A California law previously required landlords to warn prospective tenants when the property they were looking to rent was facing a foreclosure. The law requiring this notification, however, was repealed on January 1, 2018. Under another California law, California Civil Code section 2924.8, residents of a rental should still receive notice of a pending foreclosure from the trustee or agent handling the foreclosure. However, section 2924.8 also expired on December 31, 2019, and as of February 2020, no new law has taken its place.
Read on to learn the history of the law and what the law required (while in effect), as well as about current protections for existing tenants under the law.
On September 25, 2012, Senate Bill 1191 was signed into law by then Governor Jerry Brown, which added Section 2924.85 to the California Civil Code. This law required that certain landlords who received a Notice of Default—the first step in the California nonjudicial foreclosure process—provide written notification of the foreclosure to any prospective tenant before a lease or monthly rental agreement was signed.
Under Section 2924.85, if a landlord received a Notice of Default, that landlord had to provide notification of the foreclosure to prospective tenants, but only if the property that was being offered for rent was:
Because of these restrictions, there are some situations where the landlord didn't have to provide this notification. For example, a landlord who owned a large apartment complex didn't need to let potential tenants know that a foreclosure was happening. The reasoning behind excluding large properties was that those properties were likely to continue to be operated as rentals, even after foreclosure. A single-family home or small property, though, might not remain a rental after a foreclosure.
The law expired on January 1, 2018.
While Section 2924.85 didn't extend to existing tenants, under California law, tenants will get some advance warning of a foreclosure under California Civil Code section 2924.8, although this law is due to end as of December 31, 2019.
In a nonjudicial foreclosure in California—the most common kind of foreclosure in the state—the foreclosing party must post a Notice of Trustee's Sale on a property that's being foreclosed (Cal. Civ. Code § 2924f), as well as mail a notice to residents at least 20 days before the foreclosure sale. (Cal. Civ. Code § 2924.8). (The sunset date for the statute that requires a mailed notice to residents is December 31, 2019, and unless extended, the law will expire at that time.)
Existing tenants who are concerned about the possibility of a foreclosure can take steps to ensure that they receive even more notice. Tenants can go to the county recorder's office and file a form that tells the clerk to notify them that a Notice of Default has been filed by the lending institution. People who request notification of the Notice of Default will also get a mailed notice about the sale. (Cal. Civ. Code § 2924b).
Learning of a Notice of Default alerts tenants that a foreclosure sale is possible, though not for at least 110 days. If they have a month-to-month rental agreement, they might choose to give notice and move. If they have a lease that expires soon, they might decide not to renew it.
Under the federal Protecting Tenants at Foreclosure Act (PTFA), a new owner after a foreclosure sale has to honor an existing residential lease until it ends, unless that new owner wants to live in the home. In that situation, the new owner has to give the tenant 90 days' notice to move out. Also, month-to-month tenants are entitled to 90 days' notice before having to move out under the law.
The PTFA also provides that if state or local law gives a more generous amount of time for renters to stay in the home, that longer period applies. (Some states have a law that gives tenants protection from eviction after a foreclosure. Often, these laws are similar to the federal PTFA, but not always. Some cities also provide eviction protections to tenants.)
If you have questions about your rights as a tenant under federal, state, or local law following a foreclosure, consider talking to a landlord-tenant attorney or a foreclosure attorney.