Legal Question in Real Estate Law in California

Re: Rental Foreclosure

I agree with Mr. Shers' discussion of your problem except the part about your new landlord. What he says about your retaining your rental or lease rights would be accurate for an ordinary sale of the property, but when ownership changes by foreclosure, leases that are more recent in time than the lien being foreclosed are "wiped out" along with junior liens. After a foreclosure, unless your lease predated the loan being foreclosed, you would be left with a claim for damages for breach of the lease against the former owner, and the probability that the buyer in foreclosure will want to evict you, and thus will give you a three-day notice and then file an unlaful detainer action.

Of course, it is entirely possible that the buyer in foreclosure would want to keep you as tenants, and you might try to negotiate a new lease with the buyer. You are more likely to succeed if your credit history is good.

Finally, I question whether you were notified by accident. Since your lease is affected by the foreclosure, I believe it was necessary and proper for the foreclosing lender to notify you along with any other lenders and anyone with an ascertainable legal interest in the property.

Re: Rental Foreclosure

Mr Whipple is correct when he points out that your lease might not affect the foreclosing beneficiary under a deed of trust. The law states that the foreclosure wipes out junior liens and encumbrances, because it dates back to the date that your landlord now, executed the deed of trust, because he conveyed a power of sale to the beneficiary.

So your leasehold interest may be wiped out, and you may be looking at eviction once the foreclosure sale is complete.

Very truly yours,

Re: Rental Foreclosure

In California, you are allowed to deduct up to one month's rent to reimburse yourself for actual expenses incurred in fixing a defect that you informed the landlord of and gave him reasonable time to repair it. So your withholding rent does not seem legal.

If you live in a city that has rent control, you might be able to petition for a rent reduction which could be made to apply to prior months.

Your landlord probably figures that the cost of repair is greater than the rent you pay, and since he is going to lose the building there is no incentive to fix it up. Your new landlord will take the building subject to the same terms of your lease until that expires. You will have to sue, probably in Small Claims Court, for the deposit and hope he does not appear so that you get a default judgment because if the judge hears you have not paid rent for two months the award would be against you. Of course, it you track him down and try t collect from him, you will likely find he has no money [reason for him being in foreclosure] or he then sues you for the back rent you owe. If I were in your position I certainly would not sue.

You probably can stay there without paying any rent until it is sold to some, who will probably be willing to pay you some money to leave if the lease has not yet expired. Yes, you do owe him for all the months you have and will be there, no you should not try to get the deposit back since you are coming out ahead if you do nothing to rock the boat.