Monday, December 1, 2014


The foreclosure crisis has been slowing for about two years now.  I can tell, as I suspect that there aren't many people who think, I could look at porn or I could read up on tenants in foreclosed properties in California; I'll do the foreclosed properties.  But I'm still getting almost 100 hits a day, on average, so I assume that the blog is still helpful.

This doesn't mean that banks and their agents have become any better behaved, however. They still try to pull the same scams they originated in 2008.  Fannie Mae is still trying to evict tenants in violation of their own rules.  Soon-to-be-foreclosed homeowners are still renting out properties just before the Notice of Default is filed.  Realtors still treat tenants as though we're dog dung.  And owners are still trying the rent-to-own scheme, getting large payments from tenants who will allegedly be able to buy the building in a couple of years, and then allowing the building to go into foreclosure.

I've heard that the "stop eviction" operations are still claiming that they can, for a fee, help tenants to stay in their homes after a foreclosure. Don't pay them money.  Please. From the Notice of Default, a tenant has seven months without paying anyone a sou.

Help Your Fellows

The Protecting Tenants at Foreclosure Act (PTFA) will expire at the end of this month. This is the legislation that protected tenants throughout the country who had the misfortune to live in a foreclosed property.  In many states this is the only protection afforded tenants, and its demise would allow the foreclosing lender to unceremoniously evict an unsuspecting tenant with little or no notice.  Imagine trying to pack up your house and find a new place to live in 72 hours.

Many states did nothing to provide protections for tenants in foreclosed properties, even though 40% of the households affected by the foreclosure crisis rented their homes.  You can check on your state on page 14 of the National Low-Income Housing Coalition's report. If you live in one of the red states and the PTFA is not extended, you will not have the very basic protections of that law.  And there is little reason the believe that if State Legislatures would not act during the crisis, that they will suddenly see the light and enact protections for a relatively few tenants.

And to help your fellows, you need only contact your Senators and Representative, asking them to vote to make the PTFA permanent.  You should also ask your Representative to co-sponsor the bill to make the PTFA permanent.  It will take only a few minutes, and it will give tenants who have the misfortune to live in a foreclosed property basic rights and protections.

Using This Blog

What is this blog for? 

This blog is for California tenants whose landlords have allowed their rental property (your home) 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 what options you have and, most important, how much time you have to relocate. Please read the entire blog as, while I try to present everything in a logical sequence, information may sometimes not be where you think it should be.

You'll find various miscellaneous entries at the end when I've been good and re-dated the blog entries, so that the information stays both current and coherent.

What about the rest of us?

If you don't live in California, much of the information here won't help you. Foreclosure laws and procedures vary by state, and I'm not competent to give you much help in dealing with your landlord or your landlord's lender. Having said that, the Protecting Tenants At Foreclosure Act applies to all tenants in foreclosed properties in the United States. I will discuss this legislation in its own section, so that you can find it easily. In addition you should probably read the section on "cash for keys" and the section on protecting yourself from bad landlord and lender behavior, as egregious conduct seems to have spread across the country faster than H1N1 did.

So who the hell are you?

I am a long-ago tenant activist, and I wrote the first edition of this blog in 2007, when foreclosure was still relatively uncommon. Mercifully, foreclosure procedure in California is relatively straightforward, so putting this information together wasn't terribly complicated. I'm not a lawyer, so I can't give you legal advice or represent you, and I will sometimes tell you that you need a lawyer immediately. 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.

So what's changed since you first wrote the blog?

Remarkably little. I wish I could report that lenders and their servicers had seen the light and allowed tenants to stay in foreclosed properties to keep them occupied until they were sold, but that isn't true. I wish I could report that lenders and their servicers always gave tenants the required legal notice, but that would--unfortunately--be a lie.  I wish I could report that lenders and their servicers always required that the realtors working for them treated tenants in foreclosed properties with respect and courtesy. But that wouldn't be true either, and tenants who are Latino or African American often receive special discourtesies. Sort of like shopping at Nordstrom's.  
They're just as ill-behaved as they were in 2007. In fact, some have used the experience of the crisis to refine their nasty tactics.

The only good things are that Tenants Together has a hotline for California tenants in foreclosed properties, and local tenants' groups are working to protect tenants in their communities. This is particularly important in communities with rent control and/or just cause eviction, as tenants in those communities have rights the State Legislature has not seen fit to grant the rest of us.  In addition, TT publishes regular reports of the plight of tenants in foreclosed properties.

The Tenants Together Hotline, in particular, can help with more difficult problems like utility shut-offs, badly-behaved lenders, and the like. In addition, you'll realize that you aren't alone, as nearly a million tenants in California have had to deal with their landlords' foreclosures.

So what are the three most important things the State Legislature could do for tenants in foreclosed properties?

Only three?

Yes, only three. Otherwise we'll be reading far into the night.

Okay, three.

First, all county recorders/assessors should be required to send a copy of any Notice of Default to the occupants of any property on which a Notice of Default has been filed. This gives tenants an early warning of a problem and enables tenants to plan their lives, rather than being at the mercy of the charming fellows we have deciding policy at Wells Fargo and Deutsche Bank.  Presently only San Francisco and Fresno send warning of the Notice of Default to all properties in those counties.

Second, the State Legislature could enact statewide just cause protections for foreclosed properties. This would, particularly, protect low-and moderate-income communities, where foreclosures leave large numbers of unoccupied, and deteriorating, properties strewn about the neighborhood. Cities tend to be much more assertive in protecting richer neighborhoods, so the state should take the lead in protecting everyone. Now the State Legislature has extended 90-day protection to most tenants in foreclosed properties in California, but "just cause" eviction would give tenants more protection and limit the "life after people" landscapes in so many low-income and minority neighborhoods.

That's actually three, you know, but we'll give you one more.

Thanks. The State Legislature should pass a law like that in Oregon, enabling tenants in properties where a Notice of Default has been filed to withhold rent to recover their security deposits before the foreclosure sale. That would save tenants from having to sue the bank to recover their money. And...

Stop. That's enough.

Special note: if the lender is trying to sell you the house you rent, read this first.

What's Happening? And Why?

So why are we having a crisis that may cost me my home?

Unless you've been living under a rock for the last five years, you already know most of the answer to this question.  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.

And the problem spread from the most precarious to people who had far more resources, like your landlord. Because housing prices have fallen rapidly in many parts of the country, homeowners and landlords can't refinance their mortgages 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.

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, or sometimes many months, the lender files a Notice of Default.

3. Your landlord has at least 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, 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, the lender can file a Notice of Trustee Sale and and try to sell the building at a courthouse auction.  The lender must give the borrower three months after filing the Notice of Default before filing the Notice of Trustee Sale and selling the building, but it can take many more months for the lender to get 'round to it.

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.  The process will take at least four months from the filing of the Notice of Default, but it often takes much longer.

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 or Fresno County, 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. The Notice of Trustee Sale is only mailed to properties where the tax notices and the like are mailed to another address.  You should receive a copy of that Notice and a warning that the building is in foreclosure.  The Notice will also inform you that the new owner will not be able to evict you for at least 90 days after the sale.

Since January 1, 2013, tenants in California are protected by a state law--AB 2610--that mostly mirrors the federal Protecting Tenants at Foreclosure Act.  However, there are a couple of important differences--and they're better.  The first is that all tenants are protected except those who live with the owner.  Those tenants receive only 30 days' notice.

Leases will generally survive unless the tenant is a parent, child, spouse or ex-spouse of the foreclosed owner, or the rent is substantially below market, or the lease is not what's called an "arm's length" transaction.  In these cases the lender still has to give 90-days' notice.

And under state law, you don't have to show that you are a "bona fide" tenant, which means that the lender can't frighten you out of your home by spouting Latin at you.  No, I'm serious.  I get email from tenants all the time asking me whether they're "bona fide" tenants, as the notice they received from the lender either wants the tenant to prove that she is, or is claiming that she isn't.  Now California law requires that the lender or new owner prove that you're not a bona fide tenant.

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 90-days' notice. 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.  However, you will probably already know about the foreclosure as you've been inundated with mail from the lender, foreclosure "rescue" scammers, and the like.

There are another good provision of the California law--AB 2610.  I'll probably move discussion of this elsewhere once I complete the blog revision, but for now I'll just mention it here.  One of the bad behaviors of some lenders is proceeding to "evict" the landlord, failing to even note that tenants live at the property.  This causes immense hassles for tenants, as they aren't named in the unlawful detainer action and have to intercede in the process to protect their rights.  A tenant who finds herself in this situation is not time-limited in asserting her rights.  Because some tenants never see the court papers, their first inkling that something is wrong is when the Sheriff delivers the notice that they'll be evicted in five days.  And yes, that is scary, and infuriating.  But now the tenant can stop the action by going to court--and you can do this up to the time that the Sheriff shows up to put you out.  If this happens to you, though, you need legal help.

Unfortunately, the Legislature has never enacted 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.)

Now there is an exception to this rule if you move into your new home after the Notice of Default was filed.  This happens relatively rarely these days, as most tenants are diligent about checking out properties before they rent them.  But it does still happen, particularly to tenants moving from other states where foreclosure is less of an issue.  SB 1191 requires that a landlord disclose that a Notice of Default has been filed on the property to prospective tenants.  (Yes, if you moved in before the Notice of Default was filed, the landlord is not required to notify you, even if he hasn't been paying the mortgage for a year and a half.)  A tenant who moves in and then discovers that the Notice of Default had been filed before she signed the lease can do one of two things:

She can void the lease and move out.  Then she can sue the landlord for a month's rent or for twice her actual damages, and any prepaid rent.  In computing this, you'd add up the cost of finding a new place and moving into it, and determine whether that sum is greater than a month's rent.  If the month's rent is more, sue for that.

Or if the foreclosure has not yet occurred, the tenant can deduct one month's rent and stay in the property.

In either case, you should, after expressing your anger, consternation and fury, notify the landlord in writing of your choice, reminding him in not so gentle terms that he violated the law by not informing you that the property was in foreclosure.

I have a year's lease. Can the lender evict me if it hasn't expired?

In most cases, no. Under federal and state 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.

Do I have to pay the rent?

Most of the time, yes. Your landlord owns the property up to the day of the Trustee Sale. So he can collect rent until then. And since most rental agreements and leases require that the full rent be paid on the first of the month, you may have to pay the full rent, even though the landlord is going to lose the property on the fifth. You can try paying the rent for the period up to the date of the Trustee Sale, but the landlord could serve you a 3-days' notice to pay rent or quit, and then you'd have to pay the rest of the rent for the month.

The lender may not collect rents for periods prior to the Trustee Sale, and may not collect rent if you've already paid your now former landlord for the month in which the Trustee Sale occurs. If, for instance, you paid the April rent on the first, and the Trustee Sale was on the fifth, the lender cannot collect the rent for April again. You have met your obligation under the rental contract.

It gets a bit iffier if you paid several months rent in advance. While you paid the landlord when he owned the property, you paid for periods after the Trustee Sale, and that's a more complicated legal issue. If you must pay rent in advance, be sure that your agreement to do so is in writing, so that you have some proof of the advance payment. Better still, don't pay rent for several months in advance. And ferhevensake, don't ever pay the rent in cash. It's a large sum of money; you want a paper trail better than a receipt on the back of an old envelope.

What if I don't know who owns the building?

You would think that lenders would operate in a more businesslike manner than just showing up at the door and demanding that you move or pay the rent or whatever.  You know, the courteous telephone call informing the tenant that the building as been foreclosed, and asking to make an appointment to talk.  Or perhaps a letter sent through the mail, rather than an illegible missive on a scrap of binder paper, asking when it would be convenient for the tenant(s) to meet and discuss the property.  You know, the kind of behavior that doesn't treat tenants as though we're lowlifes who are going to make off with the copper pipes, given the opportunity.  

Sometimes both the landlord and the lender come round demanding rent from you. Under the law the new owner, whether or not it's the lender, is supposed to notify the tenants within 15 days after the sale--in writing.  But that doesn't always happen, and sometimes a realtor just shows up demanding the rent.  If you don't get the written notice, ask for it.  It's the law, ferhevensake.  Then, before handing anyone a check, call the County Recorder and confirm the ownership of the building. If the Trustee Sale was canceled or hasn't been scheduled, you should pay the rent to your landlord. If the Trustee Sale did happen, find out the name and address of the new owner (whether the lender or someone else). If it's not clear who the owner is, send both your landlord and the lender a letter stating that it's unclear and that you will hold the rent until you receive definitive word.

And thanks to another new California law, AB 1953, a landlord who does not give you the required notice cannot evict you for not paying rent when you didn't know who to pay.  (This has been a common strategy in communities with rent control, where lenders show up four months after the Trustee Sale, demanding the rent, and then evicting tenants for not paying it.)  The new landlord can sue you for the money, but cannot evict you from your home if they've failed to make the required notification.  And if a lender does try to evict you, you have a defense to the unlawful detainer.

Anything else?

I hope that I don't have to tell you that just because someone comes round demanding the rent, you don't have to hand him a check. On occasion, scam artists have gone round to foreclosed properties, claiming to be the agent for the lender, and demanding the rent. And on occasion, tenants have given them the money. It would be helpful if I could say that no realtor would come round demanding the rent the way the loan sharks of yore demanded payment on the loan, but it's not true.

But you should not hand it over. Explain gently but firmly that you do not hand over checks for large sums of money to anyone who demands same, and that you will wait for the official notice from the lender, and that then you will mail the check to the address noted.

Now don't you want to take back all the nasty things you've said about the State Legislature, as they have passed some good legislation on the issue?

No, I don't.  It's been five years since I wrote the first version of this blog. Nigh on a million tenants have been forced from their homes, and the Legislature should get credit for closing the barn door after most of the horses done got loose?  Not in my world.  And the view that tenants should engage in lifelong forelock-tugging crosses party lines.  The brothers Calderon are particularly egregious Democrats.  Most of the Legislature believes that nothing should be done that might discomfit landlords. Heaven forfend, for instance, that tenants should be able to get their security deposits back from landlords who often haven't paid their mortgages for more than a year.  I'd be more impressed if the Legislature took responsibility for what has happened and allowed tenants who do lose their deposits should take the entire amount of the lost deposit as a tax credit.

What Happens Next?

And after the foreclosure sale?

It depends. That's helpful, isn't it?

First, once you've found the Notice of Trustee Sale tacked to the garage door, you should notify the lender IN WRITING that you are a tenant living at the property. Give the lender your contact information. In some cases this will be the first inkling that the landlord doesn't live there, as some landlords got loans for properties by claiming that they were going to live at the property.

However, if you've notified the lender that you are a tenant living at the property, and given the lender your contact information, it will also notice more unscrupulous lenders that they cannot simply "evict" your former landlord from the property. And that's a good thing, because the first notice that you would receive would be the notice of eviction from the local Sheriff, giving you only a few days to move. (Unfortunately, should that happen, you need a real lawyer, and fast.)

Legally what should happen is that you should receive written notice that the property has been "sold"--either back to the lender or to a new owner. You would then know where to send the rent and who is responsible for repairs, maintenance and the like. This doesn't always happen though. Sometimes people aren't contacted for months after the foreclosure sale. In other cases the agent for the owner shows up and threatens tenants with immediate eviction.

So what do I do?

Know your rights, first of all. Second if the lender doesn't show up for months, don't spend the rent money on a vacation. The lender has the right to collect the rent, and may ask for it. This is particularly important in rent-controlled properties, or in communities with foreclosure eviction moratoriums, as the unscrupulous lenders have been known to try to evict protected tenants with a 3-days' notice to pay rent or quit. In some cases they did it after informing the tenants that they didn't have to pay rent. (As always, if you make an agreement with the lender's representative, get it IN WRITING. And yes, I am going to keep putting "in writing" in upper case letters because it is so important.)

Now with the passage of AB 1953, this will be more difficult for lenders or new owners, as new owners who don't give tenants their contact information within 15 days of the ownership change won't be able to evict tenants for nonpayment of rent.  They can sue tenants, but can't evict them.  However, it's not a good idea to spend the rent money, no matter how tempting that might be.

It's very likely that, however, you will receive a personal visit from the lender's representative, usually a realtor. (The realtor is chosen for a couple of reasons. First he is probably the person who will handle the sale of the building. Second he is not bound by the legal constraints that, say, a lawyer is, and can lie to you with impunity. A lawyer who tried to trick you out of your rights could be disbarred.)

And then, and then?

Let's go through the possibilities.

What is Cash for Keys?

Please get any cash for keys agreement in writing. Banks and their agents frequently offer what appears to be a cash for keys offer and then renege when the tenants move.

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 are 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.  Whether it's convenient for you to move.  It may be more convenient to move at the end of the school year, for instance, and if your 90 days would get you to July, you might rather not move at the end of April. Yes, it is okay to say that moving at the convenience of the owner is not convenient for you.

3. 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.

4. 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.

Cash for keys offers should be in the mid-four figures, at least.

I received a notice from a realtor working for the lender, offering me $1000 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.
And these notices may be illegal. California law requires that the notice be clear and unambiguous, and many lenders are trying to get out of doing their due diligence--finding out who lives at the property and giving them clear notice of termination. So they send an all-purpose notice, evicting either the owner (a three-days' notice), and a tenant who is protected under state and federal law (a 90-days' notice). 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.

I have a roommate and my roommate wants to stay. I'm ready to go and want to take the cash for keys offer.

The realtor wants to empty the entire unit. This means that you and your roommate have to agree. If you and your roommate can't come to a meeting of the minds, the "default" would be the notice to vacate.

Do realtors actually threaten tenants who won't take the "cash for keys" offer?

Amazingly, yes. Indeed you will have no greater experience of your status as a second-class citizen than as a tenant dealing with a realtor. Among others, there are the realtors who deal in foreclosures who not only circle the building, but bang on the door and demand tours of the house. That's because most properties can't be examined prior to the foreclosure sale, and the realtor wants a leg up on the competition. But that still doesn't give the realtor any right to demand a tour, so you can refuse any realtor who tries this one.

My landlord called me last week and told me that I have to move by the end of the month. He wants to collect the "cash for keys" that he thinks the bank will offer.  Can he do this?

Not exactly.  In most parts of California a landlord can evict a tenant for any reason or no reason at all.  Only in jurisdictions with "just cause" eviction does the landlord have to provide notice of the allowable reasons for eviction.  But your landlord does have to give you proper notice.  He can't just tell you to move.  Assuming that you've paid the rent and haven't trashed the place, the landlord must give you 30-days' notice if you've lived in your unit for less than a year, and 60-days' notice if you've lived there more than a year.

However, if your landlord does give you the proper notice, he can evict you and collect whatever "cash for keys" the bank offers.  That's why we need statewide "just cause" eviction--to protect tenants from this kind of scum-bag behavior.

Fannie Mae and Freddie Mac

What if my house is owned by Fannie Mae or Freddie Mac?

Once upon a time Fannie Mae and Freddie Mac said they were going to develop procedures to allow tenants to stay in Fannie and Freddie-owned houses while the GSEs tried to sell them.  At one time, Fannie Mae even had a toll-free phone number for tenants.  We were hopeful, excessively so, as it turned out.  Now they have web sites with instructions for tenants, but they make them hard to find.  And they seem to think that most tenants are potential criminals or low-lifes, requiring people who may have lived at the property for years to undergo background checks before getting a lease or rental agreement.

But I've done the work and found what little information is available for Freddie and Fannie tenants.  Fannie tenants should read this and Freddie tenants should look here.

Unfortunately these rules are most often observed in the breach.  Many tenants have reported that Fannie and Freddie aren't taking responsibility for the bad behavior of their agents, and are behaving as badly as Deutsche Bank and Wells Fargo.

Protecting Tenants at Foreclosure Act

The Protecting Tenants at Foreclosure Act was not extended by Congress, so tenants outside California are, as of January 1, 2015, only protected by state laws, most of which range from pretty bad to absolutely appalling.  California tenants are protected by the state's version of the PTFA.

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.

On Security Deposits

My landlord has suffered foreclosure and I'm going to move. How do I get my security deposit back?

The return of security deposits is governed by state law. And unfortunately state law lacks any precision in addressing this issue. But it appears that the federal Protecting Tenants at Foreclosure Act decides the issue, as it provides that leases survive foreclosure. In California, this means that the lender, as successor in interest, does have to return your security deposit.

If the lender or new owner demands rent for the 90-day notice period, the lender or new owner must return your security deposit. However, if the lender or new owner doesn't require that you pay rent, you have recovered your security deposit in rent savings.

If you move before the Trustee Sale, you'd recover your rent from your landlord, just as you would if he weren't in foreclosure.

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, Hayward, Los Angeles, Santa Monica, West Hollywood, Beverly Hills and Palm Springs. San Jose has 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! Check here for the most current list of communities with "just cause" protections for tenants in foreclosed properties. Update 12/20/11: Merced has become the first Central Valley community to pass "just cause" protections for tenants in foreclosed properties. You can read more about it here.  Unfortunately that legislation was repealed in 2012.

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 do 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.

Basic information for tenants in the City of Los Angeles is here.

The San Francisco Tenants Union has information for San Francisco tenants here.

2009 Legislation

This information is for California tenants only. In 2009, 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

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. NLIHC published an updated report here, and page 10 of that report has a map of states with more tenant protections than the federal Protecting Tenants at Foreclosure Act.  (And yes, the states with no additional protections for tenants are almost all states that voted for Mitt Romney in the 2012 election.)  Still, you should 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.