In Nativi v. Deutsche Bank National Trust Company (6TH Dist. 2014), 2014 WL 255587, the tenants were evicted from their rented garage by the foreclosing bank, even though the tenants had several more months remaining on their one-year lease. The trial court held that the foreclosure sale extinguished the lease pursuant to California state law generally providing that the nonjudicial foreclosure of a dominant deed of trust extinguishes subordinate interests, including leases.
However, the court of appeal held that under the federal Protecting Tenants Against Foreclosure Act (“PTFA”) (enacted in the wake of the foreclosure crisis in 2009), a residential lease that was entered into after the foreclosed on deed of trust was recorded nonetheless survives foreclosure for the remainder of the term, and that the tenants and immediate successor of the foreclosed property have a landlord-tenant relationship subject to the PTFA and California landlord-tenant law. The court further held that the tenants were protected by various provisions of the PTFA even though their tenancy in a converted garage was illegal under the local zoning ordinance.
Notes: The PTFA expires by its own terms on December 2014. Similar protections are provided under California Code of Civil Procedure section 1161(b). Under both of these statutes, residential tenants occupying foreclosed property under month-to-month or at will tenancies are entitled to 90 days’ notice prior to being evicted following change of ownership after a foreclosure. Various exceptions apply.
©2014 Miles J. Dolinger. This article is not intended to and does not constitute legal advice or a solicitation for the formation of an attorney-client relationship
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