California Law to Prevent Bulk Foreclosed Property Sales

Existing law prescribes various requirements to be satisfied before the exercise of a power of sale under a mortgage or deed of trust and prescribes a procedure for the exercise of that power. Existing law requires, among other things, that a statement of the default containing specific information be mailed to the trustor or mortgagor at that person’s last known address. If the deed of trust or mortgage containing a power of sale is secured by real property containing from 1 to 4 single-family residences, existing law requires the notice of sale to contain specified notices to potential bidders and to the property owner in substantially prescribed language.

This bill, until January 1, 2026, would require the notice of sale also to contain a specified notice to a tenant regarding the tenant’s potential right to purchase a property containing from 1 to 4 single-family residences pursuant to a process the bill would prescribe. In connection with these properties, the bill would also require a trustee to maintain an internet website and a telephone number to provide specified information on the properties that is free of charge and available 24 hours a day, 7 days a week.

Existing law, with regard to the exercise of a power of sale under a mortgage or deed of trust, requires the sale to be held in the county where the property or some part of it is situated and to be made at auction, to the highest bidder, as specified. Existing law generally requires that if the property consists of several lots or parcels, they are to be sold separately unless the deed of trust or mortgage provides otherwise.

This bill, until January 1, 2026, for purposes of the exercise of a power of sale as described above, would prohibit a trustee from bundling properties for the purpose of sale, instead requiring each property to be bid on separately, unless the deed of trust or mortgage provides otherwise. Existing law prescribes certain requirements for bids made at a trustee sale, authorizes a trustee to require bidders at these sales to satisfy certain conditions, and specifies when a trustee sale becomes final.

This bill, until January 1, 2026, would prescribe an alternative process in connection with a trustee’s sale of property under a power of sale contained in a deed of trust or mortgage on real property containing 1 to 4 residential units. In this process, if a prospective owner occupant, as defined, is the last highest bidder, the date upon which specified conditions required of the bidder at the trustee sale to become final are met. The bill would require the trustee to require the prospective owner occupant to provide certain information confirming the owner occupant’s status. If a prospective owner occupant is not the last highest bidder, the bill would grant eligible tenant buyers, as defined, and other eligible bidders, as defined, certain rights and priorities to make bids on the property after the initial trustee sale and potentially to purchase it as the last and highest bidder, subject to certain requirements and timelines. The bill would prescribe duties for trustees in connection with this process that would be performed if an owner occupant is not the last highest bidder.

This bill would state that specified provisions related to mortgages and deeds of trust do not relieve a person who is deemed the legal owner of property when a trustee’s deed is recorded from complying with applicable law regarding the eviction or displacement of tenants, including requirements for the provision of relocation assistance and just cause eviction.

Existing law specifically requires the owner of vacant residential property purchased at a foreclosure sale, or acquired through foreclosure under a mortgage or deed of trust, to maintain that property. Existing law authorizes a governmental entity to impose a civil fine of up to $1,000 for each day that the owner fails to maintain the property, subject to the owner being given notice and an opportunity to cure the violation, as specified. Existing law requires the entity levying the fine to provide a period of not less than 30 days for the legal owner to remedy the violation prior to imposing a civil fine.

This bill would increase the above-described civil fine to up to $2,000 per day for the first 30 days, and up to a maximum of $5,000 per day thereafter, subject to the discretion of the governmental entity levying the fine. The bill would require the entity to provide notice of intent to assess a civil fine if the legal owner does not commence action to remedy the violation, notify the entity of that action, and complete the action within certain periods to be determined by the entity, subject to specified minimum lengths of time.

This bill would incorporate additional changes to Section 2924f of the Civil Code proposed by SB 1148 to be operative only if this bill and SB 1148 are enacted and this bill is enacted last. If this bill and SB 1148 are enacted and SB 1148 is enacted last, this bill would make inoperative provisions that otherwise would be added by this bill, to be operative January 1, 2026, that would be inconsistent with the additional changes to Section 2924f of the Civil Code proposed by SB 1148.