Foreclosure Eviction

This section explains the special situations involving the former owner, the tenant of that former owner, and some dirty tricks used to evict you. There are special procedures and rules that concern foreclosure-related evictions. We’ll use the term “buyer” to refer to whomever it is that wants to evict you, and “former owner” to mean the one foreclosed on. The buyer could be the bank that foreclosed, a third party who does this as a business, or even a buyer from the successful bidder at the foreclosure sale. The buyer just wants the building empty in order to prep and sell the property.

Foreclosure Process

This is foreclosure, in a nutshell: Usually after a few months of mortgage delinquency, the bank posts, mails and records a Notice of Default, and the former owner has 90 days to bring the account current. If he doesn’t, the next step is a Notice of Trustee’s Sale, which is also posted, mailed and recorded. The Trustee’s Sale is an auction where the property is sold to the buyer. After that sale, a Trustee’s Deed is given to the buyer, which is then recorded in the county recorder’s office. That recording makes the deed public information and completes the foreclosure process by “perfecting title.”

Once title is perfected, the buyer can evict the former owner by a special 3-day notice to quit, and evict any tenants by a special 90-day notice. After that, the buyer files a special UD. The eviction process then proceeds through the court to a trial, followed by a lockout by the Sheriff if the plaintiff is successful. If the former owner or tenants wins that case, the eviction is canceled and the battle then shifts to new grounds, depending on circumstances.

Strategies for the Former Owner

If you are the former owner, things are bad enough with everything that brought you to this horrible final act. Divorce, accident, business closure, severe illness, and other things can put you there. Now this. Late mortgage payments, foreclosure vulture scammers, or even the bank stalling you with a promise of refinancing, may have occurred. You can’t effectively fight the foreclosure, itself, in an eviction, so you need to file a separate lawsuit about that. The UD is the last step, but you are simply stalling the process to get more time to regroup.

A primary goal is to have time for regroup and move. Normal foreclosures are based upon Civil Code Section 2924 and related statutes, all of which must be strictly followed. The UD that follows must also be strictly done according to law. Slight mistakes by the buyer or his lawyer ruin their case and you win. Just by fighting the eviction case, you can gain months of staying possession paying nothing, giving you time to look around, make plans, save up the money to move, and even fight the foreclosure.

You raise those mistakes in the UD. One of the most common mistakes is the 3-day eviction notice is served before the trust deed is recorded. Another common mistake is the notice required by Civil Code Section 2924.8, to be given to tenants of the owner prior to the sale, is not served, which invalidates the sale and eviction if there is a tenant in possession of a room in the house. There are also mistakes found in all eviction cases that can also occur. You can stall the case by raising them, and win due to them.

Scammers abound during times when the economy is suffering, with “we can help” schemes. One of them is where the scammer has you deed the property to them, you pay them rent, and they supposedly cover the mortgage to stop the foreclosure, and you eventually buy it back from them. The collect your rent, but don’t pay the bank, only stalling the foreclosure. A variation on that scheme is that you only get a monthly tenancy, and the scammer immediately evicts you to sell the property or try for a cash payoff. There are special laws that help you stop those evictions.

Bankruptcy is another strategy helpful to the former owner, whether Chapter 7 or 13. It can be filed to stop the foreclosure sale or stall the UD. The foreclosing bank or buyer then has to ask the bankruptcy judge to “lift the stay” to proceed. Typically, that process can delay a month or two at a minimum. Due to the 10-year effect on credit, it should be used sparingly. Since the usual foreclosure leaves you owing nothing on the loan by operation of law, the primary financial benefit of filing bankruptcy prior to foreclosure avoids IRS taxes on your perceived “income” from relief of that mortgage debt. In the UD case, a bankruptcy filed right before trial not only delays the trial but eliminates any rental “damages” that have accrued while fighting the eviction after the foreclosure, as well as the tax debt from the sale.

Renting out a room in your home starting prior to the foreclosure sale can bootstrap extra time using the tenant’s rights to longer and postpone notice, discussed below. Having that extra income may help you qualify for refinancing, or simply provide you with cash flow, but you can stay in possession while financing your tenant’s defense to the eviction. You get only 3 days’ notice; your tenant gets 90 days. If your tenant has a lease, service of the 90-day notice is postponed. Your financing the tenant’s eviction defense gains you time in possession, while satisfying your obligation of “quiet enjoyment” [Civil Code Section 1927] by protecting your tenant from interference by third parties, like the buyer. If the tenant continues to pay rent and is willing to participate as a defendant, you both benefit by working together.

Strategies for the Tenant

The rights you have as the tenant of the former owner depend on how you fit into technicalities of the law. If you are not a tenant but just live there, you are evicted by the same 3-day notice as the former owner. If you are the spouse, child or parent of the former owner and are renting all or a portion of the property, you are entitled to a 30-day notice of termination. That notice may be limited by local ordinance, requiring you to be paid a substantial “relocation assistance” amount to help you move, or it may not be a legal reason to evict at all.

However, if you are a normal tenant, you have the federal “Protecting Tenants at Foreclosure Act of 2009″ [“PTFA”], which requires that you get a 90-day notice of termination. (There is also a similar California law [CCP 1161b], but the PTFA is what we go by.) That notice requires special wording, and is usually added to the 3-day notice to the former owner.

That 90-day notice is postponed for a qualified tenant who has an unexpired lease. To qualify, you cannot be the spouse, parent or child of the former owner, the lease must be for market value, and have started prior to the foreclosure sale. The lease can be oral if it will end within to a year from making it, but must be written if it ends more than a year later. This includes renting a room in the former owner’s home where he still resides. If you qualify by those standards, then that 90-day notice cannot even be given to you unless there is a buyer ready to move in as their primary residence.

Therefore, the first strategy once you learn that the place is facing foreclosure is to get a long term lease, like 2 years. In the usual situation, the landlord was collecting rent from you, but not using it to pay the mortgage. The landlord owes you “quiet enjoyment” under Civil Code Section 1927, which means protecting you from the buyer’s UD. Giving you a long term lease gets you the benefit of a postponed eviction notice, minimizing impact of the foreclosure. If the former owner doesn’t do that, you should sue him in small claims court for breach of contract in addition to stopping rent payments.

The second strategy is to require the buyer to fulfill obligations that the former owner may have neglected. Under the PTFA, the buyer becomes your new landlord, under the same lease even if they don’t have a copy of it or know its terms. The buyer is entitled to the rent, but is also obligated to maintain the premises in good condition, which the former owner may not have been able or willing to do. The buyer is answerable to the Building, Health, and Fire Departments, as well as local rent and eviction control agencies. The buyer can be sued for violating tenant rights, including a trespass.

The third strategy is fighting the eviction. The former owner may not care because they lost the property, but you do, because you live there and you are the one who will be evicted. Out of every kind of eviction, being the former owner’s tenant is the strongest possible position, and easiest UD to win. A foreclosure is not your fault, and you are the innocent victim, specially protected by the PTFA for that reason. If the foreclosing bank and buyer just followed the law, it would be a smooth transition, but they don’t. Instead, they use a series of dirty tricks to manipulate, defraud, and cheat you out of those legal rights. It hasn’t changed over the decades, because there is no punishment for trying to do that, and it usually works. In your case, because you know what to do, their plans backfire horribly.

Dirty Tricks Department: How the buyer tries to cheat tenants out of their legal rights

The buyer is burdened with the time, money and procedures of eviction while floating a high interest, short term loan and trying to schedule contractors to remodel and sell it. The smart ones offer a generous relocation package, more than the tenant may be legally entitled to, just to move on. Most are stupid, however, blinded by greed and arrogance, who think they can cheat the tenant out of possession. In reality, it is rare that the buyer follows the law.

Here are the 6 most common dirty tricks that the buyer will use:

1. Disinformation (fraud): The buyer simply lies to the tenants their rights, saying things this like:

• There is no landlord- tenant relationship with you
• You have no right to stay there, and must immediately go
• You have to let them come in and do remodeling while you live there
• You have to let them show the property while you live there, without any restrictions
• You have to let them put a lockbox with a key to your home, so realtors can show the property
• You have no right to get anything fixed
• You have to give them a copy of your rental agreement
• You have to tell them who lives in the home, give them everyone’s name
• You have to give them your financial information for a credit check to qualify as their tenant
• You have to apply for a new tenancy with them or leave
• You will be held liable for holding up the sale if you don’t immediately leave
• The police will arrest you for trespassing if you don’t immediately leave
• You have no rights to fight the eviction in court
• The eviction is only against the owner, and none of your business
• They don’t owe you the security deposit and you have to get that from the former owner
• You have to do whatever the realtor tells you to do
• They don’t have to pay you any relocation assistance – you have to ask the former owner

By defrauding you about your rights and their authority, they hope to manipulate you into leaving and abandoning your whole strategy. Just don’t do as they request, and contact caltenantlaw.com ASAP.

2. “Cash for Keys” is a common scam. The buyer offers you some money to go, which you don’t get until you are completely out, and hand them the keys, but then they pay nothing. A variation on that is that they give you only your security deposit back, as though that were all you are entitled to get. They may pay you some money, and tell you to get your deposit from the former owner who is probably broke. Rarely are these agreements in writing, so they can be denied as mere negotiation. It is possible to have an honest and generous offer, but you really want legal advice before accepting any such deal.

3. What tenant? The buyer probably knows that you live there, because the former owner lives somewhere else, where the foreclosure notices were mailed, and they viewed the property prior to bidding at the foreclosure sale. Why not knock on the door, and say, “Hi, I’m your new landlord.”? That would spoil this dirty trick. They only name the former owner on the notice and on the UD, to give you the impression that this is none of your business, just something against the former owner. The papers they serve, however, (try to) satisfy the legal requirements to evict everyone, knowing that the former owner will probably not fight the eviction, at all. If you take no action, like filing the PJCRP and defending the case, you will be quickly removed by the Sheriff, having forfeited your rights and a great deal of time in possession without paying anything, winning, and they suing them for trying to do this.

4. Report or Move. It is common that the 90-day notice will say that you must report to them, show proof of your lease, financial information, etc. or you have no rights and must immediately move out. There is no such requirement. You don’t forfeit your rights to possession or defend against the UD for failure to obey them. They bought the property, so they can get the leases, etc from the former owner, or simply be nice with you and do as the law requires. They won’t do that, because they want to cheat you into thinking that if you don’t do as they say, you have no rights.

5. Malicious Prosecution is almost always the case. The buyer and his lawyer know that you have rights which they are violating, but they persist in the UD hoping to intimidate and/or financially exhaust you. Sometimes they will file 2 or 3 UD cases in succession, dismissing each just before trial. Your legal costs in defense are less than rent would be, and you simply sue the buyer and their lawyer for malicious prosecution, etc. after each UD victory, seeking punitive damages based on their wealth.

6. Settlement Scams give you the impression that you are getting what you want, but what they say to you is not what is on paper. They tell you your credit will not be affected, but they insist on a judgment which does just that, even if there is a delay in the lockout. They say if you leave you owe nothing, but the papers say that if you fail to leave the place clean or turn in the keys on time, you owe all the money, without any notice to you. Then, they claim that you didn’t leave the place clean, or make themselves scarce on the move-out day in order to claim that you didn’t hand over the keys on time. They omit your deposit from the agreement and keep it. Don’t sign any settlement without our review!