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Tenant Rights in Foreclosure - Los Angeles California Updated For 2012

Prepared By: Melissa C. Marsh, Los Angeles Landlord-Tenant Attorney
Written: March 2009 - Last Updated: December 2011

On December 20, 2011, the Los Angeles City Council passed ordinance 181964, extending the the ban on banks, and other lending institutions, from evicting a tenant in a foreclosed property (even a single family residence) through December 31, 2012. In effect, if you are a tenant residing in the City of Los Angeles and you have paid your rent in full and on time, a bank cannot evict you without "just cause." If you have been served with an eviction notice, please contact our office for assistance by calling 818-849-5206, OR schedule a 15 or 30 minute telephone consultation by completing our online Telephone Consultation Request Form and Melissa Marsh will call you back at the time you select.

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 opened to hold the rent until requested. The City of Los Angeles has extended Just Cause Eviction to ALL rental units in the City of Los Angeles through December 31, 2012. 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 $7,300 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, or is a low income tenant as defined by the 2011 HUD Low Income Limits for Los Angeles. 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, or is a low income tenant as defined by 2011 HUD Low Income Limits for Los Angeles. A lower amount of relocation assistance is required for "mom and pop" properties (4 units or less) where the owner is seeking to occupy the premises, or to move in a resident manager AND the owner does not own any other tenant occupied structures. In such instances, eligible tenants are only entitled to $7,050 and qualified tenants are only entitled to $14,150 in relocation assistance.

It should be clearly noted that the relocation assistance amounts noted above are the total sum paid to all of the tenants in a rental unit, 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 and/or a substantial cash for keys incentive. If presented with any paperwork, or a threat of eviction such as an eviction notice or Cash For Keys Offer, we strongly suggest you contact a licensed California attorney well versed in the landlord tenant laws.

Non Rent Controlled Units Outside of Los Angeles.
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 federal law (Protecting Tenants in Foreclosure Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act) through December 31, 2014, a tenant's right to occupy his or her rental will not change if the tenant is "a tenant in good standing." A tenant in good standing is a tenant that has paid all of the rent on time. Under federal law, a tenant under a fixed term lease that is in good standing cannot be evicted (forced to move) by a lending institution until the end of the fixed lease term; and a tenant under a month-to-month rental agreement must be provided with at least 90 days notice and relocation assistance (if applicable under local law). If you are under a fixed-term lease, and your rental unit was auctioned off at a foreclosure sale to a third party, 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 position 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.

Have a few additional questions? If you would like additional information and/or would like the assistance of a California landlord tenant attorney, please schedule a 15 or 30 minute telephone consultation by completing Ms. Marsh's online Telephone Consultation Request Form and Melissa Marsh will call you back at the time you select.

© 2009 - 2011 Melissa C. Marsh. All Rights Reserved.

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Disclaimer: The information presented on this web site was prepared by Melissa C. Marsh for general informational purposes only and does not constitute legal advice. The information provided in my articles and alerts should not be relied upon, or used as a substitute for professional legal advice from an attorney you retain to advise or represent you. Your use of this Internet site does not create an attorney- client relationship. Transmission of this article is not intended to create, and receipt of it does not constitute, an attorney-client relationship. All uses of the contents of this site, other than personal uses, are prohibited. You may print or email a copy of any information posted on this web site for your own personal, non-commercial, use, but you may not publish any of the articles or posts on this web site without the Express Written Permission of Melissa C. Marsh.

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Located in Los Angeles, California, the Law Office of Melissa C. Marsh handles business law and corporation law matters as a lawyer for clients throughout Los Angeles including Burbank, Sherman Oaks, Studio City, Valley Village, North Hollywood, Woodland Hills, Hollywood, West LA as well as Riverside County, San Fernando, Ventura County, and Santa Clarita. Attorney Melissa C. Marsh has considerable experience handling business matters both nationally and internationally. We routinely assist our clients with incorporation, forming a California corporation, forming a California llc, partnership, annual minutes, shareholder meetings, director meetings, getting a taxpayer ID number (EIN), buying a business, selling a business, commercial lease review, employee disputes, independent contractors, construction, and personal matters such as preparing a will, living trust, power of attorney, health care directive, and more.