The firm represented a tenant against PNMAC Mortgage. The tenant had two separate unlawful detainer actions filed against her. Ronald Richards & Associates, APC takes cases where lawyers like to bully the underdog. This case was part of the firm’s lower income program which helps tenants who are victimized by landlords. The first unlawful detainer was filed after the tenant’s prior landlord lost the house in foreclosure in January of 2011. It was dismissed after a motion to dismiss was filed in March of 2011, due to the action being filed prematurely. A second unlawful detainer was filed in December of 2011. In February of 2012, the trial court heard a motion to quash. On March 7, 2012, the Court granted the motion to quash. A copy of the opinion and order is attached here:
A written opinion is extremely rare because most tenants cannot afford to litigate these issues. They are already struggling with the their former landlord losing their home. The publishing of the written opinion is intended to assist other tenants and their counsel from what is an abusive practice by law firms and banks.
Here is the factual background and procedural history:
Plaintiff PNMAC Mortgage purchased the property at issue at a foreclosure sale in January 2011. They were represented by Deborah Bass and Ellie Navid of the Law Offices of Deborah Bass. They are supposed to be experts in unlawful detainer actions. At all times during the case, they refused to settle the case and sign a new lease with the tenant. The defendant was a tenant of the prior owner. Plaintiff served defendant with a three day notice to pay rent or quit in December 2011, claiming that defendant failed to pay rent of $2,500 per month for a 10 month period from March 2011 thru November 2011. The rent was not paid and plaintiff brought the unlawful detainer action to evict defendant. At no time was the tenant ever a real tenant of the banks.
The firm brought a motion to quash the service of the summons and first amended complaint pursuant to Delta Imports v. Municipal Court, 146 Cal.App.3d 1033, 1036 (1983), challenging the sufficiency of the complaint. Specifically, the tenant claimed that because plaintiffs took over the property by foreclosure, the tenant is entitled to a minimum 90 day notice to quit under the Federal Protecting Tenants in Foreclosure Act (“PTFA”), rather than the 3 day pay rent or quit notice alleged in the complaint. Plaintiff through its attorneys contended that the 3 day pay rent or quit notice is legally sufficient because, regardless of the 90 day PTFA requirement, tenants still must pay the rent or be subject to only a 3 day pay or quit notice. Oral arguments were held on February 27, 2012 and the matter was taken under submission.
Motion to Quash
Required Notice Period
The firm argued that the complaint was insufficient as it alleged only a 3 day notice to pay rent or quit rather than a federally mandated 90 day notice period under the Protecting Tenants in Foreclosure Act of 2009 (“PTFA”), 12 U.S.C. § 5220. The bank contended that only a 3 day notice is required in failure to pay rent cases under §1161(2) and not the PTFA 90 day notice.
The applicable provision of the PTFA states: In the case of foreclosure … any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to:
(1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice; and
(2) the rights of any bona fide tenant –
(A) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease ….
In simple terms, a foreclosing party must provide a bona fide tenant a minimum 90 day notice before termination of the tenancy and must honor any remaining term of a bona fide lease. Plaintiff conceded that the complaint alleges only a 3 day notice, but argued, in essence, that the 90 day PTF A notice is applicable only when a foreclosing party seeks to evict based on the eviction alone, and that plaintiffs are not seeking eviction on that basis but rather on a failure to pay rent theory which requires only a 3day notice pursuant to § 1161 (2). Accepting this analysis, it is possible for a foreclosing party who would otherwise be barred from evicting a tenant for 90 days, to be able to effectuate an eviction before the 90 day period if a tenant failed to pay rent within that time.
The Court ruled that the Plaintiffs theory reads into the PTFA something that it is silent on: a requirement that bona fide tenants continue to honor their rental obligations post foreclosure and that failure to do so gives rise to the right of the foreclosing party to evict the non-paying tenant. At first blush, plaintiff’s theory that upon foreclosure they step into the shoes of the prior landlord and therefore assumes the right of the landlord to evict for failure to pay rent on a 3 day notice has persuasive appeal from both a common sense and fairness perspective. After all, since subsection (a)(2)(A) of the PTFA binds the foreclosing party to honor any remaining term of a prior bona fide lease agreement, it only makes sense to hold the tenant to their responsibilities under the same bona fide lease agreement, that is, the tenant is entitled to the remainder of his lease on the condition that he continue to timely pay his rent as required by that lease. Without this implied corollary to PTFA (a)(2)(A), the landlord would be bound to allow the tenant to live out the remainder of the lease agreement rent free, which would be patently unjust. In accepting the theory that the PTF A requires both parties to honor their respective responsibilities for the remainder of the lease, one should also logically accept the converse of that theory: if the tenant does not continue to pay the rent, the foreclosing party is relieved of his/her obligation to honor the remainder of the lease term and, as plaintiff urges, should be allowed to evict the non-paying tenant with a 3 day notice to pay rent or quit pursuant to CCP § 1161 (2).
The Court agreed that even after foreclosure, there is an ongoing duty of the tenant to pay the rent in order for him/her to invoke the PTF A protections for the remaining term of the lease agreement. The Court also agreed that the tenant’s failure to pay rent during the remaining lease period relieves the landlord of his/her obligation to honor the remaining balance and provides the foreclosing party with the remedy of eviction under CCP § 1161, which requires only a 3 day notice. But how can this analysis be accorded with the 90 day notice requirement under the PTFA? More specifically, does the 90 day notice still apply when the theory of eviction is failure to pay rent? In this case, PNMAC’s attorneys concocted a false tenancy between the bank and the tenant in possession after a foreclosure.
The answer lies in a close examination of the specific language of the PTFA, which requires that “any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to … [providing to a bona fide tenant] a notice to vacate … at least 90 days before the effective date of such notice … (emphasis added).” Here, the applicable “interest” assumed by plaintiff in this action was the prior landlord’s right to demand defendant to continue to pay his/her rent or be subject to eviction for failure to do so; however, that interest is subject to and conditioned upon plaintiff providing the tenant a notice to vacate “at least 90 days before the effective date of such notice.” The language of the PTF A is unequivocal in this regard; no matter what rights or “interest” the foreclosing party assumes (including the right to evict for nonpayment of rent), it cannot evict without providing the minimum 90 day notice to bona fide tenants. In other words, the Court held that the 90 day notice period is inviolable no matter what theory of eviction a foreclosing party has available to it.
Plaintiffs argued that in applying the PTF A in this manner in the non-payment of rent context, it allows for tenants to live rent free for a minimum of 90 days, which cannot be the intention of that statute to allow for such an unjust result. However, the 90 day PTFA notice period does not excuse the tenant from his/her rental obligations; it merely delays the remedy of eviction for a 90 day period. Following the 90 day notice, plaintiff is entitled to avail itself of all the rights and remedies the prior landlord had to seek redress for the tenant’s failure to pay rent, including eviction and the awarding of back rent, and holdover damages for the 90 day period. In this case, the bank wanted rent for an entire year plus it wanted the Court to disregard the 90 days notice provision.
Having found that the PTFA 90 day notice is applicable even in the failure to pay rent context, the Court correctly found that the defendant’s motion to quash service of the summons and complaint must be granted because the complaint fails to allege compliance with that statutory notice requirement.
Now, the tenant may in the future, be faced with a third unlawful detainer from the same bank, an entity that she has never had a lease. The firm will be right there with her defending her from any further attempts to violate his statutory rights.