In November 2016 the California Supreme Court ordered that a decision from the appellate division of the San Diego Superior Court in U.S. Financial, L.P. v. Michael McLitus (“McLitus”) be published.   

McLitus held that an owner that acquires a property at a non-judicial foreclosure sale is required to perfect title before serving a Three Day Notice to Quit, the first step in initiating an unlawful detainer action under Code of Civil Procedure §1161a. The court held if the Notice to Quit was served before title was perfected, the notice would be defective and could not support an unlawful detainer action.

Based on the decision in McLitus, the new owner of a property purchased at foreclosure would have to wait to receive the Trustee’s Deed Upon Sale from the foreclosure trustee, and then until the Trustee’s Deed is recorded by the county recorder, before serving a Three Day Notice to Quit. Thus, McLitus had the potential effect of delaying a new owner from obtaining possession to an occupied property.

McLitus Decision Short-Lived

Four months after the McLitus decision was ordered published, the Second Appellate District of the Court of Appeal issued an opinion squarely rejecting the McLitus holding.   

In Dr. Leevil, LLC v. Westlake Health Care Center (“Westlake”), Westlake Village Property, which owned Westlake Health Care Center (WHCC), defaulted on a loan and filed for bankruptcy. The bank sold the loan to Leevil who instituted a non-judicial foreclosure, and subsequently purchased the health care center at a trustee’s sale. Leevil then served a Notice to Quit on WHCC. When WHCC refused to vacate the property, Leevil filed an unlawful detainer action under §1161a. Leevil ultimately obtained possession to the property.

On appeal, WHCC relied on the McLitus decision to argue the Notice to Quit was invalid because Leevil did not perfect title before serving the Notice. 

The Court of Appeal rejected WHCC’s argument and affirmed the trial court’s decision. The Court found that §1161a does not require that title be perfected prior to serving a Notice to Quit. Rather, this Section only requires that title be perfected before a party may be removed from the property following a foreclosure sale.

Code Civ. Proc. Section 1161a states, in pertinent part:

a person who holds over and continues in possession of . . . real property after a three-day written notice to quit the property has been served . . . may be removed therefrom . . . [w]here the property has been sold in accordance with [s]ection 2924 of the Civil Code . . . and the title under the sale has been duly perfected.

Nothing in Section 1161a requires that title be perfected before a Three Day Notice to Quit is served.  Further, the Court of Appeal held that “[n]one of the cases cited in McLitus support the requirement that title be perfected before service of the notice to quit.”

Future of Unlawful Detainer Suits

Because the Westlake decision is binding on lower courts, and decisions from the Appellate Division of the Superior Court are not, trial courts should be guided by Westlake.  Accordingly, as it stands now, purchasers at foreclosure do not have to wait until title is perfected before serving a Three Day Notice to Quit.