SENATE BILL 1079 - CALIFORNIA OVERHAULS THE NON-JUDICIAL FORECLOSURE PROCESS
On January 1, 2021, Senate Bill 1079 (“SB 1079”) overhauling aspects of the non-judicial foreclosure process went into effect. The law titled “Homes for Homeowners, Not Corporations” applies to properties containing 1 to 4 single-family residences, including investment and rental properties.
Right of First Refusal
One of the primary modifications to the foreclosure process is the creation of a right of first refusal to “eligible bidders” and “eligible tenant buyers”. Previously the trustee’s sale was complete upon the “falling of the gavel”. Now, unless the highest bidder is a confirmed “owner-occupant” SB 1079 gives tenants, local governments, affordable housing nonprofits, and community land trusts a 45-day window to best the highest bid at the auction. Eligible tenant-buyers only need to match the highest bid at the auction. Eligible bidders have 15 days from the trustee sale to bid or provide a nonbinding written notice of intent bid, and another 30 days to pay the funds.
Bulk Sales Prohibited
Additionally, SB 1079 prohibits trustees from bunding the sale of multiple properties to a single buyer unless the deed of trust or mortgage requires otherwise. This is true even where the property consists of several lots or parcels.
Trustee Duties
Trustees are now required to maintain a website and a telephone number accessible 24/7 and free of charge providing up-to-date information about the trustee sale including the date of the sale and the amount of the last and highest bid. Further, SB 1079 requires a Notice of Sale for a single-family home to include specific language informing tenants of their rights to purchase the property if the “eligible tenant-buyer” can match the last and highest bid at the trustee auction.
Steeper Fines for Failure to Maintain
SB 1079 also imposes stricter fines for failure to maintain vacant properties acquired through foreclosure. City and county officials now have the discretion to levy fines of $2,000 per day (up from $1,000/day) after notice and opportunity to remedy the situation. If the violation lingers more than 30-days the fines can be increased to a maximum of $5,000 per day.
The Goal
It is estimated that Wall Street owns an estimated $60 billion worth of single-family rental housing in the United States. SB 1079, which sunsets on January 1, 2026, seeks to level the playing field in California between corporations and would be tenant/owner-occupants of homes purchased at auction and avoid a repeat of the 2007-2008 housing crisis which resulted in corporations purchasing thousands of foreclosed homes. A concern that has resurfaced in the wake of the ongoing COVID-19 pandemic which has cost thousands of Californians their jobs.
On the other hand, critics of the new law say the ambiguity in the language is fodder for litigation, and the process may temper interest in foreclosure sales, particularly given the cloud on the title during the 45-day right of first refusal process, which will ultimately harm the borrowers.
The information provided above does not and is not intended to, constitute legal advice. All information, content, and materials are for general informational purposes only and do not create an attorney-client relationship. The experienced and knowledgeable attorneys at Blake Law Firm are available to answer questions on non-judicial foreclosures and help you navigate any other real property issues.