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Ins & Outs of Tenancy Notices for Foreclosed Property

Whether you’re a landlord terminating a month-to-month tenant agreement or a renter who is on the receiving end, tenancy notices can be tricky. For many years, there were only two kinds of notices used to terminate a residential tenancy: 3 Day Notices and 30 Day Notices. With Foreclosures reaching a peak over the last several years and property values in flux, Congress and the State of California enacted new “Notice” law. These new laws are meant to protect residential tenants, who in the past, would have been ousted from their homes and searching for a new one in a relatively short period of time.

Tenancy Notice for Foreclosed Property

There are relatively new rules for foreclosing lenders (or immediate successors-in-interest at time of foreclosure) must give in order to terminate a tenancy. Some cities have passed specific rules regarding the termination of a tenancy after foreclosure. Local ordinances must be reviewed to determine what type of notice is appropriate; some areas may impose more restrictive requirements than others.  The following is meant to provide an overview of the notices required to terminate a month-to-month tenancy:

3-Day Notice

  • If the tenant or occupant of the residential property is the borrower, then the lender can serve a Three Day Notice to Quit to terminate a tenancy. A three day notice is also sufficient for a tenant who is a party to the mortgage note.  See California Code of Civil Procedure Section 1161 (a & b) for more details about the law.

60-Day Notice

  • If the borrower is not occupant but family members (like a child, parent, or spouse) are the tenants, then the lender must serve a 60 Day Notice to Quit prior to initiating the eviction process.
  • If non-family members are tenants and the lease is below market rent and terms. A rental transaction at “arm’s length” means that the terms are commensurate with market rates and terms. To make it easier to understand, let’s use an example. Dad rents to his son rent at $2,000, yet the fair market value (FMV) rent is actually $4,000. This arrangement is not an arm’s length transaction because the son is, in a sense, receiving a gift from his Dad. If the property is foreclosed upon, the son needs a 60-day Notice to Quit to terminate the tenancy.

 90-Day Notice

If the tenants are non-family members and the lease is at “arm’s length” (they are renting at fair market values and terms), they are entitled to a 90-day notice. Even if the tenancy arrangement continues on a week-to-week or month-to-month basis with no clear termination date, they still should receive proper 90-day notice.

The following notice rules apply to fixed term leases:

  • 60-day Notice to Quit if borrower does not occupy property and non-family member are tenants;
  • No notice can be given until lease term ends if non-family members are tenants, borrower does not occupy the property, and rent is at market rate; and
  • Exception to No Notice:  If the  property is sold to a 3rd party who plans to occupy the property, then a 90-day Notice to Quit is required.

Just the First Step

Many people are surprised to learn that providing a tenant with notice is only the first step to evicting a tenant. Once notice has been properly served and the notice period has expired, additional steps must followed to legally evict the tenant from the property.  One last note, the above notices and rules discussed do not apply to mobile home tenancies.

The law can be confusing. What questions do you have about Tenancy Notices on a Foreclosed Property?

 

 

 

About Sean Hanley

Practicing law since 2007, Sean specializes in the ever-changing laws related to real estate, business and estate planning. Embracing technology with a focus on personalized service, he understands the challenges of living and thriving in Silicon Valley. Tapping into his education in economics and business administration, Sean also serves on the non-profit Willow Glen Business Association.

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