By necessity, most landlords stay current on the long list of disclosures to prospective tenants required by California law. A relatively new addition to this list (Section 2924.85 of the California Civil Code) requires landlords to warn prospective tenants when the property they are applying to rent is facing foreclosure. As of January 2013, property managers and landlords in California must disclose in writing to any prospective tenants the fact that a notice of default has been recorded against the property. This law applies to all rentals of single-family homes and of apartment buildings having no more than four units.
The required disclosure
The required disclosure also includes a notice advising that, if a new owner takes ownership of a property following foreclosure, the new owner must give the tenant at least 90 days’ written eviction notice in most cases.
The measure is designed to protect those persons who might be unexpectedly evicted from their recently rented homes in the event that (a) their new landlord was already in foreclosure and ended up losing title to the property, and (b) the new owners elected not to rent the property. Accordingly, apartment buildings of more than 4 units are exempt, the thinking being that, even in foreclosure, the new owner would opt to keep all units in the property rented, so that it would be unlikely that the renters would be affected.
The penalties for violation
The penalties for violation of this disclosure requirement include the right of the tenant to void the lease and awarding damages to the tenant in the amount of the greater of one month’s rent or twice the actual damages suffered, as well as the return of all prepaid rent, including rent paid in advance on the first day of the month for the that month’s tenancy, and any rent designated as “last month’s rent” as part of the security deposit. Alternatively, the tenant can elect not to terminate the lease (so long as the foreclosure has not yet been completed) and deduct the amount of one month’s rent from future rent amounts owed to the landlord.
This new law applies only to prospective tenants, not existing tenants. Landlords, even those who would otherwise be required to give notice as described above, need not notify current tenants of an imminent foreclosure. However, existing tenants who are concerned about the possibility of a foreclosure can take steps to see that they receive even more notice. Like any other interested person, a tenant can go to the county recorder’s office and file a document requesting the clerk to notify the tenant as soon as a Notice of Default has been filed by the lender, pursuant to California Civil Code Section 2924b. This request must be recorded at least three months before a Notice of Sale is sent.
