Navigating Post-Foreclosure Evictions in California

You just foreclosed on your REO, now what? In many cases, the borrower or tenants with agreements made with the former borrower may still occupy the property. This article explores the legal considerations and steps private lenders must take to evict tenants post-foreclosure while ensuring compliance with California law and minimizing risks.

County and Municipal Considerations

After foreclosing on property in California, a lender should familiarize themselves with, or retain counsel who is familiar with, the nuances of eviction laws in the state. However, what many lenders are not prepared for is the differences between certain counties and even municipalities when it comes to evicting tenants post-foreclosure. While some counties and municipalities simply adhere to the general state guidelines set forth for evictions, there are several counties and cities with their own additional set of rules and procedures. Regarding eviction protections and protocols, lenders must remember that California simply sets a floor, not a ceiling.

For example, an owner seeking to evict in Los Angeles will have the same set of state laws as an owner in San Diego, but Los Angeles and San Diego have different municipal codes that may require different or additional steps when it comes to the notice and eviction process. These considerations alone make it worthwhile to do your research or contact counsel to guide you through the process.

Understanding Post-Foreclosure Tenants and Eviction Considerations

Another important consideration before you begin the post-foreclosure eviction process is to do your best to determine the types of tenants which reside on the property. The first step in a usual post-foreclosure eviction is to provide a written notice which should be served upon the tenants or occupants of the property. How much notice is required will depend on the types of tenants which occupy the property.

The two types of potential occupants that lenders may need to deal with are:

1. Former Homeowners: In many cases, the homeowner who defaulted on the mortgage may still be living in the property.
2. Tenants: Sometimes, the foreclosed property may be occupied by tenants who were renting the home at the time of foreclosure.

Each of these situations has distinct legal implications for eviction processes.

Evicting Former Homeowners

If the property is still occupied by the former homeowner, private lenders will need to begin the eviction process. While the former homeowner no longer has any rights to the property. A formal eviction is still necessary before the lender can take full possession of the property.

The eviction process for former homeowners typically follows these steps:

1. Notice of Eviction: The first step is providing the former homeowner with an official eviction notice, which informs them that they must vacate the property. The required notice period for former homeowners still occupying the property is three days’ notice. [Cal. Civ. Proc. Code section 1161a(b)].
2. Court Action: If the homeowner refuses to leave after the notice period expires, the lender will need to file for eviction with the court. This is known as an unlawful detainer action. The lender or the lender’s attorney will need to file an unlawful detainer complaint and then decide whether to pursue the case summarily by motion or request a trial date.
3. Eviction Judgment/Writ: If the court rules in favor of the lender, an eviction judgment will be entered, after the judgment is entered, a writ for possession must be submitted and entered by the clerk to empower the sheriff or local law enforcement to remove the homeowner from the property.
4. Sheriff’s Process: The writ of possession authorizes the sheriff to physically remove the former homeowner. It’s important to note that the lender cannot take matters into their own hands and must rely on law enforcement to enforce the eviction. However, lenders should have their own locksmiths handy in order to change the locks once the occupants have been removed by the sheriff.

Evicting Tenants in Foreclosed Properties

Evicting tenants who are renting the property at the time of foreclosure is more complex to navigate alone.  In addition to state regulations, another consideration is the federal legislation – Protecting Tenants at Foreclosure Act (PTFA) which provides protections for tenants who are living in a foreclosed property.

Under PTFA, tenants are generally entitled to remain in the property for a specified period after foreclosure, depending on the nature of their lease agreement. Here’s what private lenders need to know about evicting tenants in California:

1. Lease Term: Tenants with a lease in place are entitled to remain in the property for the remainder of their lease term. If the new property owner intended to occupy the property as their primary residence, the tenant can typically be evicted after 90 days.
2. Notice Requirement: The lender or new property owner must give tenants proper notice before beginning the eviction process. This includes a 90-day notice of eviction for tenants with a lease agreement. A 30-day notice can be given if the persons occupying the property are tenants or subtenants under a lease entered into before the date the property was sold at foreclosure, and they are occupying with the former homeowner who was a party to the foreclosed note. These notices must be provided in writing, and the tenants must be informed that the property has been foreclosed upon.
3. Eviction Process: If the tenants refuse to vacate the property after receiving the notice, the lender will need to initiate the eviction process through the courts. The same steps apply as with former homeowners—filing an unlawful detainer action, going to court, and obtaining an eviction judgment then writ to provide to the sheriff.

As discussed above, even though PTFA sets federal guidelines, California and certain counties and municipalities have additional laws that protect tenants during foreclosure. These protections can vary widely, so it’s important for private lenders to consult with a local attorney who understands tenant law in the jurisdiction where the property is located.

General Considerations for Private Lenders

Navigating post-foreclosure evictions requires careful attention to the law to avoid potential liabilities or mistakes that may cost you the unlawful detainer action requiring you to re-file and try again.

Here are several key general points private lenders should keep in mind:

1. Timely Legal Action: Lenders should act swiftly to start the eviction process, but they must also ensure they are following all required legal procedures. Failure to comply with eviction laws could result in delays or affirmative defenses for the tenants.
2. Consult an Attorney: The eviction process can be complex, especially when dealing with tenants or multiple occupants. Consulting with a real estate attorney who is familiar with eviction laws and tenant protections can help lenders avoid costly mistakes.
3. Tenant Protections: Lenders must be aware of federal and state tenant protections. Violation of tenant rights during eviction can lead to lawsuits, fines, or delays in the process.
4. Consider Alternatives to Eviction: In some cases, lenders may be able to reach an agreement with tenants, such as offering them financial incentives to vacate the property voluntarily. This can save time and legal fees, although it may not always be feasible depending on the situation. There are also legal considerations within that process, so be sure to consult with an attorney prior to exploring those alternatives.

Navigating Post-Foreclosure Evictions with Confidence

Handling post-foreclosure evictions is one of the most intricate aspects of the foreclosure process for private lenders. With varying local, state, and federal regulations, even a minor misstep can lead to costly delays or legal challenges. Ensuring compliance with tenant protections and eviction procedures is crucial to mitigating risks and securing your investment.

At Geraci LLP, our Litigation and Bankruptcy team specializes in protecting private lenders’ interests throughout the foreclosure and eviction process. Contact us today to safeguard your investment and move forward with confidence.