The United States Secretary of Housing and Urban Development v. Colquitt King

The United States Secretary of Housing and Urban Development v. Colquitt King

The Protecting Tenants Against Foreclosure Act of 2009 (PTFA) provides protections for bona fide tenants of residential real property at foreclosure following the date of its enactment until its sunset at the end of 2014. PTFA, §§ 702, 704. The United States District Court, Northern District of California, subsequently determined that, by enacting the PTFA, “Congress did not intend to create a private right of action remedy, but rather intended to provide tenants additional rights which could be used in state court proceedings.” Nativi v. Deutsche Bank National Trust Co. (N.D.Cal., May 26, 2010, No. 09-06096 PVT) (2010). The protection under the Protecting Tenants at Foreclosure Act of 2009 (PTFA) of bona fide tenancies for a term would be empty if it did not impliedly impose a legal duty on immediate successors in interest in foreclosed properties to make reasonable efforts to identify all bona fide tenants and determine whether they are entitled to continue as tenants under a bona fide lease for the remainder of the lease’s term. This duty may, under particular circumstances, include requesting a copy of a lease agreement, if any, from persons living on the premises or claiming to be tenants. We see nothing in the Act that places the onus on tenants, who may be unsophisticated or lack resources, to provide this proof without request. Nativi v. Deutsche Bank National Trust Co., 223 Cal. App. 4th 261 (2014).

The PTFA causes a bona fide lease for a term to survive foreclosure through the end of the lease term subject to the limited authority of the immediate successor in interest to terminate the lease, with proper notice, upon sale to a purchaser who intends to occupy the unit as a primary residence. The Act impliedly overrides state laws that provide less protection but expressly allows states to retain the authority to enact greater protections. Bona fide tenancies for a term that continue by operation of the PTFA remain protected by California law. Erlach v. Sierra Asset Servicing, LLC, 226 Cal. App. 4th 1281 (2014). Permitting an immediate successor in interest in a foreclosed property to invoke the general rule that illegal contracts are unenforceable would allow it to circumvent the PTFA and frustrate its fundamental public policy purpose. Id; Nativi v. Deutsche Bank National Trust Co., 223 Cal. App. 4th 261 (2014).

Code Civ. Proc., § 1161b, subd. (b)(1), provides that tenants or subtenants holding possession of a rental housing unit under a fixed-term residential lease entered into before transfer of title at the foreclosure sale have the right to possession until the end of the lease term, and all rights and obligations under the lease survive foreclosure, except that the tenancy may be terminated upon 90 days’ written notice to quit if the purchaser or successor in interest will occupy the housing unit as a primary residence. Epps v. Lindsey, 10 Cal. App. 5th Supp. 1, (2017). In Epps v. Lindsey (2017), summary judgment in favor of plaintiffs in their unlawful detainer action against a property occupant that arose from plaintiffs’ post-foreclosure acquisition of the at-issue property was proper because plaintiffs, who intended to use the property as their primary residence, were successors in interest under the statute, given that they were two steps removed from the foreclosure sale and that the immediate successor had acquired the property on their behalf; a bank had purchased the property during a foreclosure sale, and following the foreclosure, the parents of one of the plaintiffs purchased the property at an online auction and subsequently transferred the property to plaintiffs.

In this case, the plaintiff served a 3-Day Notice to Quit and Surrender Possession, which was served by posting at the property and addressed to “Colquitt King and all Tenants, Subtenants, and all others in possession.” See POS, dated October 29, 2018. On November 9, 2018, the present Unlawful Detainer action was filed. The summons and complaint were personally served “All Unknown Occupants” on November 11, 2018, at the property address by delivering to a co-occupant named Ruben Moliva. See POS, dated November 13, 2018. Unique Thomas has asserted a right to remain in possession via a lease agreement dated February 27, 2013. Based on § 1161b, subd. (b)(1), Thomas, who hold possession of rental housing unit under a fixed-term residential lease entered into before foreclosure (2013), have right to possession until the end of the lease term. Thomas’ rights and obligations under lease survive foreclosure. The United States Secretary of Housing and Urban Development, the successor, is not in interest to occupy the housing unit as a primary residence and, therefore, ineligible to terminate Thomas’ lease term. Epps v. Lindsey, 10 Cal. App. 5th Supp. 1 (2017).