New Laws for 2013

For this edition of the AOA Northern California Question and Answer column, I have been asked if there are any new laws starting January 1, 2013 that might affect property owners and landlords. There are several, and many of them involve foreclosure proceedings as they affect tenancies. Below is a survey, in question and answer form, of each of those new laws.

Question 1: What is the “California Homeowner Bill of Rights”, and does it affect my tenants?
Answer 1: According to a press release by the California Attorney General, Kamala Harris, on July 11, 2012 Governor Jerry Brown signed the California Homeowner Bill of Rights (HBR) into law “to bring fairness, accountability and transparency to the state’s mortgage and foreclosure process.” The Homeowner Bill of Rights goes into effect on January 1, 2013. According to AG Harris, the legislation is meant to provide consumers with certain protections in dealing with mortgage lenders about first mortgage delinquency issues.  It includes limited tenancy protections, which are discussed in detail below.  The primary non-tenant components of the HBR are:

Dual Track Foreclosure Ban: Mortgage servicers will be required to render a decision on a loan modification application before advancing the foreclosure process by filing a notice of default or notice of sale, or by conducting a trustee’s sale. The foreclosure process is essentially paused upon the completion of a loan modification application for the duration of the lender’s review of that application.
Single Point of Contact: Mortgage servicers will be required to designate a “single point of contact” for borrowers who are potentially eligible for a federal or proprietary loan modification application. The single point of contact is an individual or team with knowledge of the borrower’s status and foreclosure prevention alternatives, access to decision makers, and the responsibility to coordinate the flow of documentation between borrower and mortgage servicer.
Enforceability: Borrowers will have authority to seek redress of “material” violations of the California Homeowner Bill of Rights. Injunctive relief will be available prior to a foreclosure sale and recovery of damages will be available following a sale.
Verification of Documents: The recording and filing of multiple unverified documents will be subject to a civil penalty of up to $7,500 per loan in an action brought by a civil prosecutor. Enforcement will also be allowed under a violator’s licensing statute by the Department of Corporations, Department of Real Estate or Department of Financial Institution.

The tenant-related provisions include the following:
Notice to Tenants of Pending Foreclosure that Their Lease Is Not Extinguished, and the Tenants are Entitled to at Least a 90 Day Notice of Termination of Tenancy Existing law requires a notice of sale to be posted before any foreclosure sale, and that a resident of property upon which a notice of sale has been posted be provided a specified notice advising the resident that, among other things, if the person is renting the property, the new property owner may either give the tenant a new lease or rental agreement, or provide the tenant with a 60-day eviction notice, and that other laws may prohibit the eviction or provide the tenant with a longer notice before eviction. The new law, AB 2610, revises certain portions of the notice to instead require a resident of property upon which a notice of sale has been posted to be advised that if the person is renting the property, the new property owner may either give the tenant a new lease or rental agreement, or provide the tenant with a 90-day eviction notice.

The bill would require the notice to advise a tenant who has a lease that the new property owner is required to honor the lease unless the new owner will occupy the property as a primary residence or under other limited circumstances. The bill would require the Department of Consumer Affairs to make translations of the notice available, and that these changes to the notice would become operative on March 1, 2013, or 60 days following posting of a dated notice incorporating those amendments on the Department of Consumer Affairs Internet Web site, whichever date is later. The bill would extend the operation of these provisions until December 31, 2019.

 Question 2: Does the HBR affect my ability to evict tenants from a foreclosed property?Answer 2: Yes. The tenant-related components of the HBR include AB 2610, designed to help protect tenants in foreclosed properties.  It is very similar to the existing federal Protecting Tenants from Foreclosure Act of 2009, with a couple of very important differences. Primarily, the state version (like the federal version) requires that a tenant in a foreclosed property be given a 90 day, rather than the current 60 day, notice of termination. However, the state version requires such extended notice regardless of whether the tenancy is ‘bona fide.’ Under the federal law, a tenancy is not protected unless it is ‘bona fide,’ meaning the tenancy was:

  • Created by ‘arms length’ bargaining;
  • Is not between specified family members, and;
  • Is for fair rental value.

If any of these three requirements are missing, the tenancy is not covered by the federal protection, and is subject solely to applicable state law. The new state law, on the other hand, applies these restrictions only to a term lease (e.g. one longer than month-to-month), but does not apply them to a month to month tenancy. In other words, even if the tenancy is not ‘bona fide,’ the tenant is still entitled to receive a 90 day notice before he or she may be evicted.

Another significant difference between the federal and state versions of the law is that the federal law only applies to the foreclosure sale buyer, whether that be the foreclosing lender or a third party buyer. Once the property was sold by the foreclosing buyer to a new owner, the federal protections no longer apply.

It should be noted that under both the state and federal versions, if the purchaser intends to occupy the housing unit as a primary residence, he or she may terminate even a term lease by 90 days’ notice.

It should also be noted that the new law shall not apply if any party to the foreclosed loan remains in the property as a tenant, subtenant, or occupant.

Question 3: Is there a new law that affects my ability to evict all occupants from my property, even those I don’t know and those who claim to live there?
Answer 3: Yes, but only if you are conducting a post-foreclosure eviction. You are probably referring to the procedure which is used in most eviction actions (the unlawful detainer lawsuit), known as the prejudgment claim of right to possession (PCRP). Existing law provides that in an unlawful detainer action, if an owner or owner’s agent has obtained service of a prejudgment claim of right to possession, no occupant of the premises, whether or not that occupant is named in the judgment for possession, may object to the enforcement of the judgment.

This new law, part of AB 2610,   provides that in any action for unlawful detainer resulting from a foreclosure sale of a rental housing unit pursuant to specified provisions, the above provisions regarding objection to the enforcement of a judgment do not limit the right of a tenant or subtenant to file a prejudgment claim of right of possession or to object to enforcement of a judgment for possession, regardless of whether the tenant or subtenant was served with a prejudgment claim of right to possession, as specified.

The practical effect of this new legislation is difficult to predict. The prejudgment claim to right of possession procedure was enacted in 1991 to prevent unnamed occupants from delaying the eviction process at the ’11th hour’ by asserting a right to possession of a rental unit from which the named and known occupants were being evicted by a writ of possession issued after an unlawful detainer judgment had been entered. Once the unnamed occupant asserted a right of occupancy, the Sheriff was required to ‘stay’ the eviction, and the unnamed occupant was given 10 days to file a formal appearance in the unlawful detainer proceeding, and to try to establish that person’s right to continued occupancy. For reasons too lengthy to cover here, such an event often had the result of requiring the landlord to start over in her eviction case, or to forego the effort altogether. The PCRP procedure was enacted to provide all unnamed occupants a 10 day period to claim a right of occupancy, but to provide that period at the beginning of the eviction process, with the service of the lawsuit on the named occupants. If no unnamed occupant came forth in that initial 10 day period, any judgment entered was enforceable against any person in occupancy at the time of the judgment or the eviction. This procedure removed a tremendous uncertainty from the eviction process, and has routinely been employed by landlord attorneys since it was enacted. This new law, allowing occupants in foreclosed properties to assert a right of occupancy at any time, will require some evictions to be delayed until the court can hear the claims of the unnamed occupant. The results of those hearings will depend on the facts of each case, and, one suspects, most particularly on establishing proper service of the notice of termination of tenancy at the beginning of the unlawful detainer procedure.

Question 4: If my rental property is being foreclosed, do I have to notify the tenants? 
Answer 4: Yes, as to new tenants. Under current state law, there is no express obligation by the owner of a residential building to notify her tenants that the building is undergoing foreclosure proceedings. Senate Bill 1191 will make it clear that new tenants must receive such notice before entering the lease, or the lease may be voided by the tenant. Starting January 1, 2013 every landlord who offers for rent a single-family dwelling, or a multifamily dwelling not exceeding four units, and who has received a notice of default on a deed of trust secured by that property, must disclose the notice of default in writing to any prospective tenant prior to executing a lease agreement for the property. A violation of this provision allows the tenant to void the lease and to recover one month’s rent or twice the amount of actual damages from the landlord, and all prepaid rent, if the tenant voids the lease and vacates the property. If the tenant elects not to void the lease and the foreclosure sale has not yet occurred, the tenant may deduct a total amount equal to one month’s rent from future rent obligations owed the landlord who received the notice of default. Property managers are exempt from liability for failing to provide the written disclosure notice unless the landlord notified the property manager of the notice of default and directed him or her in writing to deliver the written disclosure.

Question 5: If I need to do work on my rental unit that requires the tenant to move out, do I have to pay the tenant?
Answer 5: Generally not, though it depends on where your property is located, and if it is covered by a local ordinance that does require such payments. For example, in San Francisco, a tenant covered by the local rent and eviction control ordinance who is required to vacate for major repairs to the unit is entitled to relocation benefits of approximately $5,100.00 per person, up to a total of three persons. Further, if one of the tenants is over 60, that tenant is entitled to receive an additional payment of approximately $3,500.00. Finally, if the household includes a minor, the household is entitled to receive an additional payment of approximately $3,500.00. This had the sometimes incredible effect of requiring a landlord who had to do repairs to a unit which contained a parent, child and grandparent, for example, to pay over $22,000.00 in relocation benefits, even for a temporary relocation. Obviously this was grossly unfair to landlords who wanted or needed to do renovation or repair work. Fortunately, for landlords, legislation was introduced by San Francisco’s assemblyperson to eliminate this local requirement, and to replace it with a relocation requirement of a payment of $275.00 per day and actual moving expenses for relocations lasting less than 20 days. Depending on the number and ages of the tenants, and assuming the work can be completed in under 20 days, this new law could result in saving landlords thousands of dollars, and is long overdue.

Question 6: Have there been any changes to the 30-60 Day Notice of Termination?
Answer 6: Yes. Starting January 1, 2013, the standard Notice of Termination of Tenancy that is required to be given to the tenant whose month-to-month tenancy is being terminated must be revised to include the following language: “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.”

While the legal consequence of omitting this newly required language is not spelled out in the law, a reasonable guess is that the Notice will be deemed defective and will not support a subsequent eviction action, meaning the landlord will lose the case and have to start over. Therefore, all 30-60 Day Notices of Termination should be revised to include this new language.

Question 7:     Can I require my tenant to de-claw her cat if she wants to have it at the rental unit?
Answer 7: Not after January 1, 2013 you can’t. SB 1229 will prohibit a landlord who allows a tenant to have an animal on the premises, from advertising or establishing rental policies in a manner that requires a tenant or a potential tenant with an animal to have that animal declawed or devocalized as a condition of occupancy. The bill would authorize law enforcement relief for a violation of these prohibitions, including a civil penalty, not to exceed $1,000, for each violation of these provisions.

Question 8:     Do I have to provide the tenant with my address? Is there any penalty if I don’t?
Answer 8: Yes (or that of your agent), and maybe. Existing law requires an owner of a rented dwelling, or a party acting on behalf of the owner, to provide specified information to a tenant, including, among other things, the name, telephone number, and address of the person or entity to whom rent payments shall be made. Existing law requires a successor owner or manager to comply with these requirements within 15 days of succeeding the previous owner or manager.

Beginning January 1, 2013, an amendment to Civil Code Section 1962 will prohibit a successor owner or manager from evicting a tenant for nonpayment of rent that accrued during the period of noncompliance by a successor owner or manager with the above-described information requirements. While the tenant would not be relieved of any liability for unpaid rent, she could not be evicted for non-payment of rent while the required information was not provided. In other words, if you buy a tenant-occupied property after January 1, 2013, be sure to provide the required information immediately.

Question 9: Has the law on return of security deposits changed?
Answer 9: Yes, a bit. AB 1679 will allow landlords after January 1, 2013 to return any remaining portion of the security deposit by electronic deposit to the refunded amount to a tenant’s designated bank account, and allow the landlord to send the post-tenancy itemized accountant statement to the tenant by delivery to an email address provided by the tenant. This change will streamline the owner’s obligations to the tenant after the tenant has vacated with a security deposit remaining.

One other change in the security deposit statute (Civil Code Section 1950.5) affects the pre-move-out inspection notice which must be provided to the tenant prior to the tenant’s leaving the unit. If an inspection is requested, the parties shall attempt to schedule the inspection at a mutually acceptable date and time. The landlord shall give at least 48 hours’ prior written notice of the date and time of the inspection if either a mutual time is agreed upon; or if a mutually agreed time cannot be scheduled but the tenant still wishes an inspection. The tenant and landlord may agree to forgo the 48-hour prior written notice by both signing a written waiver. The landlord shall proceed with the

inspection whether the tenant is present or not, unless the tenant previously withdrew his or her request for the inspection. Written notice by the landlord shall contain, in substantially the same form, the following:  “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.”

Question 10:   Are there any new notices that must be given to departing or evicted tenants?
Answer 10: Not new notices, but there are revisions to existing notices (in addition to the pre-move-out notice discussed above). Currently, the tenant who vacates or is evicted must be provided written notice that he or she has 15 to 18 days (depending on the method of service of the notice) to reclaim abandoned property, and that if the landlord reasonably believes that the total resale value of the property not released is less than three hundred dollars ($300.00), the landlord may retain the property for his or her own use or dispose of it in any manner. The current notice also provides that the tenant is responsible for the reasonable storage cost of the abandoned property, and the landlord may require payment of that reasonable storage cost before releasing the property to the tenant.

After January 1, 2013, AB 2521 will increase the value of the abandoned property that may be disposed of to $700.00, which is a benefit to the landlord who otherwise has to go through a lengthy auction process if the property was deemed worth over $300.00.

Secondly, the notice must now advise the former tenant that if he or she reclaims the property within two days, the storage costs may not be required by the lessor as a condition of releasing the property.

Finally, AB 2521 allows the landlord to send the notice by email if the former tenant provided the landlord with the tenant’s email address. However, the statute does not specify if the notice period is 15 days (as it is when the notice is personally served) or 18 days (as it is when the notice is mailed). Out of caution, waiting the longer period is advised, until the law is clarified.

Richard Beckman, of Beckman Blair, LLP has been practicing landlord-tenant law for over 19 years, primarily in rent-controlled jurisdictions such as San Francisco, Oakland and Berkeley. He represents clients in a broad range of real estate-related disputes, including partition of co-ownership interests, purchase contract disputes, insurance coverage analysis and land use. Mr. Beckman also specializes in all aspects of landlord-tenant issues, representing landlords and tenants in residential and commercial matters. He can be reached at 415-495-8500; email rich@beckmanblairllp.com or by visiting the website www.beckmanblairllp.com.

 

 

 

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