California Supreme Court Clarifies That The Purchaser of Real Property At a Foreclosure Sale Must Wait For The Foreclosure Deed To Be Recorded Before Serving a Notice to Quit

On November 30, 2016, the California Supreme Court ordered published the opinion of the Appellate Division of the Superior Court of San Diego in U.S. Financial, L.P. v. Michael McLitus, which held that title is not perfected for purpose of California’s post-foreclosure eviction statute until the foreclosure deed has been recorded.

Code of Civil Procedure section 1161a permits the purchaser of real property at a foreclosure sale to evict the former owners where: (1) “…the property has been sold in accordance with Section 2924 of the Civil Code, under a power of sale contained in a deed of trust executed by such person, or a person under whom such person claims, and the title under the sale has been duly perfected”, (2) the former owners have been served with a three day notice to quit, and (3) the former owners continue in possession of the property. (Code Civ. Proc., § 1161a, subd (b)(3))

The legal issue decided in this case is whether a foreclosure purchaser must wait for the foreclosure deed (known as a “Trustee’s Deed Upon Sale” or “Trustee’s Deed”) to be recorded before serving a notice to quit.

Various arguments have been advanced as to why the foreclosure purchaser does not need to wait for the foreclosure deed to be recorded before serving a notice to quit. One such argument is that the foreclosure statutes state that “The trustee’s sale shall be … deemed perfect as of 8 a.m. on the actual date of the sale if the trustee’s deed is recorded within 15 calendar days after the sale….” (Civil Code § 2924h) Under this argument, as long as the foreclosure deed is recorded within 15 days of the foreclosure sale, it is proper to serve a three day notice as soon as the foreclosure sale is completed. Another argument is that Code of Civil Procedure 1161a does not specify the order of when title must be perfected and the notice must be served; so, as long as both occur before the filing of an eviction, the requirements of the eviction statute have been met.

This issue is now resolved. The purchaser at a foreclosure sale must wait for the foreclosure deed to be recorded before serving a notice to quit. The language of Civil Code § 2924h stating that title is perfected as of 8 a.m. on the date of the sale if the trustee’s deed is recorded within 15 days of the sale relates to perfection of the sale rather than perfection of title. Title is perfected when the trustee’s deed is recorded. The eviction statute requires both the sale and title to be perfected before service of the notice to quit.

For further information, please contact Wallace, Richardson, Sontag & Le, LLP at (949) 748-3600; website: www.rwclegal.com.

The law firm of Wallace, Richardson, Sontag & Le, LLP represents landlords, property management companies, institutional and private lenders, employers and insurance companies throughout the State of California in real estate, business and employment litigation. The information provided herein is for general interest only and should not be relied upon or construed as legal advice.

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