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Entries in federal law (12)

Thursday
Jan302014

Protecting Tenants at Foreclosure Act: California Court of Appeal

Business LitigationSan Fernando Valley Business Litigation Lawyer

 

Nicholas Kanter
818.907.3289

Five years after the Protecting Tenants at Foreclosure Act was passed, the California Court of Appeal recently published its first opinion interpreting the Act in depth.

The PTFA, a federal statute, was passed in 2009 as an effort to protect tenants from being quickly displaced from a rental property following a foreclosure sale. Prior to the PTFA, a foreclosure sale would generally eliminate a lease that was junior to the deed of trust for the subject property.  

As a result, the purchaser at a foreclosure sale was able to file an unlawful detainer lawsuit against tenants in a foreclosed property following the expiration of a Three Day Notice to Quit. The PTFA changed this.  

Under the PTFA, a purchaser at a foreclosure sale takes title to the property subject to the rights of a bona fide tenant residing in the property under a bona fide lease, with certain exceptions. 

For example, where the lease is terminable at will, or the purchaser intends to occupy the property as his/her primary residence, the tenancy can be terminated upon 90 days written notice to the tenant. However, if these exceptions do not apply, a foreclosure purchaser must generally honor the bona fide tenancy through the end of the lease.  

In Nativi v. Deutsche Bank Nat'l Trust Co., (Cal. Ct. App. Jan. 23, 2014), Deutsche Bank purchased a residential property at a foreclosure sale in August 2009. At the time of the sale, Rosario Nativi was renting a converted garage unit on the property pursuant to a lease that did not terminate until June 1, 2010. Following the sale, Nativi was displaced from the property and sued Deutsche Bank for a number of landlord-tenant causes of action, including wrongful eviction, breach of the covenant of quiet enjoyment, illegal entry of landlord and illegal lockout.  

Ultimately, the trial court granted a motion for summary judgment filed by Deutsche Bank finding the foreclosure sale extinguished the lease under California law, and therefore Deutsche Bank, as the immediate successor in interest in the property, did not step into the shoes of the landlord.  

The Court of Appeals reversed the trial court finding that under the PTFA, 

…a subordinate bona fide lease survives foreclosure for the remainder of the term by operation of the Act regardless of the state law to the contrary and, consequently, the bona fide tenants under that lease and the immediate successor in interest in the foreclosed property have a landlord-tenant relationship, although the lease may be terminated as provided in the Act. 

While the Court’s holding is not surprising in light of the PTFA’s language, it reinforces the importance of the foreclosure purchaser to take steps to determine if the purchased property is tenant occupied, and if so, the terms of the tenancy. Moreover, if a bona fide tenancy exists, based on the Court’s ruling, the purchaser becomes the tenant’s landlord and should act accordingly or risk claims by the tenant. 

Although the Nativi ruling focuses on the rights of bona fide tenants under the PTFA, it also touches an important but overlooked aspect of the Act.  

In particular, the PTFA does not explicitly address whether a bona fide tenant is required to pay rent to the new owner of the property, and if so, whether the new owner can terminate the tenancy for failure to pay rent without waiting 90 days. Nativi appears to answer this question in the affirmative.  

As quoted above, the Court held that “bona fide tenants…and the immediate successor in interest…have a landlord-tenant relationship…” In a landlord-tenant relationship, the tenant pays rent to the landlord.  Furthermore, the Court relied on administrative construction of the PTFA to support its ultimate findings.  One of the administrative guidelines relied upon was a release by the FDIC which stated: “For tenants under a lease who are current on their rental obligations, PTFA prohibits eviction prior to the end of their lease terms…”  (Emphasis added). 

This implies that tenants must be current on their lease to enjoy the protections of the PTFA.  A logical conclusion is thus, if a tenant is not current on his/her lease, the new owner may terminate the tenancy prior to 90 days for failure to pay rent.  

The lesson learned here is this: anyone purchasing a residential property at a foreclosure sale should take steps to ascertain the status of the occupants in the property. 

If tenants are occupying the property under a bona fide lease the purchaser should try to obtain a copy of the lease to determine the rights and obligations of both the tenant and the landlord (i.e., the purchaser) thereunder. Depending on the lease terms, the purchaser may be able to terminate the lease upon proper notice to the tenant, or may have to honor the lease until it expires. 

 

Nicholas Kanter is a Real Estate Litigation Attorney at our firm. Contact him via email: nkanter@lewitthackman.com.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

Tuesday
Oct012013

Government Shutdown & How It Affects Your Business

Franchise & Trademark Litigation Lawyer

 

by Tal Grinblat & Stephen T. Holzer

818.990.2120

 

About 800,000 non-critical federal employees are out of the office today, and will remain out until Congress overcomes the impasse regarding the Affordable Care Act. In the meantime, the government shutdown – the first since 1996 – will affect more than your travel plans, but also your business.

Here's how:

1. Courts: Federal Courts will remain open, and operate for the first 10 or so business days as usual. As funding dries up, non-critical employees will have to be furloughed, which means a potential slowing of the judicial process.

Government Shutdown Business Affects2. Commercial Finance: Those seeking business loans and loan guarantees will see their plans impeded. The Small Business Administration saw an influx of loan applications just before the shutdown, which will slow the review process once the SBA resumes operations.

3. Contracted Projects and Construction: Companies with government contracts may not be able to apply for and obtain permits and reviews. Construction projects will shut down.

4. Corporate Strategy: Ready to alert the Federal Trade Commission of anti-competitive practices or unlawful trading? You'll have to wait. (The Security and Exchange Commission is open, for now.)

5. Employer Defense: Employers, you may get a bit of a breather if you're facing employee wage and hour, discrimination, or other claims.  

The Equal Employment Opportunity Commission will continue to process claims, but will not conduct investigations or participate in scheduled mediations. The EEOC will continue to accept charges for filing, to preserve claimants' rights.

The National Labor Relations Board will not process charges (though special circumstances apply), and will postpone hearings.

The Department of Labor will investigate incidents involving serious injury or death and will continue some operations with minimal staff.

Employee Hiring: The E-Verify system of the Department of Homeland Security has been shutdown, which means employers will be unable to process I-9 work authorizations for the time being. You can submit late verifications when DHS resumes full operations.

6. Environmental Law:  The Environmental Protection Agency has mostly gone dark, though a few EPA projects that are not government-funded, and some considered emergency activities, will continue operating.

7. Intellectual Property: The U.S. Copyright Office, as well as its Public Information Office and Tech Support services, are closed. It's still possible to file a Copyright Application, but clients won't get results until the staff comes back to work.

The United States Patent and Trademark Office is open, and will remain open for about four weeks. The PTO will shut down when they run out of reserve funds, and continue to run with minimal staff.

It's not all bad news.

The U.S. Postal Service is considered a private company, so you'll still be able to send and receive mail. The Social Security Administration will continue to send checks, and NASA will continue to keep the  lights on in their control rooms for our astronauts aboard the International Space Station.

But for those of us doing business on a day-to-day basis, we can only hope this shutdown won't last for very long.

 

Tal Grinblat is a Franchise & Trademark Lawyer, and Stephen T. Holzer is an Environmental & Business Litigation Attorney. Contact either of them via email: tgrinblat@lewitthackman.com, or sholzer@lewitthackman.com.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
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