Client Alert: From the Scheer Law Group: Where Politics/Social Reform and Law Meets: Radical Changes to Foreclosure Law in CA: SB 1079 Now in Effect . Bill Passed now. Effective 1.1.21

By Spencer P. Scheer

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News

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Last Modified on Mar 28, 2023

Note: The following is a general discussion on the specified topic or issue and may not be relied on as legal advice in any specific case or matter you encounter. You should review any applicable case, or matter with counsel experienced in this area of law and should not generally rely on the discussion in this Alert.

Date: October , 2020
Client Alert:
To: All Scheer Law Group Clients and Affiliates:
Subject: Where Politics, Social Reform and Law Meet: Radical Changes to Foreclosure Law in CA: SB 1079 Now in Effect.

Many new laws addressing real and perceived financial emergencies were recently “pumped out” by the California legislation. Some of the laws reflect the changing socio-political landscape in CA, and possibly the nation.

Recently enacted SB 1079 radically changes the laws governing foreclosure sales in CA. In essence, “eligible bidders” are given a right to match or overbid the price bid at a completed foreclosure sale for up to 45 days. Eligible bidders now include the tenants on the property that was foreclosed, purchasers who will agree to owner occupy the property, and a vast array of non-profit and local state and agencies who will ostensibly put the foreclosed property to good use.

Whether the impact is beneficial or not remains to be seen. One thing is certain: The impact on the finality of foreclosure sales in CA will be substantial. In addition, the impact will spread out to affect guarantor liability, and will dramatically increase the potential entanglement of state and local government with the foreclosure process and finality of sales. Another lesser ramification is a very punitive allocation of obligations to maintain the exterior of foreclosed residential properties or to pay escalating fines of up to $5,000 per day!

The following is a very brief overview:

• Effective Date: Passed September 28, 2020. Effective January 1, 2021.
• Expiration date:  January 1, 2026.
• Covered Properties: 1-4 unit family dwellings, including investment and rental properties.
• Eligible Bidders (Civ Code §2924 m): Established by affidavit with bid or notice of intent to bid received by Trustee no more than 15 days after sale. Eligible bidder is one of following.
• Tenant Buyer: Natural person who at time of sale occupies prop as primary residence; or who has an arm’s length lease with the borrower dated before NOD recorded and is not the borrower. Note: Tenant Bidder has special bid rights i.e. option to purchase at prior foreclosure sale price.
• Prospective Owner-Occupant: Must give affidavit to Trustee that he or she will owner occupy within 60 days of date TDUS recorded; will live on property for at least one year; is not the borrower or borrower’s family; and is not acting as agent.
• A non-profit entity in which an eligible tenant buyer or prospective owner occupant is a voting member or director.
• An Eligible CA Non Profit Corp; whose primary activity is development and preservation of affordable housing, or an LP or LLC in which the GP or managing member is an eligible non-profit developing or preserving affordable housing.
• Community Land Trust; or a Limited Equity Housing Coop.
• A Limited equity housing cooperative
• State of CA , Regents of CA university, a county, city, district, public authority, or public agency or any other political subdivision or public corporation is CA.
• Note: If notice of intent to bid submitted within 15 day period then bid must be received by Trustee within the 45 day period.
• Allows an Eligible Bidder to submit a bid to a foreclosure trustee to buy a foreclosed property 45 days after a Trustee’s Sale has occurred.
• Effective Date: September 28, 2020.
• Expiration date: January 1, 2026 (Civ. Code §2924f (e).
•  Covered Properties:  1-4 unit family dwellings, including investment and rental properties.
• Significant Provisions:
• Eligible Bidders (Civ Code §2924 m): Established by Affidavit with bid or notice of intent to bid received by Trustee no more than 15 days after sale), establishing bidder is one of following.
• strong>Tenant Buyer: Natural person who at time of sale occupies prop as primary residence; or who has an arm’s length lease with the borrower dated before NOD recorded and is not the borrower. Note: has special bid rights i.e. option to purchase at sale price.
• Prospective Owner-Occupant: Must give affidavit to Trustee that he or she will owner occupy within 60 days of date TDUS recorded; will live on property for at least one year, is not the borrower or borrower’s family, is not acting as agent.
• Note: When Prospective Owner-Occupant is Last and Successful Bidder at Sale: If a prospective owner-occupant is the last and highest bidder at the trustee’s sale, and timely pays, the date upon which the conditions set forth in Section 2924h of the Civil Code for the sale to become final are met.
• A non-profit entity in which an eligible tenant buyer or prospective owner occupant is a voting member or director.
• An Eligible CA Non Profit Corp; whose primary activity is development and preservation of affordable housing, or an LP or LLC in which the GP or managing member is an eligible non-profit developing or preserving affordable housing.
• Community Land Trust; or a Limited Equity Housing Coop.
• A Limited equity housing cooperative
• State of CA, Regents of CA university , a county , city, district, public authority, or public agency or any other political subdivision or public corporation is CA.
• Note: If notice of intent to bid submitted within 15 day period then bid must be received by Trustee within the 45 day period.
• Eligible Bidder Can Buy Property After Foreclosure up to 5:00 p.m. on the 45th Day After Sale (Civ. Code § 2924m):
• Special Bid Price for Eligible Tenant Buyer: An Eligible Tenant Buyer can bid in amount equal to full amount of last and highest bid at sale. Any other bids must exceed the last and highest bid at the trustee sale.
• Note Impact on Full Credit Bid and Guarantor liability if full credit bid.
• Changes to Notice of Sale (Civ. Code 2924f):
• Notice of FC Sale Must include now include special notice to Tenants Advising of Right to Purchase.
• Foreclosure Trustee must maintain website and telephone number to provide information to prospective bidders, including last highest bid so that Eligible Bidders can bid.
• FC Sales now not Final Until After Eligible Bidder Time to Purchase is Extinguished (Civ. Code § 2924 h):
• If an Eligible Bidder submits sufficient affidavit of notice of intent to bid, per Civ. Code §2924m, then trustee’s sale shall be deemed perfected as of 8 a.m. on the actual date of the sale, if TDUS recorded within 48 calendar days after the sale or the next business day following the 48th day if recorder office is closed on 48th day.
• Note Impact on BK.
• Note impact on collusive sales to stall effect of sale.
• Note impact on foreclosure sale by 2nd TD, can first be assumed i.e. due on sale?

Fines Increased for Failure of Owner to Maintain Residential Property (Civ. Code §2929.3) :

• Beginning on day following end of cure period established by City or County.
• $2k fine per day for first 30 days and $5k per day for each day thereafter.

Please call or email if you have any questions or want to discuss.

Spencer Scheer