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Many investors purchase foreclosed properties at a trustee’s sale by submitting a bid at a verbal auction. The winning bidder acquires the property by paying off the remaining balance on the foreclosing loan. Although this can be an attractive means of purchasing property at a price far less than the fair market value, the new owner may face obstacles if the previous owner, occupants, or tenants refuse to vacate the premises. Generally the new owner will have to commence eviction proceedings to gain possession of the property. Before commencing legal action, however, the new owner should make sure they follow the necessary procedures for successfully winning their case.
The first step in this process is making sure that the new owner’s title to the property has been duly perfected. Generally title is duly perfected upon recording of the deed with the County Clerk. In California, title is deemed perfected on the actual date of the sale if the trustee’s deed is recorded within 15 calendar days after the sale.
The next step is determining what type of notice to serve upon the occupants of the property. If the previous owner of the property or his or her household refuses to vacate the premises then California requires the new owner to serve them with a Three Day Notice to Quit. This notice requires the previous owner to vacate within three days. If the previous owner refuses to vacate within three-day time period, then the new owner can proceed by filing a lawsuit for unlawful detainer to have them removed from the premises.
If the premises are occupied by tenants who reside on the property pursuant to a rental agreement, then California law requires the new owner to serve them with a 30 Day Notice to Quit. This notice can be served upon the tenants regardless of the length of their lease because in most cases the sale of the property effectively destroys the lease. If the tenants fail to vacate the premises upon the expiration of the notice, then the new owner can proceed by filing an unlawful detainer action.
If, however, the residents recorded their rental agreement with the County Clerk prior to the foreclosure proceedings, then the existing lease is not extinguished and the new owner remains bound by all the terms and conditions of the lease. In this scenario if the new landlord wishes to terminate the tenancy of the residents, and they are on a month-to-month lease, then the landlord can serve them with a 30-Day Notice to Terminate Tenancy if any of the tenants or residents have occupied the unit for less than one year. If the residents have been residing in the premises for more than a year, then they must be given a 60 Day Notice to Terminate Tenancy.
Taking Possession of Foreclosed Property Through Eviction
After determining that an eviction action is necessary the new owner should consider filing a Prejudgment Claim of Right to Possession with their lawsuit. This is particularly important since there is a possibility that unknown occupants may be residing in the premises. A prejudgment claim puts those who were not named in the lawsuit on notice that they must fill out the prejudgment claim form served with the summons and complaint if they claim a right to possession of the property. Upon filling out the form and filing it with the court, the individual adds themselves as a defendant to the lawsuit. If the individual fails to fill out the form and file it with the court they are prevented from later claiming that they had a valid right to possession of the property.
Another important element of an unlawful detainer action is requesting the appropriate amount of damages in the complaint. Monetary damages are generally awarded on a per diem basis. If the previous owner or tenants fail to vacate upon the expiration of the notice that was served upon them, then the court will grant daily damages for every day that they remained in possession of the premises until the day the new owner obtains possession. To ensure that the new owner is requesting the appropriate amount of damages they should ascertain the market rental value of their newly acquired property.
Once the unlawful detainer action has commenced, the new owner should be aware of the possible defenses the defendants can allege that can cause a delay in the eviction process. The occupants could allege that the property was not properly foreclosed on and that the necessary procedures leading up to the sale were not followed. If the previous owner claims that they are still the rightful owners of the property they could file a separate lawsuit to quiet title or a wrongful foreclosure action alleging an illegal or fraudulent sale of the property. Once the separate lawsuit is filed, a stay or restraining order could be imposed in the unlawful detainer action until the court resolves the separate allegations and makes a determination as to which party has title to the real property.
In this particular circumstance, either party has the option of filing a Motion to Consolidate both the unlawful detainer action and the separate lawsuit filed by the occupants. If the motion is granted, the court would order a joint hearing or trial on any or all of the matters at issue in the lawsuits in order to avoid the unnecessary delay and costs in adjudicating two separate lawsuits. The new owner could also request the court to order the occupants to place the daily rental value of the property in escrow until the cases have been resolved.
An occupant could further delay the unlawful detainer action by filing for bankruptcy. The filing of a petition for bankruptcy immediately stops the eviction action. Before the new owner can continue with the eviction they must go to bankruptcy court and obtain relief from stay. Obtaining such relief terminates the stay in the eviction action and permits the new owner to proceed with the unlawful detainer to obtain possession of the premises.
As a rule of thumb, investors should familiarize themselves with not only with the pre-foreclosure rules but also with the challenges they may face post foreclosure. By doing the right homework and understanding the legal process in evicting the occupants, the new owner can reduce the possibility of losing an unlawful detainer action in court. An educated investor can thus enjoy the benefits of a lucrative investment by following the right procedures from the start.
Kimball, Tirey & St. John LLP is a full service real estate law firm representing residential and commercial property owners and managers. This article is for general information purposes only. Before acting, be sure to receive legal advice from our office. If you have questions about this article, please contact Puneet Singh at 800.525.1690. For past alerts and articles on other related topics, please consult the resource library section of this website.
good article, thanks for the info
This is a very good article. It doe s a great job of touching on both sides of the issue and is understandable to a layman. The TV sellers of these "easy to flip property" programs forget to say anything about the pitfalls of these high dollar transactionz. I think anyone with any of intelligence should deeply check on the sale of the foreclosed property to determine if all procedures were followed. With so many defaults you will see the trustee’s trying to go around the requirments of the staute to ease the immense workload.
Notice of sale is a particularly important area to focus on. It is easy to make a mistake in the "notice to owner". A mistake here could send a deal into a tail spin. This could cause the exixting owner to prove or at least make questionable the proper notices being done correctly. Think about what you would do if it were youor home and if had lived in the home for years and had a large amount equity. Consider how hard an existing owner would fight to keep what there home of many years and the hard work put into it. It is more than just a house for some people and the circumsatnces surrounding the sale may not be some slob who just decided not to make the payments or took every penny they could get from a bank with the intention not to pay it back. there is a huge difference. The assumption that a trustee properly filed the multiple notices required for the perfection of a legal sale is just dumb and with so much money at risk it seems to be an absolute. It should be checked and double checked.
I think the a subsequent article could be written and if so inclined, include a check list to reduce the buyers exposure to a finacial debacle. Despite the fact that the title insurance company would provide a clean title or compensation for a illegal transfer, there is the time required for the party’s to determine the facts and conclude the compensation. They are not going to just write a check for $100′s of $1000 of dollars and does anyone know an expeditious insurance company? This could tie up a small "one off" buyer in paying payments on a investement that cannot provide a return, but also tie up all of the funds available to them for the other possible deals that could be done. The number of homes is not going to be so available by such motivated miortgage company’s who want to dump the inventory. I hope to find something regarding the subject of failure to provide notice compliance. If anyone in your firm responds to these could a quick email be sent on the what would be an owners evidence and the rock hard proof of a trustee’s failure to perfect notice if in the hands of a judge’s review or the proper filing of notices in the same situation. Thanks for the time, effort and dedication it requires to do this for all of us wanna be D.Trumps out here. Thanks in advance, PAUL WASHBURN IN LA,CA
how do these rules pertain to CCC 1950.5 and 1946.1?
1946.1 suggests that if I am a tenant for more than 1 yr I am entitled to 60 notice not 30?
The Unlawful Detainer form UD-100 has a note at the bottom saying "Do not use this form for evictions after sale (ccp para.1161a)". Can anyone tell me which form I SHOULD use for eviction of the previous home owner after foreclosure sale?
It is somewhat unclear if the new buyer has to file the deed with county recorders office before eviction. Can you cite CA law primary source.
My question is regards your statement, "The first step in this process is making sure that the new owner’s title to the property has been duly perfected. Generally title is duly perfected upon recording of the deed with the County Clerk. In California, title is deemed perfected on the actual date of the sale if the trustee’s deed is recorded within 15 calendar days after the sale."
I have been reading about the new "Obama law" that gives bona fide tenants 90 days nationwide.
I have recently won at a Trustee Sale and find 2 tenants renting my new house as roommates. One moved but the other thinks he can stay 90 days. Is this true?
Thanks
What can be done for someone living in a home that has been forclosed on but is not paying rent (the house was owned by my sisters husbands mother and she defalted on the upside down loan). How long can they stay in the house before they have to move? They live in Contra Costa County. They heard from his mother that they have to get out on the 31st of Jan. 10 but there has been no eviction notice.
I’m renting a house. I havent pay rent for 3 months. The property was sold in foreclousure. The bank offer us cash for keys but they havent answer for this 3 months. At first they offer us $1000. But we said no, then a they told us that they will try to get us something better , but till now they havent answer. We told them we wanted the $$$.Are they going to be able to take us out without the $$$.
Living in garage of Forclosed home. Previous owners still on property. Rep. came and gave court eviction papers to owners. The court does not know that we are on the property, nor the bank. Pre owners said don’t worry, we are working with someone to get the house back.
1. Do I red flad the bank and ask for cash for keys or try to get more days until I have to vacate?
2. No lease. I pay month to month. I think I have paid to pre owners when property was not theirs. I did not pay the rent due today for next month. I do not have to pay these people because they are not the owners right?
We had a trustee sale notice placed on our door dateing the 24th of November 2009 and that the sale would be held on February 23 2010. We sent to all involved in the alledged sale a administrative commercial claim with a prommissory note for the full payment on the house with an affidavit of truth all signed by a notary this was in timely increments acc and they never answered to any of the proofs and we know that an unrebutted affidavit stands as truth in commmerce and therefore they have defaulted last thing we sent in the acc was an estoppel they have been trying to just continue lying and railroading us since however no answer still to our claim the trustee sent us a deed of trust with our unilateral contract signatures on it and gave us a colorful currency sheet that we could pay a certain amount and keep the home we accepted it for value as non-responsive and sent their recontract presentment back to them they had another auction date in their mailing as of March 26 2010 and so we were thinking that they were gonna sell it then we did worry imensley for this because they are predators and they know they are doing wrong but dont care its their bread and butter they say. So after the 26 of march they sent us a notice that the house had been sold to Freddie mac and that we are being offered a few choices by freddie mac and that the trustee is still being retained to evict us out and that we have 10 days to accept 1 of their offers $4000, $2500 or to stay as renters and pay the alledged rent and also allow for people to come and walk through the home. we found out that we were tenants of the property anyways even though the whole time we had signed the alledged note to the home we thought that we were the owners but found out that all homes were to be in foreclosure since the US went into bankruptsy in 1933 when all gold and silver were removed by a threat from roosevelt to the people allowing the people nothing to pay with. so what we need to know is are these predators gonna railroad over us and just disregard our remedy and how do we know if they are once again wanting to recontract with us and if they are just lying to us again still because the title is clouded. The property is non-abandoned and we stand on the LAND
most advice given over the internet is misleading and downright wrong, simply because the people do not really have the legal skills to truthfully inform the questionars.