Legal Question in Real Estate Law in California

A property owner can remove appliances that have not been built-in. Today, most stoves, and dishwashers too, I think, would fall into the category of "fixtures," having been sufficiently attached to the realty to become part of it. Most refrigerators are not, even if they have an icemaker water line connected. None of the appliances should be removed while you have tenants, of course; if they were there at the outset of the rental, they are part of the package. Finally, the tenants cannot legally withhold rent just because the property is in default and likely to be foreclosed. However, nearly all deeds of trust also contain an assignment of rents in favor of the lender, which may direct that the rent be paid to it, rather than to the borrower, after a default and before a foreclosure.

See a bankruptcy lawyer about stopping your foreclosure.

Mr. Whipple is correct except in one particluar. The right to collect rents is an alternative to a trustee's sale. They cannot proceed with a trustees sale and collect rents at the same time. It is an election of remedies. As long as they have a notice of default on file and the clock is ticking on a foreclosure, even with the moritorium, they cannot take the rents. You get them.

I don't know where Mr. McCormick gets these bizarre ideas. A lender can collect rents pending a foreclosure sale.

As Mr. Whipple pointed out, most deeds of trust contain an assignment of rents clause. Sometimes they are in a separate document that is signed at the time of financing. The assignment of rents and profits to the beneficiary may be included in the actual deed of trust, or it may be in a separate document. (Civ. Code, � 2938 subd. (b).)

If you never signed such a clause, then they cannot collect rents until they take possession after foreclosure. Absent a sepcific agreement between a trustor and a beneficiary, the beneficiary is not entitled to collection of rents. (Snyder v. Western Loan & Building Co. (1934) 1 Cal.2d 697, 701-702.)

Assignments of rents prior to January 1, 1997 are called conditional assignments. This means that in those agreements, the lender must either have the court appoint a receiver or gain possession of the premises to collect rents. In the situation involving a receiver, the receiver may be continued while a nonjudicial foreclosure sale is pending. (Code of Civ. Proc., sect. 564 subd. (b)(11).) Collection of rents after the trustee's sale is a given.

All assignments after January 1, 1997 are absolute. Civil Code section 2938 subd. (c)provides for four different remedies by which the lender may enforce the assignment of rents after the borrower defaults:

1. Appointment of a receiver. This is a court proceeding appointing someone to receive the rents, for the benefit of the lender.

2. Obtaining possession of the rents, issues or profits.

3. Delivery of a written demand to turn over rents (the form is called �Demand to Pay Rent to Party Other Than Landlord,� and is set forth in Civil Code section 2938 subd. (k).) to one or more of the borrower�s tenants.

4. Delivery of a written demand for rents, issues or profits to the borrower-assignor, with a copy to all other assignees of record.

Presently, the mere recordation of the assignment of rents does not give the beneficiary any right to recover rents until the trustor is in default and the beneficiary has taken some action to enforce the security interest. (Federal National Mortgage Association v. Bugna (4th Dist. 1997) 57 Cal.App.4th 529, 535.)

An enforcement action taken under Civil Code section 2938 subdivision (c) is not an "action" violating the one action rule of Code of Civil Procedure section 726 or barring a deficiency judgment, nor does it otherwise limit any rights available to the assignee (lender) with respect to its security. (Civ. Code, sect. 2938 subd. (e)(1) & (3).)