IMPACT: Tenants in Foreclosure - Buying at Trustee Sales
A unique California law provides certain "eligible bidders" exclusive rights to bid on one-to-four unit residential buildings in trustee (foreclosure) sales. The way it was before, banks and small groups of flippers were the only bidders when properties were sold at trustee sales. Civil Code § 2924m (SB 1079) enacted in 2021, extends the process to provide "eligible bidders" a broader opportunity to participate. Under the law, a trustee sale of property containing one to four residential units is not deemed final until the earliest of the following:
(1) If a "prospective owner-occupant" is the last and highest bidder at the trustee's sale, then the date the conditions set forth in § 2924h are met (when the winning bidder submits the declaration under penalty of perjury stating they meet the all the criteria to be a "prospective owner occupant" and pays in full by cashier's check or cash.)
(2) Fifteen days after the auction, unless at least one "eligible bidder" submits a bid (with payment in full) or a nonbinding written notice of intent to place a bid.
(3) The date upon which "a representative of all the eligible tenant buyers" submits to the trustee a bid (with payment in full) in an amount equal to the last and highest bid at the trustee sale (auction). [NOTE, this can occur earlier than the 15-day period, above. Tenants usually meet the definition of prospective owner-occupants, and are better off bidding as prospective owner-occupants at the trustee sale (auction), if at all possible.]
(4) Forty five days after the trustee sale, except that during the 45 days, an "eligible bidder" may submit to the trustee a bid (with payment in full) in an amount that exceeds the last and highest bid at the trustee sale. There are other requirements, but as of 5pm on the 45th day, the highest bid from an eligible bidder wins.
WARNING: There are several important nuances in the language of the statute. The process can vary greatly depending on the status of the bidders and the fact scenario presented. Bidders must carefully investigate the title to the property and understand what they are buying. For example, there may be previously recorded loans or claims against title. If you are a prospective owner occupant or eligible tenant buyer, or a representative of eligible tenant buyers, we urge you to consult with experienced legal counsel.
Richard Hurlburt (SBN 179072) represents § 2924m, bidders statewide. The fee is $325 per hour with a five-hour refundable retainer, paid in advance. Call 415.391.6480 or email for more information. Or, pay here, and we will contact you ASAP.
(1) If a "prospective owner-occupant" is the last and highest bidder at the trustee's sale, then the date the conditions set forth in § 2924h are met (when the winning bidder submits the declaration under penalty of perjury stating they meet the all the criteria to be a "prospective owner occupant" and pays in full by cashier's check or cash.)
(2) Fifteen days after the auction, unless at least one "eligible bidder" submits a bid (with payment in full) or a nonbinding written notice of intent to place a bid.
(3) The date upon which "a representative of all the eligible tenant buyers" submits to the trustee a bid (with payment in full) in an amount equal to the last and highest bid at the trustee sale (auction). [NOTE, this can occur earlier than the 15-day period, above. Tenants usually meet the definition of prospective owner-occupants, and are better off bidding as prospective owner-occupants at the trustee sale (auction), if at all possible.]
(4) Forty five days after the trustee sale, except that during the 45 days, an "eligible bidder" may submit to the trustee a bid (with payment in full) in an amount that exceeds the last and highest bid at the trustee sale. There are other requirements, but as of 5pm on the 45th day, the highest bid from an eligible bidder wins.
WARNING: There are several important nuances in the language of the statute. The process can vary greatly depending on the status of the bidders and the fact scenario presented. Bidders must carefully investigate the title to the property and understand what they are buying. For example, there may be previously recorded loans or claims against title. If you are a prospective owner occupant or eligible tenant buyer, or a representative of eligible tenant buyers, we urge you to consult with experienced legal counsel.
Richard Hurlburt (SBN 179072) represents § 2924m, bidders statewide. The fee is $325 per hour with a five-hour refundable retainer, paid in advance. Call 415.391.6480 or email for more information. Or, pay here, and we will contact you ASAP.