California Appeals Court Revives Tenants’ Claims Against Foreclosing Bank

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On January 23, the California Court of Appeal, Sixth District, held that under the federal Protecting Tenants Against Foreclosure Act (PTFA) a lease survives foreclosure through the end of the lease term, except under limited circumstances, and allows tenants to bring state law claims for violation of the federal law. Nativi v. Deutsche Bank Nat’l Trust Co., No. H037715, 2014 WL 255587 (Cal. Ct. App. Jan. 23, 2014). Two tenants sued to challenge their eviction by a bank that through a nonjudicial foreclosure sale purchased the property the tenants were renting. The trial court held that the eviction was not improper because the foreclosure sale extinguished the lease under California law and, therefore, the bank, as immediate successor in interest did not step into the shoes of the landlord. The trial court held that the PTFA only required the bank to give a 90-day notice to vacate the premises; the PTFA did not require the bank to assist the tenants in recovering possession of the leased premises. On appeal, the tenants challenged the trial court’s interpretation of the PTFA. The appeals court held that the PTFA causes a bona fide lease for a term to survive foreclosure through the end of the lease term, and grants only limited authority of the immediate successor in interest to terminate the lease, with proper notice, upon sale to a purchaser who intends to occupy the unit as a primary residence. The court explained that while the PTFA impliedly overrides state laws that provide less protection, it expressly allows states to retain the authority to enact greater protections. The court added that California law protects bona fide tenancies for a term that continue by operation of the PTFA, and explained that although the PTFA does not itself provide a private right of action, it can be enforced through litigation under state law claims. After finding that there were triable issues of fact, the court reversed the trial court’s order granting summary judgment to the bank and reinstated the tenants’ claims.