March 2009

Tenant Rights in Foreclosure - Los Angeles California

Updated: 6-29-2009
Pursuant to a new U.S. law that went into effect in May of 2009, no renter in the state of Califronia who is residing in a foreclosed (or to be foreclosed) rental unit can be forced to move until the end of their lease, or at least 90 days.

Los Angeles Rent Controlled Units.
If a tenant is residing in a Los Angeles City rent-controlled unit, or an apartment with "just cause" eviction protections, the tenant cannot be forced to leave just because the landlord sold the building, or lost it in foreclosure. The tenant, however, must continue to pay his or her rent on time. If the new owner refuses to accept the rent, then the tenant should open an escrow account and place his or her rent into that account and write the new landlord a letter advising that an escrow account has been opended to hold the rent until requested. The City of Los Angeles has extended Just Cause Eviction to all rental units in Los Angeles. You cannot be FORCED to move unless the new owner (bank or lender) has "Just Cause" to evict you. However, if you live elsewhere in the state of California, then the new owner is merely required to provide you with 90 days notice to vacate, unless your local rent control laws provide otherwise.

Under the City of Los Angeles Rent Stabilization Ordinance (RSO), tenants evicted for "no fault" reasons (which includes a foreclosure) are entitled to relocation assistance of at least $7,000 if the tenant resided in the unit for less than 3 years, and $9,650 if the tenant has resided in the unit for 3 years or more. If the rental unit is occupied by a qualified tenant (senior citizen, disabled adult, or dependent child), then the qualified tenant is entitled to $15,500 if the qualified tenant resided in the unit for less than 3 years, and $18,300 if the tenant has resided in the unit for 3 years or more. It should be clearly noted that this is the total sum paid to all of the tenants, and that sum must be shared or divided if the rental unit is occupied by more than one individual. For example. If a rental unit has been occupied for 3 years by two roommates, one who is a typical 50 year adult and a second adult who is 63 (a qualified tenant), then the two adults would be entitled to share $18,300. These figures are subject to change, can be significantly higher if certain other conditions are met, and should not be relied upon. If you are entitled to relocation assistance, please schedule a telephone consultation, or check with the Los Angeles Housing Department for the amount you may be owed.

If the new landlord, lender, bank, or mortgage company opts to evict the existing tenants, the foreclosing lender must still provide the tenant with 90 days written notice. In addition, the foreclosing lender must also pay the existing tenants any required relocation assistance within 15 days of being served the Notice of Eviction.

Tenants in a single family home, condo, or apartment that is being foreclosed, or has been foreclosed, would be well advised: (1) NOT TO RELY ON ANYTHING SAID by a real estate estate; and (2) NOT TO SIGN ANYTHING as it could cause you to lose your right to relocation assistance. If presented with any paperwork, such as a Cash For Keys Offer, contact a local landlord tenant attorney.

Non Rent Controlled Units.
If the tenant is renting a single family home, or resides in a non-rent controlled structure, outside the City of Los Angeles which has extended "just cause eviction" protections to all rentals (including single family homes) within the city, the tenant will not have the protections of just cause eviction, or relocation assistance, unless their local city laws provide it. In such a case, the new owner, bank, or mortgage company is still required to provide the tenant with the required 90-day notice to vacate and the tenant should plan to leave within the required time frame, or risk being sued for eviction. However, all tenants in this situation should contact a local landlord-tenant attorney to ensure they are not losing any of their rights as the maw in this area is constantly changing.

Leases are Typically Extinguished.
All leases are generally extinguished at the time of a foreclosure. However, under the new May 2009 federal law, and under many rent control laws, your right to occupy the premises will not change so long as you are "a tenant in good standing." A tenant in good standing is a tenant that has paid all of the rent on time. That does not mean that a tenant in good standing cannot be evicted; it just means that the new owner will be forced to provide such a tenant with 90 days notice and relocation assistance (as stated above if applicable). If you are under a fixed-term lease, the original landlord is liable for contract damages (your moving expenses and any increase in rent the tenant must pay in a new place during the remaining months of the lease), but if the old landlord was foreclosed on, what is the likelihood that s/he is collectible?

Security Deposit.
The new owner, or foreclosing lender, who decides to evict a tenant, should return the tenant's security deposit as required under California Civil Code §1950.5(h). However, many lenders are presently refusing to do so arguing that they are not successors in interest, and are therefore not responsible for returning tenants’ security deposit. The California Department of Consumer Affairs now maintains the possition that the new owner of the rental is responsible for the security deposit. We strongly suggest such tenants send a written letter, or fax, to the new owner (foreclosing lender) demanding the return of their security deposit, and if necessary file a claim in Small Claims Court.

Section 8.
Pursuant to federal law, a landlord may not terminate a Section 8 lease without cause. 24 Code of Federal Regulations, §982.310(d). While "cause" includes "business or economic reasons," including the "sale of the property," the new owner, or foreclosing lender may NOT terminate a Section 8 lease that is in its first lease term. In addition, all Section 8 tenants are entitled to 60 days notice to vacate the premises and are protected by " just cause eviction" protections (e.g. relocation assistance).

Building For Sale versus Foreclosure.
If the rental unit is under rent control, the tenant is protected. The new landlord cannot change the terms of the lease, increase the rent (unless permitted due to the lack of a prior rent increase), or force a tenant to move (absent a showing of "just cause"). If the unit is not rent controlled, the new landlord who purchased the building or home in a short sale cannot terminate a lease, or force a tenant to move without providing the proper notice, and in many cases relocation expenses. In addition, a new owner who purchases a building, even in a short sale, is required to return the tenant's security deposit when the tenant moves.

Estoppel Certificate.
When a buyer is interested in purchasing a building, the real estate agent will often send each of the tenants a form called an "Estoppel Certificate" which requests each of the tenants to certify the terms of their rental agreement. Although tenants are NOT legally required to complete an Estoppel Certificate, but there may be advantages to completing and returning the Form especially if: (1) the tenant is a senior, or disabled; (2) the tenant is receiving a rent reduction which is not evident from looking at the lease itself; or (3) the tenant has been given a certain right (e.g. to have a pet) that is also not evident or stated in the original lease.

For example, if the tenant's lease prohibits pets, but the landlord allowed you to have one anyway, it is important to complete the Estoppel Certificate and on said form to advise the potential new owner-landlord that you have been granted permission to have a pet. The same would apply if the landlord provided a rent reduction, use of a parking space, a storage space, or other right that is not specified in the tenant's rental or lease agreement.

Showing The Apartment.
Under California Civil Code 1954, a landlord is required to provide the tenant with 24 hours written notice of his or her intent to show the rental unit to a prospective buyer. In addition, the landlord is supposed to show the rental only during normal business hours (which is presumed to be 9 am - 5 pm, Monday through Friday). If the landlord is being uncooperative, you can advise the landlord in writing that his requested time is not good and suggest one or more alternatives.

If you would like the assistance of a landlord tenant attorney, please schedule a telephone consultation for just $65 by completing our Telephone Consultation Request Form and Melissa Marsh will call you back at the time you select or Send us an Email.

© 2009 Melissa C. Marsh. All Rights Reserved.