Senate Bill 1079, enacted on September 28, 2020, introduces critical reforms to California's foreclosure and post-foreclosure processes. Targeting properties with one to four residential units, this legislation aims to reduce the impact of large investors converting foreclosed homes into rentals. Below, we delve into the most impactful provisions: the revised post-auction bid process, enhanced eviction protections, increased penalties for property maintenance, and the implications for investors and prospective homebuyers.

2. Revised Post-Auction Bid Process

One of the most significant changes under SB 1079 is the overhaul of the post-auction bid process. Traditionally, the highest bidder at a foreclosure auction would secure the property immediately. However, SB 1079 introduces a new layer to this process designed to prioritize owner-occupancy and give tenants and other eligible bidders a fair chance.

If the highest bidder at the auction is not a prospective owner-occupant, other eligible bidders, including tenant buyers, can submit a Notice of Intent to Bid within 15 days following the auction. This notice is non-binding but signals the intent to match the highest bid. The trustee is then required to wait until the 45th day after the auction for these bidders to submit their funds.

This process ensures that if a tenant group can match the highest bid, they can secure the property. The impact on lenders is considerable, as this change delays the finalization of the sale and the receipt of proceeds. Lenders must now wait up to 45 days, during which the property remains under their responsibility, potentially increasing costs and risks associated with maintenance and security.

3. Enhanced Eviction Protections

SB 1079 significantly strengthens eviction protections for tenants in properties that have undergone foreclosure. New Civil Code section 2924n clarifies that post-foreclosure evictions must comply with existing tenant protection laws, including those established by Assembly Bill 1482.

This means that tenants in foreclosed properties are entitled to notice requirements, relocation assistance, and just cause eviction protections, unless the new owner is exempt under AB 1482. This compliance requirement introduces additional steps for new owners, including lenders who acquire properties through foreclosure, ensuring that any eviction or displacement of tenants adheres strictly to the law.

4. Increased Penalties for Property Maintenance

The Bill also increases the penalties for failing to maintain post-foreclosure properties. Civil Code section 2929.3 has been amended to raise the fines for property maintenance violations. Previously, fines were capped at $1,000 per day. SB 1079 increases these fines to up to $2,000 per day for the first 30 days of non-compliance, and up to $5,000 per day thereafter.

This substantial increase in potential fines underscores the importance of property upkeep during the period between foreclosure and resale. Lenders and new owners must be vigilant in maintaining properties to avoid these severe financial penalties, which can accrue rapidly and significantly impact the profitability of a foreclosure sale.

For Investors and Prospective Homebuyers

SB 1079 creates a more challenging landscape for investors and prospective homebuyers. The extended timelines and enhanced tenant protections may deter some investors due to the increased complexity and potential for delayed returns on investment. However, for prospective owner-occupants and tenant buyers, the Bill provides new opportunities to acquire properties that might have otherwise been out of reach.

The requirement for eligible bidders to act swiftly and have sufficient funds ready within 45 days post-auction creates a competitive but potentially rewarding environment for those prepared to navigate the new process. Additionally, the emphasis on compliance with tenant protection laws ensures that tenants' rights are preserved, making the process fairer for all parties involved.

Conclusion

California's Senate Bill 1079 introduces substantial changes to the foreclosure and post-foreclosure processes, aiming to prioritize owner-occupancy and protect tenant rights. While the revised post-auction bid process and enhanced eviction protections create additional challenges for lenders and investors, they also open new avenues for prospective homeowners and tenants. The increased penalties for property maintenance further emphasize the importance of diligent property management. As these changes take effect, all stakeholders must adapt to the new legal landscape to navigate foreclosures and property acquisitions effectively.

Based on the Marcelina Barron case, Emergency rule 10(a) does not contradict Section 583.350 of the California Code of Civil Procedure; rather, it complements it by extending the time frame within which a trial must be commenced. Section 583.350 deals with situations where the trial period is extended due to statutory tolling or other legal extensions, stating that if the time to bring an action to trial is "tolled or otherwise extended pursuant to statute," and less than six months remain after the end of the tolling or extension period, the action must still be brought to trial within six months from the end of that period.

Emergency rule 10(a) directly extended the deadline to bring an action to trial by six months for cases filed on or before April 6, 2020, effectively modifying the standard five-year limit to five years and six months under specific circumstances. This rule was an administrative response to the pandemic, acknowledging the disruptions caused by COVID-19 and ensuring that parties had additional time to bring their cases to trial amidst the unprecedented court closures and delays.

The relationship between Emergency rule 10(a) and Section 583.350 is that Emergency rule 10(a) acted as a specific extension applicable to all civil actions filed before a certain date, while Section 583.350 provides a general mechanism for handling extensions due to various reasons, including statutory tolling. They operate in different scopes but address the same concern: preventing dismissals of cases due to delays that are legally justified. Emergency rule 10(a) is not a statute but a judicial rule, and its authority stems from the Judicial Council's power to manage court operations during emergencies. It doesn’t contradict Section 583.350 but rather operates alongside it, addressing a specific need identified during the pandemic.

In the legal analysis of the case of Mary Ables v. A. Ghazale Brothers, Inc., the California Court of Appeals affirmed the dismissal of a negligence lawsuit due to its failure to meet the mandated five-year timeframe for bringing a case to trial, as dictated by Code of Civil Procedure section 583.310. Central to the appeal was the interpretation of the Judicial Council of California’s Emergency Rule 10(a), which extended the deadline by six months for cases filed before April 6, 2020. Despite this extension, the trial date exceeded the five-year and six-month maximum by one month.

Ables contended that section 583.350 should allow an additional six-month grace period following any extension; however, the court clarified that Emergency Rule 10(a), being an administrative rule and not a statute, does not activate section 583.350’s provisions. The court also dismissed Ables' claims that the defendants had waived their right to dismiss or were estopped from doing so, noting a lack of substantive arguments or evidence to support these procedural claims.

This decision underscores the stringent application of procedural laws in civil litigation and the limitations of administrative rules in extending statutory deadlines, emphasizing the importance of adhering to prescribed timelines in legal proceedings.

Filing for Chapter 7 bankruptcy can significantly reduce a debtor's financial load by erasing many debts. Nevertheless, certain types of debts and legal actions can still be pursued by creditors, even after bankruptcy has been declared. Here's a rewritten overview of the article:

Understanding the Limitations of Chapter 7 Bankruptcy:

• Chapter 7 bankruptcy offers a reprieve by initiating an 'automatic stay' that halts most creditors' collection efforts, including lawsuits, calls, and billing for dischargeable debts like personal loans and credit card debts.

• Despite this stay, creditors may pursue debts if they prove the stay harms their rights, or if the debt involves fraud, DUI-related personal injury, or criminal actions.

Navigating Lawsuits Post-Bankruptcy Filing:

• Creditors can obtain exemptions from the automatic stay, especially if the debtor's assets are devaluing or if they're not sufficiently protected by the stay.

• Exemptions may also be granted for non-bankruptcy-related claims, allowing creditors to sue for nondischargeable debts such as tax obligations, student loans, and certain fines.

• Lawsuits over fraud or DUI-related debts are permitted as these are not discharged by bankruptcy. The court must first verify the fraudulent nature of the debt before a lawsuit can proceed.

Dealing with Ongoing and New Legal Challenges:

• If a lawsuit was pending at the time of bankruptcy filing, it may be moved to bankruptcy court or continued with court approval.

• Debtors can respond to post-bankruptcy lawsuits by answering the complaint or attempting to dismiss the motion, with subsequent court proceedings scheduled to clarify the case's trajectory.

Key Takeaways:

• Chapter 7 bankruptcy doesn't erase all debts, and creditors retain the right to sue for certain nondischargeable debts or if they successfully petition for an exemption.

• Ongoing lawsuits not related to dischargeable debt can still proceed, with the potential for cases to be moved to bankruptcy court or to continue after seeking court approval.

• After bankruptcy, lawsuits can be initiated for debts incurred by fraud, recent loans, or DUI-related incidents, requiring the debtor to respond legally.

Understanding the Problem:

Can you explain my legal situation in layman's terms?

What potential outcomes could I face based on the specifics of my case?

What damages might I be able to recover if my case is successful?

What could I potentially lose if the case doesn't go in my favor?

Legal Strategies:

What is your recommended approach to handle my situation?

Can you foresee any potential challenges or obstacles in my case?

Can you walk me through the pros and cons of pursuing this legal course?

Lawyer's Expertise:

Do you have a specialization in this area of law?

Can you provide examples of similar cases you have handled, and what were their outcomes?

Legal Process:

What does the usual process for cases like mine entail?

How much time should I anticipate this legal process might take?

Will it be necessary for me to make a court appearance?

Communication:

How often will we be in touch to discuss my case?

What's the most efficient way to reach you if I have further questions?

Who else in your firm will be working on my case, and may I meet them?

Legal Fees:

Can you explain your fee structure - do you charge a flat fee, hourly rate, or contingency fee?

Are there any additional costs I should be prepared for?

Can you provide an estimated total cost for this legal process?

Remember that your attorney is there to assist you, and it's essential to be as transparent and open as possible about your situation. This allows your attorney to provide the most accurate advice and guidance.

Attorney's Fees: What Happens if They're Not Mentioned in the Contract?

When drafting a contract, parties usually consider various terms and conditions to ensure that their interests are protected. One of these provisions is the attorney's fees clause. An attorney's fees clause typically requires the losing party in a dispute to pay the attorney's fees of the prevailing party. However, what happens if the contract does not include an attorney's fees provision?

In such a case, the default rule is that each party bears its own attorney's fees, regardless of the outcome of the dispute. This means that even if one party prevails, they cannot recover their attorney's fees from the other party, unless a specific law or court rule allows it.

There are some exceptions to this default rule. For example, in some states, there are laws that allow for the recovery of attorney's fees in certain types of cases, such as consumer protection or employment discrimination cases. Similarly, in federal court, there are rules that allow for the recovery of attorney's fees in cases involving civil rights, patent infringement, or other specific types of claims.

Another way that attorney's fees can be recovered is through a doctrine known as the "American Rule." Under this rule, each party generally bears its own attorney's fees unless a statute, contract, or other legal authority provides otherwise. The American Rule is followed in most states, including those that do not have specific laws governing the recovery of attorney's fees.

It is important to note that even if the contract does not include an attorney's fees provision, parties may still negotiate one after a dispute arises. If both parties agree to include such a provision, they can enter into a separate agreement that specifies the terms and conditions under which attorney's fees can be recovered.

In conclusion, when drafting a contract, parties should carefully consider whether to include an attorney's fees provision. If such a provision is not included, the default rule is that each party bears its own attorney's fees, unless a specific law or court rule allows for recovery. Parties should also be aware that they may still negotiate an attorney's fees provision after a dispute arises.

Non-judicial foreclosure is the primary method of foreclosure in California, commonly utilized by lenders when the mortgage note or deed of trust includes a "power-of-sale" clause. This provision permits the lender to sell the property and apply the profits towards the outstanding mortgage balance when the borrower defaults on the loan. As the name suggests, the foreclosure process does not involve a court hearing, but strict laws mandate lenders to furnish proof of mortgage ownership and borrower's default.

The foreclosure process commences with the lender issuing a Notice of Default, allowing the borrower 90 days to rectify the default. The trustee must also mail a copy of the notice of default to the borrower within 10 business days. Failure to rectify the default results in the lender filing a 21-day Notice of Trustee's Sale, culminating in the property being sold at an auction. However, the borrower has the option to cure the default until 5 days prior to the sale to stop the foreclosure.

Non-judicial foreclosure is preferred by many lenders as it is less time-consuming and less costly than judicial foreclosure. Unlike judicial foreclosure, non-judicial foreclosure does not provide borrowers with the right of redemption, which allows them to buy back the property after the sale.

Consider including the following five terms in job offer letters:

At-will employment: Clearly state that the employee is being hired as an at-will employee, and that either party may terminate employment with or without notice at any time. This is important to avoid disputes about the nature of the employment relationship.

Job description: Provide a detailed job description for the position being offered, including whether it is exempt or non-exempt. This can help avoid disputes over essential job functions and whether an employee is misclassified as exempt.

Integration clause: Include language in the offer letter that the terms outlined in the letter supersede any other promises or offers. This can help counter any claims later on that other promises were made to the employee.

Commission terms: If the employee is eligible for commissions, ensure that the commission agreement is in writing and signed by both parties. Carefully define key terms to avoid confusion, and be aware of how commissions affect the calculation of overtime pay for non-exempt employees.

Confidentiality provisions: If the company requires a confidentiality agreement, set forth the terms in the offer letter and have the applicant sign the agreement when accepting the job offer. Also, ensure that the applicant has no agreements with prior employers that would interfere with their duties and that they will not use any confidential information learned in previous positions.

Let's go through the three primary methods of dispute resolution:

Mediation. Mediation involves a neutral third party who assists disputants in reaching a consensus. Rather than dictating a solution, a mediator works with both parties to identify their underlying interests, weaknesses or strength in the case. Mediation can be helpful for allowing parties to express their feelings and address their grievances. It also will give an opportunity to really see the other side’s case. Mediators work with parties together and sometimes separately to help them find a sustainable, voluntary, and nonbinding solution.

Arbitration. In arbitration, a neutral third party acts as a judge who is responsible for resolving the dispute. The arbitrator listens to both sides' arguments and considers relevant evidence before issuing a binding decision. It is one step forward in terms of having a more formal process. Disputants can negotiate nearly every aspect of the arbitration process, including whether lawyers will be present and which standards of evidence will be used. Arbitration decisions are usually confidential and cannot be appealed. Unless it is a nonbinding arbitration and then it may as well be just mediation. Like mediation, arbitration is generally less expensive than litigation.

Litigation. Civil litigation is the most commonly recognized form of dispute resolution, in which a defendant faces off against a plaintiff before a judge or a judge and jury. The judge or jury weighs the evidence and makes a decision, with the information typically becoming a public record. Lawyers typically dominate litigation, which often ends with a settlement agreement during the pretrial period of discovery and preparation.

NOTE: Of course my favorite is negotiation… Negotiation is, even though it is not necessarily recognized by the mainstream, a form of dispute resolution in which the parties involved attempt to reach a mutually acceptable agreement through direct communication and bargaining. No need for third parties. Negotiation may involve face-to-face discussions, email exchanges, or other forms of communication. The goal of negotiation is to reach an agreement that satisfies the interests of all parties involved, while avoiding the need for more formal or confrontational forms of dispute resolution, such as litigation or arbitration.

Have you ever used any of these dispute resolution methods? If not, if you did not think about it, I would say “you should!”

To ensure payment for their work, a contractor, subcontractor, or supplier can file a mechanics' lien against the property of a project. Lien laws vary between states and are subject to change. In California, a subcontractor must send a pre-lien notice to the property owner, general contractor, and construction lender within 20 days of commencing work. If a pre-lien notice is filed, a contractor or subcontractor should consult their legal advisor to determine what can be claimed in a lien notice.

In California, a lien claimant can recover the reasonable value of labor, services, equipment, or materials provided or the contract price. The lien amount can exceed the contract price if there are costs based on modification, agreed upon in writing or verbally. However, a lien claimant cannot claim delay damages or attorneys' fees.

Delay damages are not allowed in a mechanics' lien in California, as held in the Lambert v. Superior Court case. Delay damages are seen as consequential damages outside of a lien's scope and would give claimants an unfair advantage in a contract dispute. Similarly, attorneys' fees cannot be claimed in a mechanics' lien as they do not add to the property's value.

If a lien claimant includes impermissible items, the lien will not be forfeited entirely. Instead, the court will reduce the lien to the appropriate amount, unless the claimant deliberately includes items not provided. While a mechanics' lien is a helpful tool for securing payment, claimants should pursue delay damages and attorneys' fees through a breach of contract action.

If you encounter occasional financial difficulties, you may fall behind on your home mortgage and accumulate arrears. However, you can opt for a loan modification that allows you to keep your home and make payments towards the arrears in installments. Another alternative is a loan reinstatement, which involves paying off the entire amount of arrears and fees to bring your loan status to current.

Loan reinstatement is a preferred option for lenders as it avoids the long and complicated foreclosure process, which may result in the lender receiving less money than the property's worth. The reinstatement process starts by determining if your lender has initiated foreclosure proceedings against you. If not, you can request a reinstatement quote, which is valid for 30 days before your payment date. You can pay the exact amount listed on the quote, and the default is cleared, allowing you to resume regular mortgage payments.

However, it is crucial to have legal representation to ensure that the foreclosure process has been dismissed, even if you have paid all the fees and arrears. Also, it is recommended to get the reinstatement quote in writing to avoid misunderstandings, and if there is any error in the quote, you can send a "notice of error" to your lender to correct it within seven business days.

If the foreclosure process has already started, you should hire a foreclosure defense attorney, who will represent you, file the necessary court papers, and negotiate with the lender's attorney. It is essential to act quickly to avoid losing your home. You can also explore other options to stay in your home, in addition to mortgage reinstatement.

If you are considering mortgage reinstatement, it is wise to contact a real estate attorney to guide you through the process and help you navigate any unforeseen obstacles of homeownership. They can look out for your best interests and answer any questions you may have.

Many of us are familiar with the disturbing reality of unlicensed contractors taking advantage of elderly individuals. I recently came across an article on the Contractor's State License Board (CSLB) website that shed light on this issue and left me feeling saddened. Aging loved ones are particularly vulnerable to these despicable scams, and as the senior population continues to grow, so does their share of the nation's liquid assets. This makes them a prime target for fraudsters who take advantage of their cognitive and physical limitations.

The consequences of these illegal activities are far-reaching, as legitimate contractors are losing billions of dollars in potential work to these unscrupulous individuals. Many of them use other contractors' identities and license numbers illegally.

Being accused of elder abuse is a terrifying prospect, but it can happen to licensed contractors who fail to take necessary precautions. Here are a few tips to prevent elder abuse allegations:

1. Encourage seniors to have a family member present when reviewing any documents ( your written contract) so that they understand the terms.

2. Put yourself in their shoes and ask how you would want a contractor to treat your loved one.

3. Always treat seniors with respect and avoid rushing them.

4. Provide your license and identification. Explain the tools that can be used to verify your license and standing with the CSLB (www.cslb.ca.gov).

5. Don't request more than the standard down payment of 10% or $1,000, and avoid accepting cash.

The CSLB is cracking down on elder abuse scams, and you can help by reporting any instances of fraud to the appropriate authorities. Let's work together to combat elder abuse and protect our loved ones.

When client’s ask me or complaint to me about my construction client’s numbers… Everyone who is getting into a construction project needs to know this:

The confusion between Markup and Profit is a common problem that we aim to clarify. It is important to note that Markup does not equate to Profit. Markup refers to the additional amount that a business charges above the direct cost to account for overhead and profit.

For instance, a remodeling contractor may reasonably have a 1.50 markup, which means that for a $20,000 estimated job cost, they will charge $30,000. Some people mistakenly assume that the contractor is making a $10,000 profit, which is not accurate. The additional $10,000 covers the overhead expenses of the business, including advertising, job supervision, office expenses, insurance, taxes, salaries, and employee expenses, among others. The typical remodeling contractor will have overhead expenses ranging from 25% to 54% of their revenue – that means every $30,000 job could have overhead expenses of $7,500 to $16,200.

Sadly, some people believe that a 20% markup or a 10% overhead and profit is the industry standard, which is not the case. As a result, they try to haggle with contractors to lower the cost of the job. However, every business must make a profit to remain viable, cover overhead expenses, and stay afloat during downtimes. Profit is what ensures the longevity of a business. Therefore, if a contractor cannot make a reasonable profit, they may not even complete the project, let alone stay in business.

It is crucial to avoid selecting a contractor based solely on price, as this can result in choosing a low-quality, unreliable, or financially unstable contractor. As the saying goes, "a fool and their money are soon parted." Just like any other business, contractors need to earn a reasonable profit to survive and thrive.

On January 1, 2022, California Senate Bill 9 (SB9) took effect. SB9 is a new state law that allows homeowners to build up to two additional units on their single-family lots, potentially doubling the number of homes on a lot.

The law allows homeowners to convert their single-family homes into duplexes, triplexes, or fourplexes, depending on local zoning laws. Homeowners can also build new structures up to two stories high, with a maximum height of 16 feet, without needing to go through the usual process of getting permits for parking, setbacks, and other requirements.

In addition, the law prohibits local governments from imposing minimum lot size requirements and reduces the fees and other barriers to building accessory dwelling units (ADUs), also known as granny flats, on single-family lots.

Proponents of SB9 say that it will help alleviate California's housing crisis by increasing the number of affordable housing units and allowing more people to live in established neighborhoods. Opponents argue that it will lead to overcrowding and exacerbate parking and traffic issues.

It's important to note that SB9 is not a blanket rule and does not automatically apply to every single-family home in California. Local governments still have the power to impose their own zoning laws and regulations. Homeowners interested in taking advantage of SB9 should check with their local planning department to see if their lot is eligible and what specific rules and regulations apply.

That's our update on California SB9. We will continue to monitor and provide updates on any new developments related to this law.

The new law extends 60-day notice requirement to 90 days. Such proposed rent increase must be combined with all other rent increases in the 12 months prior to the rent increase date. To get around 90-day notice the total must be less than 10%. This, of course, will only be permitted for housing that is exempt from the statewide rent cap law as introduced by AB 1482. (See our other blog post.) These changes are still subject to a declared state of emergency which may limit your ability to raise rent over 10%.

AB 1482 imposes a statewide rent control and just cause eviction. Now, California landlords subject to rent control with annual rent increases capped at 5% plus inflation, up to a maximum of 10% per year. Interestingly, the cap applies retroactively to all rent increases since March 15, 2019. Besides that, California landlords can no longer terminate month-to-month tenancies at will, but only with “JUST CAUSE.” There are 15 reasons to justify eviction.

Note, however, that three are exemptions to this law. The just cause provisions only protect tenants who have been in possession for a year or more, and certain types of housing are exempt - single-family homes, homes built within the last 15 years, owner occupied duplexes, and more…

The Supreme Court declined to hear the trucking industry’s lawsuit on June 30th which targeted the suspension of A.B. 5. Now, California law will create a bottleneck and further strain supply lines. Owner-operators will fail to pass a three-part test which will declassify them as independent contractors. This will create a problem not only for these operator drivers but also for the truck companies. The carriers who thought that there is still a chance that the California law would not apply to them now have to figure out a solution very quickly.

Uber Technologies Inc. wants a federal appeals court to invalidate California’s worker classification law as unconstitutional. On Wednesday, a panel will determine who is an independent contractor and who is an employee and whether the California law is irrational. Pursuant to California law, A.B. 5, a worker is presumed to be an employee unless the party hiring the person can show the worker is an independent contractor under a three-factor “ABC test.” The classification rule affects thousands of “freelancers” who get flexibility to work at any time and anywhere… These “freelancers,” however, lack employer-paid protections such as worker’s compensation and unemployment benefits. We are sure that the case will be appealed to the US Supreme Court.