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New California Laws Affecting REO in 2013

On September 25, 2012, California Governor Jerry Brown signed into to law Assembly Bill 2610 (“AB 2610”), which amends Section 2924.8 of the Civil Code and Sections 415.46 and 1161b of the Code of Civil Procedure relating to tenants. This new law will take effect on January 1, 2013 (except the provisions regarding the Notice of Sale (see below) which will become operative on March 1, 2013, or 60 days following posting of a dated notice incorporating these amendments on the California Department of Consumer Affairs Internet Web site, whichever date is later), and is intended to make California law more consistent with the Protecting Tenants at Foreclosure of 2009, as amended (“PTFA”). AB 2610 provides the following significant revisions to California law:

    • Notice to Quit
      Under existing California law, the purchaser of residential real property at a foreclosure sale may evict a tenant or subtenant after the giving of 60 days’ prior written notice.
      Under the new law, the purchaser of residential real property at a foreclosure sale may either give the tenant or subtenant a new lease or rental agreement or provide the tenant or subtenant in possession of the property under a month-to-month lease or periodic tenancy at the time the property is sold in foreclosure with a 90-day eviction notice except if the tenant or subtenant holds possession of the property under a fixed-term residential lease entered into before the transfer of title at the foreclosure sale, the tenant or subtenant has the right to possession of the property until the end of the lease term and all rights and obligations under the lease survive the foreclosure sale.
      Notwithstanding the foregoing, the tenancy may be terminated upon 90 days’ written notice if any of the following conditions apply: (1) the purchaser or successor in interest will occupy the housing unit as a primary residence; (2) the lessee is the mortgagor or the child, spouse, or parent of the mortgagor; (3) the lease was not the result of an arms’ length transaction; or (4) the lease requires the receipt of rent that is substantially less than fair market rent for the property, except when rent is reduced or subsidized due to a federal, state, or local subsidy or law.
      The purchaser or successor in interest bears the burden of proof in establishing that a fixed-term residential lease is not entitled to protection.
      Nothing contained in this new law is intended to affect any local just cause eviction ordinance. This law expires on December 31, 2019 unless extended by statute.
    • Notice of Sale
      AB 2610 revises certain portions of the foreclosure notice of sale (Section 2924.8) to advise any renters occupying the property of their rights to continue occupying the property for 90 days following service of a written notice to vacate, or until the end of the term of the renter’s fixed term lease, whichever period is longer, unless the new owner will occupy the property as a primary residence or under other limited circumstances.
    • Pre- and Post-Judgment Claim of Right to Possession
      AB 2610 modifies existing law to permit any tenants or subtenants who were not named in an eviction complaint based on foreclosure of the property to become a party to the eviction by filing a Prejudgment Claim of Right to Possession at any time before judgment, or to object to enforcement of a judgment for possession by presenting a Claim of Right to Possession to the Sheriff at any time before the Sheriff completes a lockout in which case the court will hold a hearing to determine the validity of objections to enforcement of the judgment. If the court determines that claim is valid (i.e.that the occupant is not an invitee, licensee, guest or trespasser), then the court will order the summons and complaint to be amended to include the claimant as a defendant. Service of the summons and complaint, as amended, may then be made at the hearing or thereafter and the claimant is required to answer or otherwise respond to the complaint within five days after being served. If the claimant responds to the complaint, then the case continues as a contested eviction action as to the claimant.

2. CALIFORNIA ASSEMBLY BILL 2521 On September 25, 2012, Governor Jerry Brown signed California Assembly Bill 2521. This new law is effective January 1, 2013 and provides the following significant changes to California law:

    • Additional Notice Regarding Right to Reclaim Personal Property
      The lessor of real property is required to include the following language in a notice of termination of tenancy: State law permits former tenants to reclaim abandoned personal property left at the former address of the tenant, subject to certain conditions. You may or may not be able to reclaim property without incurring additional costs, depending on the cost of storing the property and the length of time before it is reclaimed. In general, these costs will be lower the sooner you contact your former landlord after being notified that property belonging to you was left behind after you moved out.
    • Personal Property Notice Threshold Increased From $300 to $700
      Existing law provides that where personal property remains on the premises after a tenancy has terminated and the premises have been vacated by the tenant, the landlord shall give written notice to the tenant or any other person the landlord reasonably believes is the owner of the property of the right to reclaim the personal property. Existing law provides a sample notice that complies with this requirement, and which requires one of the following two statements: (1) “If you fail to reclaim the property, it will be sold at a public sale after notice of the sale has been given by publication. You have the right to bid on the property at this sale. After the property is sold and the cost of storage, advertising, and sale is deducted, the remaining money will be paid over to the county. You may claim the remaining money at any time within one year after the county receives the money.” or (2) “Because this property is believed to be worth less than $300, it may be kept, sold, or destroyed without further notice if you fail to reclaim it within the time indicated above.” This new law increases the threshold amount from $300 to $700 and modifies the foregoing language accordingly. This new law also requires the notice to provide that if the personal property is claimed within 2 days of the date the former tenant vacated the premises, that storage costs may be minimized.

3. CALIFORNIA ASSEMBLY BILL 1953 On September 28, 2012, Governor Jerry Brown signed into law California Assembly Bill 1953, which amends California Civil Code section 1963. California Assembly Bill 1953 becomes effective
January 1, 2013.
Existing law requires an owner of a dwelling structure or a party signing a rental agreement or lease on behalf of the owner, or in the case of an oral rental agreement, the owner or a person acting on behalf of the owner, to provide specified information to a tenant, including, among other things: (1) the name, telephone number and usual street address at which personal service may be effected of each person who is (a) authorized to manage the premises or (b) an owner of the premises (or a person who is authorized to receive service of process on behalf of the owner), and (2) the name, telephone number, and address of the person or entity to whom rent payments shall be made and, if the rent payment are to be made personally, the usual days and hours the person will be available to receive the payments. Existing law requires a successor owner or manager to comply with these requirements within 15 days of succeeding the previous owner or manager.
Assembly Bill 1953 prohibits a successor owner or manager from serving a Three Day Notice to Pay Rent or Quit until the specified information is provided to the tenant. Assembly Bill 1953 provides that these provisions do not relieve the tenant of any liability for unpaid rent.

4. CALIFORNIA ASSEMBLY BILL 1865 On September 7, 2012, California Governor Jerry Brown signed Assembly Bill 1865, which amends California Code of Civil Procedure section 1161.2. California Assembly Bill 1865 becomes effective January 1, 2013. Existing law requires the clerk of the court to mail a specified notice upon the filing of an unlawful detainer action to each defendant named in the action and requires the notice to contain the name and telephone number of the county bar association as well as other legal services organizations that provide services to low-income persons. This bill requires that the notice described above contain, in addition to the information of the county bar association, the name and telephone number of any entity that requests inclusion on the notice and demonstrates to the satisfaction of the court that it is duly authorized by the California State Bar as a lawyer referral service and maintains a panel of attorneys qualified in the practice of landlord-tenant law, as specified. The bill also requires the notice to contain a specified statement that includes the telephone number and Internet Web site address of the California State Bar.

For further information regarding these new laws, please contact Earl R. Wallace, Esq. at (949) 748-3600. Earl R. Wallace is the managing partner of Wallace, Richardson, Sontag & Le, LLP who has over 18 years of REO legal experience.

January 12, 2013 | Articles |