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February 17, 2010

What Happens to my family if our home is foreclosed on…?

Filed under: Forecloseure,Mortgages — Barry @ 10:43 am

First, we need to look to federal law.  Sections 701 et, seq. of Public Law 111-22 (Protecting Tenants at Foreclosure Act of 2009) provides limited protection to “bona fide tenants” receive protection from immediate foreclosure if the owner of the residence is foreclosed on.  However, owners, their children, or their parents are not afforded protected from eviction.    [The protection of tenants will be discussed in a future post.]

We therefore need to look to state law, since federal law does not protect the owners, their children or their parents in the event of a foreclosure.

In general, California law does not protect an owner who becomes a tenant after the home has been foreclosed on whether by non-judicial or judicial foreclosure.

What this means is that the new owner must give a 3-day notice to quit before filing an unlawful detainer action.  It is to the foreclosed owner’s benefit to immediately on notice of the sale to contact the new owner (usually the bank) and try to negotiate a lease for the property or “cash for keys”.  REMEMBER YOU SHOULD ACT QUICKLY AS SOON AS YOU RECEIVE NOTICE THAT THE PROPERTY HAS BEEN SOLD.

Negotiating “cash for keys” can be beneficial for both parties. The new owner does not have to go to the time and expense of an unlawful detainer action and possibly the costs of an eviction.  The former owner gets some cash to pay for the costs of the move.  Since the new owner is giving cash only on possession, they can often avoid damage by disgruntled former owners.

The buyer of the home at foreclosure is only “required” to give you a “Three Day Notice to Quit” before they may file an unlawful detainer proceeding against you.  This does not mean that they will not give you more time or work with you to get you out of the property.  The cost (legal fees, and court costs) of filing an Unlawful Detainer action (in Los Angeles County run approximately $1,000.00.  If the owner will negotiate, they might pay this amount to you instead of the court and an attorney.  Further, the owner knows that you understand that just getting the court order does not get you out of your home.   Often the judge will try to get the parties to enter into an agreement to allow the tenant a certain period to move; this is usually entered as a stipulated judgment (a judgment that will only be entered if you do not live up to the agreement).

Once you have been served with an unlawful detainer action, you have only 5-days to file an answer.  The 2010 Los Angeles County court filing fee to file an answer depends on how much the owner says you owe.  It can range from $205 to $355, unless you qualify for a fee waiver.

After the court grants possession, the new owner must apply to the court for a “Writ of Execution.”  The writ of execution must be given to the sheriff to evict you; the new owner may not forcibly move you out. This means that the new owner cannot go in, change the locks and throw your possessions in the street or trash; only the Sherriff can evict you!   The sheriff must give you a 5-day notice before they can come in to forcibly remove you from the premises.   Some sheriff’s departments move quickly, some are very slow in proceeding with even posting the notice.  The minimum fee for the eviction is $125.  The former owner will be responsible for the costs of storage.

The following article from the May 24, 2009 Los Angeles Times discusses evictions in Los Angeles County.

It is always best to work out a mutually beneficial arrangement between the new owner and old owner, as opposed to going to court and being forcibly evicted.  A cash for keys agreement can give you as little or as much time to move as you and the new owner can agree.   An unlawful detainer action in court through forcible eviction can take as little as three weeks to as many as two to six months or more.

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