January 23, 2009
By Marc Whitham and Dolores Calderón López
Many tenants are renting houses, condominiums or apartments they suspect or know are in danger of being taken back by the bank because the owners have not been making their payments. This process is known as foreclosure. Banks would not loan money to enable people to buy homes if the law did not make it simple for the bank to get the home back when the borrower stopped paying. Even though the law favors the bank, tenants caught in this situation have legal rights.
If you are renting a place that is being taken back by the bank [foreclosed], the bank must give you time to move. After the time is up, if you don’t, the bank must go through the legal process before the sheriff will remove you. In California, the bank will have to file a legal action against the tenant called unlawful detainer.
An eviction case, or unlawful detainer, does not expose tenants to the risk of arrest or deportation. A person’s immigration status is not a part of these cases. The judge in these cases is only concerned with whether the bank has done everything according to the law. If it has, the tenant will be evicted; if it has not, the bank may have to start the whole thing over again from the beginning. process. Tenants should know how a typical post-foreclosure eviction goes and what their rights are.
When the owner does not pay the bank for the money he borrowed, the bank will send out a letter warning the owner, and alerting others, that there is a problem with the loan. This is called a “Notice of Default”, and it is recorded in the County Recorder’s office. A copy is usually, but not always, sent by certified mail to the property. Many times this is the tenants’ first clue that the owner or the house is in financial trouble. There are people who search the recorder’s office records constantly to find properties and owners that are in trouble. Some may offer legitimate services. Others may be dishonest and looking to make some money off the misery of others. Many may show up and the tenants’ door looking for the owner or asking lots of questions. It is up to the tenant whether they want to talk to these people or not.
If the owner does not satisfy the bank and make the payments, the bank will then schedule an auction of the property. At this auction, the bank will submit the first bid, which is usually the smallest amount the bank is willing to pay off the entire loan. Other people may show up and bid, but they must be able to either pay cash, or be able to show that they already have a bank committed to loaning them the money to back their bid. Most often the bank ends up getting house. Sometimes they are bought by others. These auctions can produce some good buys, and some bad ones. No one should think about buying a home at these foreclosure auctions unless they have first studied and understand the risks. They must have accurate up-to-date information on the property as well.
Whoever buys the property at the auction will get a deed or title to it. Normally, when a home is sold from one person to another, the seller signs the deed and gives it to the buyer. In foreclosure sales, the seller is not involved in the sale, so the deed is signed by someone called a “trustee.” The deed is therefore called a “trustee’s deed.”
The buyer will then take the trustee’s deed” and record it in the County Recorder’s office. By recording deeds and mortgages, the public can find out the status of a piece of property, who owns it, and often, how much is owed on it. Once the trustee’s deed is recorded [the deed is stamped with a date and time by the County Recorder], the new owner has “perfected” his title.
Normally, the buyer at auction will want to get possession of the home as quickly as possible. Under California law, after the buyer records the trustee’s deed, he may give the person who borrowed the money and lost the home a paper telling them they have only 3 days to leave. If the home was rented out, the paper must give the tenant 60 days to leave.
This can lead to some good things and some bad. The buyer may not want to wait 60 days as the law requires, and instead have someone try to intimidate the tenant into believing the sheriff will throw them out much earlier. That is untrue, and tenants should not be bullied into moving. Buyers will sometimes jump the gun by not waiting until his deed is recorded before giving the borrower or tenant notice to move. A notice served too early is no good and does not start the 3 or 60 day time clock running. On the other hand, it is legitimate for the buyer to try to speed up getting the property by offering the tenant money to move out faster than the law dictates. This kind of deal is often called “cash for keys” because the tenant voluntarily agrees to take money in exchange for giving up the keys to the home much earlier than would be compelled by the law. There is no set price for this, and the buyer and tenant will have to decide for themselves how much money and time to offer.
If the buyer and the people living in the home do not reach an agreement, and do not move when the 3 or 60 days runs out, the buyer may not act on his own to get the property back. He must sue in Court using the unlawful detainer. While the bank or new owner is certain to know the name of the person who borrowed the money, the former owner, they are much less likely to know if a tenant is in the property, and what that tenant’s name is. This can lead to banks and new owners giving only 3 days notice when 60 days is required. A judge should rule for the tenant if a new owner sues on a notice that is improper. Even if the legal papers do not anywhere have the tenants’name, it is very important that those who live in the home speak to a lawyer or follow the instructions in the Summons about filing legal papers.
Defendants who are named in the Summons and Complaint in unlawful detainer have only 5 days to file papers in court. Contrary to what is commonly believed, the 5 days includes weekends. Tenants who are not specifically named in the papers have different ways to respond, but those options are a little beyond the scope of this article.
If the defendant does not file the papers, the time from getting the summons to suffering eviction by the sheriff is terribly short, as little as two weeks. If the defendant does file papers with the Court, then the plaintiff must have the Court set a day for trial. This will add another 2-3 weeks. If the new owner or bank wins the case, the final step is eviction by the sheriff. The sheriff first leaves a paper on the property called a “Notice to Vacate” that tells the people living there when the eviction will take place. He then returns 5 days later to do the eviction.
If everyone has not moved before the sheriff arrives to evict he will, forcefully if necessary, remove everyone. Things belonging to the people living there that were not moved before they were evicted, must be held by the new owner for 15 days during which time the people to whom these things belong can make arrangements to get it.
If you or someone you know someone living in a place that may be affected by foreclosure, please tell them they do have some rights. They should try to speak with a lawyer if possible. If they qualify for the free services provided by the Legal Aid Society, they can call 877-534-2524 for help. Help in filling out legal forms is available at clinics in the Courthouses.
For South County residents, Unlawful Detainer Clinic is held Monday through Friday from 9AM to 12:30 at the Southbay Courthouse, 500 West Third Avenue, 1st Floor, Room 155, Chula Vista, California.
For East County residents, Unlawful Detainer Clinic is held Mondays, Wednesdays, Fridays from 8:30AM to 12 noon and Tuesdays and Thursdays from 9:30AM to 12 noon at the East County Courthouse, 250 East Main Street, 1st Floor next to Department 1, El Cajon, California.
For Central residents, Unlawful Detainer Clinic is held Monday through Friday from 1PM to 3PM and Tuesdays and Thursdays from 9AM to 12 noon at the Hall of Justice, 330 West Broadway, 2nd Floor, Civil Business Filing Office, San Diego, California, 92101.
For North County residents, Unlawful Detainer Clinic is held Mondays and Thursdays from 12 noon to 3PM in Department 35-Annex at the North County Courthouse, 325 South Melrose Drive, Vista, California 92081. Spanish-speakers must bring a translator.
This article is for informational purposes only and does not constitute legal advice since it does not apply to any particular case, situation, or set of facts.
Marc Whitham and Dolores López are Staff Attorneys with the Housing Department at the Legal Aid Society of San Diego, Inc. 877-534-2524