Foreclosure can be a confusing and frightening experience for tenants.  Banks and real estate investors count on tenants not knowing their rights in order to illegally force them out of the property.  Having knowledge about what a foreclosure is and what laws protect your tenancy will help you stay in your home during and after this process.  

What is a foreclosure?

Foreclosures can be a lengthy and complicated process. Generally, a foreclosure happens when the owner of the property cannot pay their mortgage and the bank takes the property back. The bank then sells the property, usually at an auction.  After the property is sold, the new owner may attempt to evict the tenants that are lawfully residing in the property. What a tenant’s rights are in this circumstance will depend on whether or not the tenant lives in a jurisdiction that has eviction control laws. 

How can I get information about the foreclosure? 

You can file a form called a Request for Notice with your county recorder’s office.  Once this form is recorded, you will be notified of any foreclosure proceedings. You will also be able to obtain a copy of the Notice of Default and Notice of Sale, and find out the status of the foreclosure in general. 

Can I be evicted if the property I rent was sold in foreclosure? 

The new owner may be able to take possession of the property.  Your rights as a tenant in foreclosure hinge on whether your unit is in a jurisdiction that has just-cause for eviction protections.  There are several cities in California that have eviction control laws. Some cities with eviction control ordinances in the Bay Area include San Francisco, Oakland, Berkeley, Hayward, Marin County (unincorporated areas only), San Rafael, Fairfax, Alameda, Emeryville, San Mateo, East Palo Alto, Mountain View, and San Jose.  There are many cities outside of the Bay Area that also have eviction protections, such as Santa Cruz, San Diego, Los Angeles, and many more. Please click on any of the above cities to determine if your unit has protections under your local eviction protection law. 

For California tenants that do not live in a city with local eviction protection laws, they may be covered under the new state law eviction protections, if the building they live in is at least fifteen years old, and as long as the unit meets all other requirements under the state’s law. Tenants should read our California Tenant Protection Act guide to determine the law’s applicability to their tenancy. 

Can I be evicted if I live in a unit that is covered by either the state or local eviction control law?

If you live in a jurisdiction that has a just-cause for eviction law, you cannot be evicted during or after foreclosure.  Courts have held that eviction protections continue to apply regardless of state or federal law.  Gross v. Superior Court, 171 Cal. App. 3d 265 (1985) and 123 Stat. 1660, Sec. 702(a)(2)(B).

Just-cause eviction laws protect tenants from eviction unless there is a just-cause reason to terminate their tenancy.  Just-cause reasons may be a for-fault reason or a no-fault reason.  Some common for-fault reasons are that the tenant has not paid rent, has breached a lease term, or is causing a nuisance.  Owner move-in evictions (a landlord or their relative seeks to move into the unit) and Ellis Act evictions (the landlord desires to permanently remove the unit from the rental market) are common no-fault reasons for eviction.  For tenants that are not covered by local protections, they may be covered under the state’s eviction protections.  

Unless the property owner has a just-cause reason under your local ordinance or under state law, whichever is applicable to your tenancy, you cannot be forced out of your home. 

Can I be evicted if I live in a unit that is not covered by either the state or local eviction control laws?

Generally, a tenant with a term lease can stay in the unit until the lease expires.  Id.  However, a new owner can extinguish a term lease by serving the tenant a ninety-day notice to vacate if (1) the new owner will be moving into the unit, (2) the tenant is the foreclosed-on owner or is their child, spouse, or parent, (3) the lease was not the result of an arms’ length transaction, or (4) the rent under the lease is substantially below fair market rent.  California Code of Civil Procedure § 1161b.  The burden is on the new owner to prove that the lease falls under one of these exceptions.  Id

A month-to-month tenant is entitled to a ninety-day’s notice to vacate.  Id. 

What do I do if my utilities are shut off during foreclosure? 

When your landlord is in default of their mortgage payments and the property is in foreclosure, your landlord has probably also stopped paying the utility bills.  If your utilities are shut off, you can have them turned back on. The California Public Utilities Commission requires utility companies to allow tenants to put the utilities into their own name.  You will not be responsible for the bills that are owed by the landlord. If you live in a rent-controlled jurisdiction, you can also file a petition with the Rent Board for a reduction in rent because the additional utility payments may be considered an unlawful rent increase. 

If you are having difficulty in getting the utilities turned back on, you can also call your local Code Enforcement department, which will order the landlord to restore service. 

What does “cash for keys” mean?

Many banks and new owners are willing to pay tenants to move.  For tenants that live in jurisdictions with just-cause for eviction protections, a “cash for keys” payout offer is usually too low to justify a move.  Additionally, tenants should be aware that some jurisdictions with eviction control laws have regulations regarding buyouts. In these jurisdictions, landlords are required to make certain disclosures to tenants before even beginning negotiations, and the landlord is required to notify the Rent Board. 

In non-eviction-controlled jurisdictions, month-to-month tenants will receive less than tenants on term leases.  When negotiating a pay-out, be mindful of your security deposit, security deposit interest (if applicable in your jurisdiction), and moving costs.

During and after foreclosure, illegal tactics or tricky methods may be used to force tenants out of their homes.  If you are a tenant that has questions about your rights pertaining to foreclosure, call Tobener Ravenscroft LLP to speak with a tenant attorney.