Legal Question in Real Estate Law in California

Re: Real Estate-Notice of Default

There is a practice called 'rent skimming' which involves pocketing rent, tenant deposits, etc. while letting the property slide into foreclosure. If done in the first year of ownership, the practice is forbidden by the Civil Code, see sections 890 through 894. See 890(a) for definitions and 891(d) for tenant's remedies. It does not appear that withholding rent is an authorized remedy, so I would avoid that.

The rights of a tenant in a foreclosure depend upon whether the lease is senior to the lien being foreclosed. If your lease predates the lien, the party foreclosing said lien must respect your lease provided he/she had actual or constructive notice of the lease. A lender often is charged with constructive notice of a lease if the owner lives elsewhere or if the property is clearly income property, such as an apartment building.

If you have only a six-month lease from August, and the Notice of Default is recent, your lease may expire near, or perhaps before, the foreclosure sale takes place (if it does), so this may not be much of a concern.

Many foreclosing lenders would not mind having a good tenant in the property during and shortly after a foreclosure, as this assures the property will be somewhat cared for.

Until the foreclosure is consummated, your rights as a tenant are essentially unaffected, except that the landlord may be in breach of his covenants of possession and quiet enjoyment at such time as your rights under the lease are threatened, at which point you would acquire additional rights for damages for the breach. Until the problems worsen beyond a Notice of Default, I don't think the landlord is in breach or that you (yet) have any special rights.