Daily Journal Article, March 13, 2012

This article was published today in the Daily Journal, the premier legal newspaper in California.  The reporter did a great job. 

Rare eviction ruling gains attention

In an apparent case of first impression, bank is told its eviction

policy was illegal.

By Jason W. Armstrong

In an apparently unprecedented case in California, a judge turned down a mortgage

company’s attempt to evict a nonpaying tenant from a Los Angeles home because it

flouted a federal law requiring new owners of foreclosed properties to give such tenants

90 days’ notice before eviction.

After Private National Mortgage Acceptance Company LLC bought the owner’s

property at a foreclosure sale, the company served renter K.S. a “3 day pay

rent or quit notice,” contending she’d stopped paying her $2,500 monthly term.

But in a decision last week, Los Angeles County Superior Court Judge Lawrence H.

Cho granted the tenants’s motion to quash the eviction complaint, finding the bank failed to

give her a 90-day “notice to quit” under the 3-year-old Protecting Tenants at

Foreclosure Act. The judge ruled that Private National’s failure barred it from booting

her – even though she’d racked up $22,500 in back rent after not paying for nearly a

year. PNMAC Mortgage Co. LLC v. S….O, 11U04495 (Los Angeles County Super. Ct.,

filed 2011).

Real estate lawyers said the case could make lenders and other purchasers of

foreclosed properties reassess their eviction policies when dealing with tenants living in

such homes. The issue has heated up in the midst of the real estate downturn and has

triggered recent state legislation, including statutes addressing premature service of

unlawful detainers on renters in foreclosures.

In his ruling, Cho said the issues in the case appeared to be legally untested “without

controlling caselaw for either side.” According to legal observers, such detailed court

decisions analyzing statutes involving eviction matters are few and far between because

judges handling such cases usually have packed calendars, and most unlawful-detainer

tenants don’t have lawyers.

“The fact that Judge Cho published a written opinion about this issue shows he

knows he’ll see this issue coming up again in the future,” said Ronald Richards,

S—–O (tenant) lawyer. “The Legislature has given tenants broad protection, and the bank here

tried to circumvent that.”

Richards is a partner with The Law Offices of Ronald Richards & Associates APC.

It wasn’t clear whether the bank would challenge the ruling. Deborah Bass, an

attorney representing Private National, couldn’t be reached for comment Monday. Bass

is a partner with The Law Offices of Deborah Bass APC.

In a Feb. 27 hearing in the case, the judge and lawyers for both sides grappled with

whether the bank was legally permitted to step into the landlord’s shoes upon

foreclosure for the purposes of evicting for past due rent. Private National’s lawyers

argued that it could enforce the Tenant’s lease post-foreclosure and had the power to evict

her for nonpayment. The bank’s attorneys contended the federal 90-day notice

requirement applied only when a foreclosing party sought to evict based on eviction

alone, not on a failure-to-pay-rent theory.

“There’s never been one penny of rent paid to our client, who has right of

______________________________________________

‘No matter what rights or ‘interest’ the

foreclosing party assumes (including the right

to evict for non-payment of rent), it cannot

evict without providing the minimum 90 day

notice to bona fide tenants.’ – Judge Lawrence

H. Cho

______________________________________________

possession,” Paul Tauger, co-counsel for the lender, told Cho in the hearing,

according to a transcript. “We’re the landlord by operation of the law, which means we

have a right to collect rent.”

Richards disagreed.

“According to counsel, landlords – or owners that buy at a foreclosed sale can say,

‘Oh, you’re a tenant. Okay. I’m going to – you didn’t pay the 2,000 dollars this month.

I’m now going to serve a three-day notice,” the attorney told Cho at the hearing.

“That’s not the law,” Richards said during the proceeding.

In his ruling, Cho said the 90-day notice provision is “inviolable no matter what

theory of eviction a foreclosing party has available to it.

“No matter what rights or ‘interest’ the foreclosing party assumes (including the right

to evict for non-payment of rent), it cannot evict without providing the minimum 90

day notice to bona fide tenants.”

Cho said that, after giving that notice, the bank would have the option of filing suit to

pursue the Tenant’s back rent or of evicting her.

As part of the judge’s ruling, he denied Richards’ request for attorney fees and

sanctions against Private National.

Posted in:

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.