California foreclosures are usually nonjudicial, which means the process takes place without court supervision. After the foreclosure sale, the trustee records a “trustee’s deed” in favor of the the high bidder from the auction. At that point, the high bidder officially becomes the new owner, as shown on the foreclosed property’s title.
Those who buy a tenant-occupied foreclosed property often find that a tenant whose lease has been extinguished by the foreclosure won’t vacate the property. Before filing an unlawful detainer (eviction) lawsuit in court, the new owner has to serve the tenant a three-day written “notice to quit” (leave). The new owner may then file a lawsuit to evict the tenant.
But just how quickly can the new owner get the ball rolling to evict a tenant after a foreclosure? A recent California Supreme Court decision clarifies the timing requirements.
Dr. Leevil, LLC v. Westlake Health Care Center
In the case of Dr. Leevil, LLC v. Westlake Health Care Center, 431 P.3d 151 (Cal. 2018), Westlake Village Property, L.P. (Westlake Village) owned property in Thousand Oaks, California, that it leased to Westlake Health Care Center (Westlake Health). Westlake Village took out a loan, which was secured by the property. Westlake Village later defaulted on the loan, and the bank sold the loan (the promissory note and deed of trust) to Dr. Leevil, LLC (Leevil), which then began a nonjudicial foreclosure. Leevil was the high bidder at the trustee’s sale and, the following day, served a three-day notice to quit on Westlake Health—five days before the trustee’s deed transferring the property to Leevil was recorded. Leevil filed an eviction lawsuit about a month later.
Westlake Health argued that the eviction action was invalid because Leevil served the notice to quit before the trustee’s deed was recorded. The California Court of Appeal rejected this argument, deeming the eviction lawful. Westlake Health then petitioned the California Supreme Court to review the matter.
The California Supreme Court’s Decision
The California Supreme Court reversed the Court of Appeal’s judgment and decided that Leevil had to perfect title (record the trustee’s deed) before serving the three-day written notice to quit on Westlake Health.
The California Supreme Court noted that summary eviction proceedings apply only “in specified circumstances.” (Cal. Civ. Code § 1161a(b)). Under section 1161a(b)(3), summary eviction proceedings are allowed following a trustee’s sale, but only when “the title under the sale has been duly perfected.” Based on the statute’s wording, the Court decided that the perfection of title (recording the trustee’s deed) must happen before the owner could start summary eviction proceedings, including serving a three-day notice to quit.
The bottom line is that, in California, a new owner who gets title to a tenant-occupied property through a nonjudicial foreclosure must be on the property’s title before serving a three-day notice to quit to the tenant.
Rights Against Eviction Due to Foreclosure
After a foreclosure sale, the amount of time you have left in your home is short, unless you decide to challenge the bank. There are a few things you can do to delay or prevent an eviction, depending on your situation.
Fight the Bank
Banks do not always follow the letter of the law. The act of pursuing foreclosure while a modification has been requested, known as dual tracking, is prohibited under the California Homeowner Bill of Rights. If you are a victim of dual tracking, you most likely have grounds to fight an eviction and could actually sue the bank for damages. You should carefully scrutinize all documents and bank claims. If your lender has not followed all of the pertinent regulations, then you may have legal grounds to contest or delay an eviction.
Go to Court
In most states, including California, the homeowner is served a three-day notice to quit following a foreclosure auction. If you do not vacate within three days, the bank or new owner can file an unlawful detainer lawsuit to force you to leave the property. You have the right to contest the unlawful detainer suit in court, but you must respond within five days. Your response must include the legal reasoning for why the bank is not entitled to repossess the home. Such reasons could be that notices were not properly served or that the bank has not proved it has legal title to the property. To have your day in court, you must either show that the bank hasn’t presented enough proof to establish its case or present evidence that establishes a disputed material fact in the case. If you lose, you will be liable for legal fees and possibly back rent for staying in the property.
Redemption is a period after the foreclosure sale of your home during which you can reclaim title by paying off the remaining balance of your mortgage. State laws vary widely on redemption, but if it applies to your situation, it can protect you from eviction, at least temporarily. In California, the redemption period ranges from three months to a year but is granted only in the course of a judicial foreclosure. You cannot be evicted during the redemption period, even if you do not intend to redeem.
If You Are a Tenant
If you are renting a home and the owner is foreclosed upon, you are protected by the law against immediate eviction. If the new owners intend to continue to maintain the home as a rental property, they must honor the remaining time left on your lease. If the new owner intends to live in the property, your lease can be cut short to 90 days. If you are on a month-to-month lease, you have the right to remain in the unit for 90 days. It is common practice for banks to offer tenants a small amount of cash to leave quickly, known as “cash for keys,” but you do not have to agree to this.
Allow the Law Office of Ashish Patel to fight for you to save your home from foreclosure or to fight the eviction that may come thereafter. We have a well-deserved reputation for representing individuals and against big businesses that try to gain unfair advantages. If a lender harmed one person or one family, chances are that lender harmed hundreds or even thousands. We have the resources and the passion to file and litigate lender liability lawsuits.
If you would like more information, or would like to discuss your situation with a skilled mortgage attorney, please contact us today. We represent clients throughout Southern California.