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New Law: Landlords in Foreclosure Must Disclose Default to Prospective Tenants

Landlord & Tenant Law and Legal Update by Peter N. Brewer, Esq.

Normally a tenant would not learn that his or her unit was in foreclosure until very late in the foreclosure process, when the notice of trustee’s sale is posted on the front door.  However, on September 25, 2012, Governor Jerry Brown signed into law SB 1191 (sponsored by Senator Simitian as part of his “There Outta Be a Law” contest) which requires landlords to disclose to prospective tenants that the property is in foreclosure.

The law is to protect new tenants by informing them before a lease is signed that their occupancy could be interrupted by a foreclosure.  For example, imagine the tenant who gives a security deposit and then is informed a few months later that they are required to move, pursuant to a 90 day notice served on them by the successful bidder at the foreclosure sale, who has decided to move in.

The Notice of Default is the notice that triggers the Landlord’s obligation to disclose.  The law goes into effect January 1, 2013 as California Civil Code Section 2924.85.

The law will be in effect for 5 years and applies to single family homes or multi-family dwellings of 1-4 units.

What is interesting about this law is that it does not require landlords who own larger projects to disclose the Notice of Default, nor does it require landlords to disclose to the existing tenants.

If you have  a matter related to this article, or anything else relating to real estate law, please contact Brewer Offord & Pedersen LLP at (650) 327-2900, or visit our website at www.BrewerFirm.com.

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