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Brown Investigates Whether Tenants' Rights Are Violated in Foreclosures

Monday, June 28, 2010
Contact: (415) 703-5837

SACRAMENTO – Attorney General Edmund G. Brown Jr. today launched an investigation aimed at protecting the rights of the “forgotten victims” of the housing market collapse -- the tens of thousands of tenants facing eviction from buildings that have been foreclosed by banks.

“Tenants who live in properties in foreclosure are the forgotten victims of the collapse of the housing market,” Brown said. “We’ll fight every step of the way to ensure they aren’t rousted from their homes in violation of the law.”

As a part of his investigation, Brown today sent letters to 24 banks, loan servicers, private investors, and law firms demanding information about whether they are complying with federal, state, and local laws regarding foreclosed properties and their treatment of tenants.

More than 20 housing rights and public interest groups from across California have petitioned the Attorney General to take action, citing a “pattern of illegal conduct” and tenant harassment by banks, real estate agents and lawyers attempting to speed up evictions so that foreclosed properties can be sold.

More than one-third of all California residential units in foreclosure are rentals, according to tenants’ rights groups, and more than 200,000 California tenants have been uprooted from their homes during the housing crisis.

Since March 2009, Tenants Together, a statewide tenants’ rights organization, has assisted 3,000 tenants involved in foreclosures. The group cited many examples of abusive tactics by banks and their representatives in foreclosure situations, including intimidation, threats and misrepresentations. One case involved a Chula Vista tenant who found a chilling letter posted on his door indicating the property was “being monitored.” A Dublin tenant found a note on his door saying the locks on his unit had been changed and giving a contact if he wished to claim “personal property” left inside.

In his letter, Brown requires banks, loan servicers, private investors and law firms to provide information by July 19 about their policies and procedures when dealing with foreclosed properties and current tenants. It specifically asks the recipients to outline how they “promote or preserve tenancies after foreclosure”.

In May 2009, the federal government enacted the “Protecting Tenants at Foreclosure Act” giving tenants new protections, such as the right to stay in their homes for at least 90 days after receiving an eviction notice. While state and local laws also contain strong protections, unlawful evictions and harassment of tenants continue.

Tenants should know their rights under the law. These rights include:

• Tenants cannot be required to move out of their homes for at least 90 days following an eviction notice.
• Tenants can insist on staying until the end of their leases. The only exception occurs when the new owner of a single-family home wants to move in.
• Tenants can require banks and their agents to put all communication in writing.
• Tenants are not obliged to accept “cash for keys” money to move out sooner than the law prescribes.
• Harassment, such as improper entry into a person’s home, shutting off water and lights, or changing the locks without a court order is illegal.
• The above rights extend to tenants living in government-subsidized Section 8 housing, who may also have additional protections under state and local laws.
• If a city has a just cause for eviction law, a landlord must have a specific reason to evict a tenant, and foreclosure may not be recognized as a legitimate basis for eviction. Tenants should check local ordinances.

Sixteen cities in California have just cause for eviction ordinances: Berkeley, Beverly Hills, East Palo Alto, Glendale, Hayward, Los Angeles, Maywood, Oakland, Palm Springs, Richmond, Ridgecrest, San Diego, San Francisco, Santa Monica, Thousand Oaks, and West Hollywood.

Brown’s office has fought for Californians’ rights during the housing crisis by shutting down loan modification scams and other illegal mortgage practices. To learn more about these actions, visit: http://ag.ca.gov/loanmod/.

If you think your rights as a tenant have been violated and want to file a complaint, contact the Attorney General’s Public Inquiry Unit at http://ag.ca.gov/consumers/general.php.

Brown’s letter, sent today, is copied below:

Re: Protecting the Rights of Tenants Residing in Foreclosed Property

Dear Sir or Madam:

California is facing an unprecedented threat to its economy because of skyrocketing residential property foreclosures. As the foreclosure crisis continues to plague California homeowners, renters in foreclosed properties have become innocent victims of the crisis. It is estimated that more than one third of all California residential units in foreclosure are rentals. Once a rental property goes into foreclosure, renters may face a multitude of problems, including utility shutoffs, lockouts, and unlawful evictions. The Office of the Attorney General has learned of numerous instances where tenants have reported harassment and misconduct by realtors, brokers, and landlords, as well as improper attempts to evict them from their homes by eviction law firms.

The recently enacted Protecting Tenants at Foreclosure Act (PTFA) grants certain protections for tenants residing in foreclosed property, including the right to continue living in the premises for the duration of their lease, and the right to a 90-day eviction notice when there is no lease. State and local laws also provide specific protections for tenants residing in foreclosed property. We are concerned about the increasing number of tenant evictions without compliance with federal and state law. Given the importance of this issue, we ask that you provide the following information by July 19:

1. What policies and procedures do you have that promote or preserve tenancies after foreclosure?

2. What process do you use for determining whether a residential property is owner or renter occupied?

3. When it is determined that a renter occupies the residential property, do you notify the occupant that a Notice of Default has been filed? If so, what notice do you provide?

4. What procedures do you use to notify tenants in advance of the trustee sale? Please furnish a sample copy of a Notice of Sale and the specific language advising renters of their rights.

5. How do you notify tenants that you are the new owner of the property following the trustee sale? Please furnish a sample copy of any such letter or notice and the specific language advising renters of their rights.

6. Once it is determined that the foreclosed property is renter occupied, how do you determine whether renters are protected under the PTFA and/or local rent control ordinances?

7. What policies or guidelines are in place for your contractors, agents or property managers when it has been determined that a foreclosed property is tenant occupied? Do you have any policies that call for the properties to be vacated in order to prepare them for sale? Are your contractors, agents or property managers given any monetary compensation or other incentives if the properties are vacated?

a. Please furnish an example of any written contracts, agreements, or memoranda of understanding that you have with your contractors, agents or property managers.

b. Please furnish copies of any written policies, procedures, or guidelines advising rental agents or property managers about renters’ rights.

c. Please furnish copies of any written contracts, guidelines, policies, or procedures relating to any “cash-for-keys” incentives offered to occupants.

8. What steps are taken when a rental agent or property manager does not comply with those policies, procedures, or guidelines as described above?

9. Which California attorneys or law firms do you retain for the purpose of terminating a tenancy or bringing eviction proceedings against occupant renters?

10. Please furnish us with the following information regarding California properties that you obtained through foreclosure since January 1, 2009:

a. The number of foreclosures of single family homes, condominiums, and multi- unit rental property that resulted in you becoming the new owner or successor in interest.

b. Of the foreclosed properties described in subparagraph a. above, the number of tenant termination notices or unlawful detainer evictions you filed against the remaining occupants. Please include the name of the occupants, the property address, the date of the trustee sale, and the date that any unlawful detainer was filed against the occupants of the foreclosed property.

c. The number of foreclosures of elderly residential-care facilities that resulted in you becoming the new owner or successor in interest. These residential-care facilities include assisted living facilities, skilled nursing homes, group homes, and intermediate care facilities.

d. Of the foreclosed properties described in subparagraph c. above, the number of tenant termination notices or unlawful detainer evictions you filed against the remaining occupants. Please include the names of occupants, the property address, the date of the trustee sale, and the date that any unlawful detainer was filed against the occupants of the foreclosed property.

We look forward to receiving the requested information and also welcome any suggestions you may have to help eliminate these and other problems facing renters occupying properties in foreclosure.

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