and have specific requirements, you may need the 90 days more than the money, so consider carefully whether you want to put yourself under that kind of time constraint. If you don't, you are entirely within your legal rights to reject cash for keys, and demand a 90-days' notice. And if you are protected by just cause eviction protections or a local moratorium on foreclosure evictions, you'll likely just want to stay in your present home. And no matter how much pressure the realtor or lender's agent puts on you to move quickly, you are under no legal obligation to take a cash for keys offer. And if the lender's representative becomes nasty or rude, you may ask him to leave. If you a threatened or assaulted, it's a matter for the police.
So if I were deciding whether to accept a cash for keys offer, I'd consider the following:
1. The protections afforded by state and local laws. If those don't allow eviction after foreclosure or provide a longer notice period, you should be offered more money, as you have a greater interest in staying in your home.
2. The amount of your deposit. If the cash for keys offer is less than your deposit, it means you're are giving up the difference. Do you want to do that? If the lender prepares the cash for keys agreement, it will most likely state that the agreement settles all claims you have on the lender, which means that you give up your right to sue the lender for return of your security deposit.
3. The cost of moving. Include in this security/pet/other deposits, the cost of movers, or the truck and pizza for your friends, utility deposits, changing your address everywhere, the time you have to take off work to deal with finding a new home etc.
Then tote all these costs up and see if the cash for keys offer is close to your costs.
If the lender offered me 30 days and $500, I'd probably just call off the negotiations as not serious. And I'd hope that you'd do the same. For most units, I'd expect the settlement to be in multiples of $1,000.
I received a notice from a realtor working for the lender, offering me $500 cash for keys if I'd move in 10 days. The notice said that if I didn't take the offer, they'd begin the eviction process and the Sheriff would evict me. Is this true?
Well, what's important here is what the notice doesn't say. It doesn't say that the lender would have to serve you with a 90-days' notice to vacate and wait for the 90 days to expire before filing with the court to evict you in an unlawful detainer action. Only after the conclusion of the court action would the Sheriff be able to evict you from the property. As I've discussed elsewhere, you must move before any court eviction is filed, but that comes after your 90-days' has expired. It appears that lenders have developed a standard form notice making this offer, as many tenants don't know their rights and are rightly frightened by the very idea of a Sheriff's eviction. If you don't want to accept the offer, just send a note stating that the sum is way too small, the time to vacate way too short, and that you will wait to receive the legally-required 90-days' notice to vacate.
And this bad behavior, the one where the lender tries to cheat people out of their required notice, is happening all over the country. For example, see this. If you can't figure out what the notice says, and some of them are written to be confusing, get help. And while bureaucracy is not my thing, state legislatures may have to pass laws requiring exact wording for notices to protect tenants' rights.
That depends. Your first consideration should, of course, be whether you can find a new place within the 30 days. It may be that you've seen a better place 'round the corner for less rent than you're paying now. (I know, dreaming, but it can happen.) If that's true, you might want to tote up the cost of moving and your security deposit, with a percentage for the hassle of it all, and see if the lender is willing to agree to that sum. If the lender agrees to that sum, you'll need to prepare a written agreement, detailing your moving date, the amount of the payment and how that payment is to be made. In ALL circumstances, that agreement should be in writing and signed by an authorized representative of the lender. In the event that the lender reneges and, when you turn in the keys, no cash is forthcoming, you can sue the lender in Small Claims Court to recover the funds.
But if you have children or pets or are disabled, and have specific requirements, you may need the 90 days more than the money, so consider carefully whether you want to put yourself under that kind of time constraint. If you don't, you are entirely within your legal rights to reject cash for keys, and demand a 90-days' notice. And if you are protected by just cause eviction protections or a local moratorium on foreclosure evictions, you'll likely just want to stay in your present home. And no matter how much pressure the realtor or lender's agent puts on you to move quickly, you are under no legal obligation to take a cash for keys offer. And if the lender's representative becomes nasty or rude, you may ask him to leave. If you a threatened or assaulted, it's a matter for the police.
So if I were deciding whether to accept a cash for keys offer, I'd consider the following:
1. The protections afforded by state and local laws. If those don't allow eviction after foreclosure or provide a longer notice period, you should be offered more money, as you have a greater interest in staying in your home.
2. The amount of your deposit. If the cash for keys offer is less than your deposit, it means you're are giving up the difference. Do you want to do that? If the lender prepares the cash for keys agreement, it will most likely state that the agreement settles all claims you have on the lender, which means that you give up your right to sue the lender for return of your security deposit.
3. The cost of moving. Include in this security/pet/other deposits, the cost of movers, or the truck and pizza for your friends, utility deposits, changing your address everywhere, the time you have to take off work to deal with finding a new home etc.
Then tote all these costs up and see if the cash for keys offer is close to your costs.
If the lender offered me 30 days and $500, I'd probably just call off the negotiations as not serious. And I'd hope that you'd do the same. For most units, I'd expect the settlement to be in multiples of $1,000.
I received a notice from a realtor working for the lender, offering me $500 cash for keys if I'd move in 10 days. The notice said that if I didn't take the offer, they'd begin the eviction process and the Sheriff would evict me. Is this true?
Well, what's important here is what the notice doesn't say. It doesn't say that the lender would have to serve you with a 90-days' notice to vacate and wait for the 90 days to expire before filing with the court to evict you in an unlawful detainer action. Only after the conclusion of the court action would the Sheriff be able to evict you from the property. As I've discussed elsewhere, you must move before any court eviction is filed, but that comes after your 90-days' has expired. It appears that lenders have developed a standard form notice making this offer, as many tenants don't know their rights and are rightly frightened by the very idea of a Sheriff's eviction. If you don't want to accept the offer, just send a note stating that the sum is way too small, the time to vacate way too short, and that you will wait to receive the legally-required 90-days' notice to vacate.
And this bad behavior, the one where the lender tries to cheat people out of their required notice, is happening all over the country. For example, see this. If you can't figure out what the notice says, and some of them are written to be confusing, get help. And while bureaucracy is not my thing, state legislatures may have to pass laws requiring exact wording for notices to protect tenants' rights.
And If I Can't Move Within the 90 Days?
What if I can't move in 90 days?
It's possible that you can negotiate with the lender for more time,
particularly if you only need a week or two. A local lender is more likely to
be amenable to an extension than a European bank. (European bankers love the American landlord-tenant system. They can do things here that they would never get away with in European countries, and they tend to do them. My reading indicates that Deutsche Bank has been particularly nasty.) European banks treat American tenants the way US corporations treat agricultural workers in Central America.
If you can't negotiate with the lender, you must move by the time the 90 days is up. If you don't move, the landlord can file an unlawful detainer and ask the court to evict you. Most tenants don't know this, as they aren't often faced with eviction, but the right of private reporting agencies has eviscerated the rights of California tenants to defend themselves in court. Court documents are a matter of public record, and that enables various landlord reporting services to compile information on tenants who have had unlawful detainer actions filed against them in court. These services don't care whether the tenant won or lost the case, since most landlords don't want a tenant who has defended her rights against a landlord. The eviction reporting services look at filings; they don't care how the case was resolved. You must move before an unlawful detainer is filed. Period.
However, do remember that the lender has to give you 90-days' notice and wait for the full 90 days before filing an unlawful detainer. Less than honest real estate "professionals" are still trying to frighten people out of their homes by saying things like, "If you don't take our 45-cent cash for keys offer, we'll begin eviction proceedings." Well, yes they will, but those eviction proceedings don't become a court action until your 90-days' notice has expired.
It's possible that you can negotiate with the lender for more time,
particularly if you only need a week or two. A local lender is more likely to
be amenable to an extension than a European bank. (European bankers love the American landlord-tenant system. They can do things here that they would never get away with in European countries, and they tend to do them. My reading indicates that Deutsche Bank has been particularly nasty.) European banks treat American tenants the way US corporations treat agricultural workers in Central America.
If you can't negotiate with the lender, you must move by the time the 90 days is up. If you don't move, the landlord can file an unlawful detainer and ask the court to evict you. Most tenants don't know this, as they aren't often faced with eviction, but the right of private reporting agencies has eviscerated the rights of California tenants to defend themselves in court. Court documents are a matter of public record, and that enables various landlord reporting services to compile information on tenants who have had unlawful detainer actions filed against them in court. These services don't care whether the tenant won or lost the case, since most landlords don't want a tenant who has defended her rights against a landlord. The eviction reporting services look at filings; they don't care how the case was resolved. You must move before an unlawful detainer is filed. Period.
However, do remember that the lender has to give you 90-days' notice and wait for the full 90 days before filing an unlawful detainer. Less than honest real estate "professionals" are still trying to frighten people out of their homes by saying things like, "If you don't take our 45-cent cash for keys offer, we'll begin eviction proceedings." Well, yes they will, but those eviction proceedings don't become a court action until your 90-days' notice has expired.
On Security Deposits
My landlord has suffered foreclosure and I'm going to move. How do I get my security deposit back from my landlord?
The return of security deposits is governed by state law. And unfortunately state law lacks any precision in addressing this issue. And after having to uproot your life and move because your landlord can't keep his finances together, there is nothing more irritating, aggravating and infuriating to a tenant than to find that said landlord may also refuse to return your security deposit and there's nothing you can do about it. And it's double infuriating etc. if you had to pay a large deposit because you have pets, or not-so-good credit, or are young and don't have any credit history at all.
The return of security deposits is governed by state law. And unfortunately state law lacks any precision in addressing this issue. And after having to uproot your life and move because your landlord can't keep his finances together, there is nothing more irritating, aggravating and infuriating to a tenant than to find that said landlord may also refuse to return your security deposit and there's nothing you can do about it. And it's double infuriating etc. if you had to pay a large deposit because you have pets, or not-so-good credit, or are young and don't have any credit history at all.
There are two basic positions on this question. The first is that the lender is the "successor-in-interest" under the law governing return or security deposits and must, like any other landlord, return your deposit. But Steve Kellman of the Tenants Legal Center in San Diego makes a different argument--that the lender does not have to return your security deposit, but cannot charge rent during the 90-days' notice period. See this. I would argue, although I'm not a lawyer and might be entirely incorrect, that if the lender demands and/or accepts rent, the lender becomes the successor-in-interest and must return your security deposit.
You have several options. The first is to ask the lender for return of the security deposit. Some lenders are giving tenants "cash for keys" settlements equal to or greater than the amount of the security deposit. If the lender refuses, you can then sue the lender and your former landlord in Small Claims Court for the money. Remember that your former landlord owes you the return of your deposit regardless of any settlement you receive from the lender, no matter that most landlords believe that a security deposit is free money.
While some landlords are in serious financial trouble, many have just abandoned rental properties that no longer pencil out, so they would have resources (cash or wages) with which to pay the judgment you would obtain.
Could I just recover my security deposit from my landlord by not paying the rent?
Well, maybe.
You could, on finding out that your building has gone into foreclosure, call your soon-to-be-former landlord and tell him that you've decided to recover your security deposit by not paying rent for the next month or so. (You'd total up the entire amount of all the deposits you paid, and subtract that sum from the monthly rent. If you'd paid more than one month's rent in deposits, you'd then subtract the additional sum from a second month's rent.) And your landlord might have effectively abandoned the property, and would allow you to stop paying rent.
But the landlord could also serve you with a 3-days' Notice to Pay Rent or Quit. And then you'd have to pay the rent. If you failed to pay the rent after service of this notice, the landlord could file a suit for unlawful detainer against you in court. And no tenant can survive an unlawful detainer suit unscathed. The tenant screening services collect information on unlawful detainers from court records, and many landlords will not rent to any tenant who has had an unlawful detainer filed against her.
In addition, you wouldn't win the case. Irritating as this may be, the judge will not care that your security deposit is in jeopardy and your landlord is only going to be your landlord for another three weeks. The law requires that you pay the rent, and it's unlikely that any judge would try to find a way around that little problem, and would just order you evicted.
On Rent Control and "Just Cause" Eviction
I live in San Francisco. We have "just cause" eviction. Can the lender evict me?
Many tenants in California live in communities with rent control and/or "just cause" eviction. Unlike tenants in most of California, who can be evicted "for any reason or no reason at all," tenants who live in communities with "just cause" eviction protections cannot be evicted except for specified good reasons. Tenants can be evicted if they don't pay the rent, trash the place, engage in illegal activities, or disturb the neighbors. Tenants can also be evicted so that the owner can live in the unit, if the landlord is taking the unit off the rental market (pursuant to the Ellis Act), and for a very few other just causes. Foreclosure is not a cause for eviction in most California communities with "just cause."
Some lenders have tried to claim that state and federal law pre-empt local rent control and just cause protections. However, both state and federal laws specifically provide that local rent control and just cause eviction protections are controlling where those laws exist. That means that if local laws provide more protection for tenants, the local laws are controlling. Lenders may still try to make the argument, but tenants have the law on their side and may roll their eyes heavenward on hearing that assertion.
So how do I know if I'm covered under "just cause" eviction protections?
Ah, this question is a set up, as it allows me to explain some of the complexities of these laws. The following communities have both rent control and "just cause" eviction: San Francisco, Oakland, Berkeley, Los Angeles, Santa Monica and West Hollywood. San Jose, Palm Springs, Hayward and Beverly Hills have rent control, but no eviction protections. San Diego, however, has "just cause" eviction, but no rent control. A few other communities have mediation programs or very limited rent control. Those won't help you in this situation, and your "protection" is limited to that provided by state and federal law.
But it gets even more complicated. Some "just cause" laws provide protection to tenants who aren't covered by the rent control provisions of the local ordinances. Yes, it is confusing, but that's because the real estate interests sought (and received, of course) help from the State Legislature in limiting tenants' rights after communities with tenant majorities forced the passage of rent control and "just cause" eviction ordinances. This legislation, knows and the Costa-Hawkins Rental Housing Act or, simply, Costa-Hawkins, imposed severe limits on local laws, exempting all single-family houses and many condominiums from rent control, and requiring that all local laws allow for vacancy decontrol. However, it did not prohibit local ordinances from protecting tenants in these units from unjust eviction, so the "just cause" eviction protections may apply even if your unit isn't covered by rent control.
And it's now even more complicated. The City of Los Angeles passed a moratorium in December 2008, prohibiting eviction of tenants from foreclosed properties for one year, whether or not the house or apartment is covered by that city's rent control law. That means, simply, that all tenants in Los Angeles are protected against eviction after a landlord's foreclosure.
Two other California cities, Richmond and Ridgecrest, have passed "just cause" eviction laws that apply to tenants in foreclosed properties. You can read the Richmond ordinance here and a blog entry on the Ridgecrest ordinance here. Tenants Together did excellent work on this one!
I am not going to try to explain the intricacies of all the laws here. The best way to find out if you're covered by the "just cause" provisions of your local law is to call the Rent Control or Stabilization Board in your community, a local tenants' organization, or a lawyer specializing in tenants' rights. You'll get better information more quickly by consulting those who answer these questions all the time. And I don't think I need to tell you that you should not depend on the lender for accurate information. Lenders often don't know the local laws, or hope that tenants don't, and try to evict after foreclosure whether or not they have the right to do so. (In Oakland, for instance, the City Attorney has been forced to take action against lenders who try to evict tenants in violation of that city's ordinance.)
What do tenants who are protected against eviction need to do to enforce their rights?
Many lenders will attempt to evict tenants in violation of rent control and "just cause" eviction ordinances. The first thing you should do is to make sure that the lender or loan servicer knows that there are tenants at the property. That means sending a letter to the lender or loan servicer (you'll find that on the Notice of Trustee Sale), informing them that tenants reside at the property being foreclosed and giving them contact information. If the Notice of Trustee Sale has a telephone number for the lender or loan servicer, call and ask for the name of the person handling the property, and address the letter to her. Make a copy of the letter, and mail the letter at the post office. Obtain a proof of mailing.
As I noted above, you should also contact the rent stabilization board or a local tenants' organization. Those groups will have the most up-to-date information on local laws, and will also know how to deal with specific lenders.
Then be very aware of the possible scams the lender might try, a few of which are:
1. Allowing you to stay without paying rent. Then after a few months, the lender either serves you with a 3-days' notice to pay rent or quit, or worse still, serves you with an unalwful detainer claiming that they served you with a 3-days' notice to pay rent or quit and you failed to pay the rent. If the lender offers to allow you to stay rent free, get an agreement to that effect in writing. It's likely that if you demand this, they will not allow you to stay without paying rent, but it will protect you from eviction.
If you receive a 3-days' notice, you must pay the rent. If you receive court eviction papers (an unlawful detainer), see a lawyer promptly.
2. The foreclosing lender files an unlawful detainer against the landlord, ignoring your very clear letter informing the lender of your presence and status. You need a lawyer to handle this--you can'tdo it yourself . But the lawyer will be very happy to see your copy of the letter and the proof of mailing from the post office.
Some of the scamming has gotten so bad that San Francisco's Rent Stabilization Board is threatening illegal eviction lawsuits against miscreant lenders.
Recommendations for tenants in foreclosed buildings in Oakland are here.
Basic information for tenants in the City of Los Angeles is here.
Information for tenants in West Hollywood is here.
The San Francisco Tenants Union has information for San Francisco tenants here.
Many tenants in California live in communities with rent control and/or "just cause" eviction. Unlike tenants in most of California, who can be evicted "for any reason or no reason at all," tenants who live in communities with "just cause" eviction protections cannot be evicted except for specified good reasons. Tenants can be evicted if they don't pay the rent, trash the place, engage in illegal activities, or disturb the neighbors. Tenants can also be evicted so that the owner can live in the unit, if the landlord is taking the unit off the rental market (pursuant to the Ellis Act), and for a very few other just causes. Foreclosure is not a cause for eviction in most California communities with "just cause."
Some lenders have tried to claim that state and federal law pre-empt local rent control and just cause protections. However, both state and federal laws specifically provide that local rent control and just cause eviction protections are controlling where those laws exist. That means that if local laws provide more protection for tenants, the local laws are controlling. Lenders may still try to make the argument, but tenants have the law on their side and may roll their eyes heavenward on hearing that assertion.
So how do I know if I'm covered under "just cause" eviction protections?
Ah, this question is a set up, as it allows me to explain some of the complexities of these laws. The following communities have both rent control and "just cause" eviction: San Francisco, Oakland, Berkeley, Los Angeles, Santa Monica and West Hollywood. San Jose, Palm Springs, Hayward and Beverly Hills have rent control, but no eviction protections. San Diego, however, has "just cause" eviction, but no rent control. A few other communities have mediation programs or very limited rent control. Those won't help you in this situation, and your "protection" is limited to that provided by state and federal law.
But it gets even more complicated. Some "just cause" laws provide protection to tenants who aren't covered by the rent control provisions of the local ordinances. Yes, it is confusing, but that's because the real estate interests sought (and received, of course) help from the State Legislature in limiting tenants' rights after communities with tenant majorities forced the passage of rent control and "just cause" eviction ordinances. This legislation, knows and the Costa-Hawkins Rental Housing Act or, simply, Costa-Hawkins, imposed severe limits on local laws, exempting all single-family houses and many condominiums from rent control, and requiring that all local laws allow for vacancy decontrol. However, it did not prohibit local ordinances from protecting tenants in these units from unjust eviction, so the "just cause" eviction protections may apply even if your unit isn't covered by rent control.
And it's now even more complicated. The City of Los Angeles passed a moratorium in December 2008, prohibiting eviction of tenants from foreclosed properties for one year, whether or not the house or apartment is covered by that city's rent control law. That means, simply, that all tenants in Los Angeles are protected against eviction after a landlord's foreclosure.
Two other California cities, Richmond and Ridgecrest, have passed "just cause" eviction laws that apply to tenants in foreclosed properties. You can read the Richmond ordinance here and a blog entry on the Ridgecrest ordinance here. Tenants Together did excellent work on this one!
I am not going to try to explain the intricacies of all the laws here. The best way to find out if you're covered by the "just cause" provisions of your local law is to call the Rent Control or Stabilization Board in your community, a local tenants' organization, or a lawyer specializing in tenants' rights. You'll get better information more quickly by consulting those who answer these questions all the time. And I don't think I need to tell you that you should not depend on the lender for accurate information. Lenders often don't know the local laws, or hope that tenants don't, and try to evict after foreclosure whether or not they have the right to do so. (In Oakland, for instance, the City Attorney has been forced to take action against lenders who try to evict tenants in violation of that city's ordinance.)
What do tenants who are protected against eviction need to do to enforce their rights?
Many lenders will attempt to evict tenants in violation of rent control and "just cause" eviction ordinances. The first thing you should do is to make sure that the lender or loan servicer knows that there are tenants at the property. That means sending a letter to the lender or loan servicer (you'll find that on the Notice of Trustee Sale), informing them that tenants reside at the property being foreclosed and giving them contact information. If the Notice of Trustee Sale has a telephone number for the lender or loan servicer, call and ask for the name of the person handling the property, and address the letter to her. Make a copy of the letter, and mail the letter at the post office. Obtain a proof of mailing.
As I noted above, you should also contact the rent stabilization board or a local tenants' organization. Those groups will have the most up-to-date information on local laws, and will also know how to deal with specific lenders.
Then be very aware of the possible scams the lender might try, a few of which are:
1. Allowing you to stay without paying rent. Then after a few months, the lender either serves you with a 3-days' notice to pay rent or quit, or worse still, serves you with an unalwful detainer claiming that they served you with a 3-days' notice to pay rent or quit and you failed to pay the rent. If the lender offers to allow you to stay rent free, get an agreement to that effect in writing. It's likely that if you demand this, they will not allow you to stay without paying rent, but it will protect you from eviction.
If you receive a 3-days' notice, you must pay the rent. If you receive court eviction papers (an unlawful detainer), see a lawyer promptly.
2. The foreclosing lender files an unlawful detainer against the landlord, ignoring your very clear letter informing the lender of your presence and status. You need a lawyer to handle this--you can't
Some of the scamming has gotten so bad that San Francisco's Rent Stabilization Board is threatening illegal eviction lawsuits against miscreant lenders.
Recommendations for tenants in foreclosed buildings in Oakland are here.
Basic information for tenants in the City of Los Angeles is here.
Information for tenants in West Hollywood is here.
The San Francisco Tenants Union has information for San Francisco tenants here.
Get It In Writing
You keep nattering on about getting stuff in writing. Why?
It' not because I'm in love with paper files, let me tell you. It's because I keep hearing about tenants who made "cash for keys" agreements, moved, and then never got any cash. Any agreement you make with the lender or the lender's representative must be in WRITING and signed by an authorized representative of the lender. An oral agreement is essentially unenforceable. If the lender won't put the agreement in writing, the lender doesn't intend to honor the agreement. It's that simple.
And I'll say this here, even though it's opinion and you can discount it entirely. Why would any tenant settle for a payment of $1,500? That's not enough to cover the deposit on a new house, let alone all the costs of moving. Calculate how much the lender is saving by not having to keep the building up for the 90-days' notice period, add your deposit and moving costs, and then a percentage increase for the hassle of it all. That's how much you should be getting--and get the agreement in writing.
Oh, and require a cashier's check or money order. These people are sleazy.
I was asked whether email is good enough for "in writing." Well, yes and no. It's good enough when you're negotiating with your lender's representative. Just print out your email and your correspondent's email and keep them in a folder. Any contract, however, and that would include a cash for keys agreement, should be in hard copy and have the original signatures of both parties. To create a "dual original," just print out two copies of the document and have all parties sign both copies.
It' not because I'm in love with paper files, let me tell you. It's because I keep hearing about tenants who made "cash for keys" agreements, moved, and then never got any cash. Any agreement you make with the lender or the lender's representative must be in WRITING and signed by an authorized representative of the lender. An oral agreement is essentially unenforceable. If the lender won't put the agreement in writing, the lender doesn't intend to honor the agreement. It's that simple.
And I'll say this here, even though it's opinion and you can discount it entirely. Why would any tenant settle for a payment of $1,500? That's not enough to cover the deposit on a new house, let alone all the costs of moving. Calculate how much the lender is saving by not having to keep the building up for the 90-days' notice period, add your deposit and moving costs, and then a percentage increase for the hassle of it all. That's how much you should be getting--and get the agreement in writing.
Oh, and require a cashier's check or money order. These people are sleazy.
I was asked whether email is good enough for "in writing." Well, yes and no. It's good enough when you're negotiating with your lender's representative. Just print out your email and your correspondent's email and keep them in a folder. Any contract, however, and that would include a cash for keys agreement, should be in hard copy and have the original signatures of both parties. To create a "dual original," just print out two copies of the document and have all parties sign both copies.
On Lawyers
I want to talk to a lawyer. How do I go about finding one?
If you've read this far, you know that most of the time you're not going to need a lawyer. There are exceptions, though, and when I say that you should get to a lawyer immediately, I mean it. Some situations are serious, and then you do need more help than a blog can provide.
Here's where I get to explain that landlord-tenant law is a specialized area of legal practice, and that going to see your cousin's friend who specializes in divorce and family law is not a good idea. Tenants' organizations often have lists of lawyers who specialize in tenants' rights issues. Some tenants' lawyers advertise in the phone book. You're more likely to find a lawyer in communities with strong tenants' movements than in the Valley or communities without many tenants. You might try contacting a sympathetic local official (someone who doesn't spit when talking about the tenants in the neighborhood) or a city information line. Sometimes a Bar Association referral panel will be able to refer you to a good tenant lawyer.
It's unfortunate though that the areas with the largest number of foreclosures have very limited assistance for tenants. Foreclosures occur far more frequently in lower-income communities, and those communities are less likely to be protected by local rent control and "just cause" eviction laws. Local officials are often closely tied to the real estate interests, and are not disposed to support legislation that would be opposed by those interests unless there are sufficient middle income tenants to require passage of these laws.
[If you are a lawyer who does not regularly handle landlord-tenant cases, please read the entire blog. It is important that you understand the entire process and, particularly, the problems for tenants facing unlawful detainers.]
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