Warning: The information provided herein is for general background purposes only. You should consult an attorney for advice concerning your circumstances.
- Purchase and Sale Transactions
- Foreclosure Law
- Partition Law
Can a lender sue me if I cannot pay a mortgage on my home?
The answer depends on several factors. In California, property owners are generally protected by certain laws known as the anti-deficiency laws and the one form of action rule. The rules are technical and complex, but, generally, a purchaser of real property who obtains financing from the seller in order to finance the purchase price is protected from a deficiency judgment. In other words, the seller’s remedy in the event of default is to foreclose against the real property and take back the security, but the lender cannot sue for a deficiency. In addition, under certain circumstances, the purchaser of residential property is protected by the anti-deficiency laws even if a third-party lender, such as a bank or mortgage lender, finances the purchase price. However, if the original loan is refinanced after the original purchase, or if a second deed of trust or junior lien is obtained after the original purchase transaction, then different rules apply.
Generally, if a lender forecloses against the real property by using the power of sale contained within a deed of trust, also known as non-judicial foreclosure, the lender is prohibited from seeking a deficiency. However, if the lender elects to foreclose by using judicial foreclosure, which is a lawsuit seeking an order of the court that the property be sold and that the owner be held liable for the deficiency owed under the loan agreement, then under certain circumstances the owner, or the persons who executed the loan documents, may be held liable for the deficiency and a judgment can be awarded against the borrowers.
In general, if a second or junior mortgage is foreclosed out by a foreclosure conducted by a senior mortgage holder, then the beneficiary of the junior mortgage can directly bring a lawsuit to collect the loan against the borrowers who signed the loan agreement or promissory note.
The advice of an attorney should be obtained by anyone facing foreclosure or a debt collection lawsuit.
What is the homeowner bill of rights and how does it affect foreclosure?
In general, if a property owner does not pay a loan or debt secured by real property, then the creditor, beneficiary, or holder of the obligation can pursue either a judicial foreclosure by way of a court proceeding, or non-judicial foreclosure of the property merely by complying with the foreclosure statutes that require the posting, mailing, and publishing of certain notices. There have been recent amendments to the California Civil Code concerning foreclosure of owner occupied dwellings, for example:
- Lenders and their agents are required to provide defaulting borrowers with a single point of contact to discuss foreclosure prevention. Civil Code §2923.7
- Lenders may not dual track a foreclosure while a trial loan modification or application for permanent loan modification is pending. Civil Code §2924.11.
- ‘Robo-Signing’ is prohibited and a mortgage servicer must review documents to substantiate the borrower’s default and the right to foreclose before foreclosure documents are recorded. Civil Code §2924.17.
- If a trustee sale is postponed by the lender, its agent, or the trustee for more than 10 days, then written notice must be given to the borrower of the new sale date and time. Civil Code §2924(a)(5).
- A borrower can bring a lawsuit for injunctive relief or monetary damages for a violation of these statutes, including an award of attorney fees. Civil Code §2924.12 and §2924.19.
- Many of the statutes concerning foreclosure only address the rights of first lien mortgages or deeds of trust secured by owner-occupied, residential property containing no more than four dwelling units. However, many of the rights of a borrower may be waived if the borrower voluntarily surrenders the property to an agent of the lender, or if the borrow enters a contract with an organization involved in the business of advising people on how to delay or extend the foreclosure process and avoid their contractual obligations, or if the borrower has filed a petition for bankruptcy. Civil Code §2920.5.
- Tenants of property in foreclosure are provided with special rights, including a right to a 90-day termination notice after a trustee sale of the landlord’s property. Also, a residential tenant or subtenant under a fixed-term lease entered into before the foreclosure sale may have the right to remain in possession until the lease terminates, and the rights and obligations of the tenant under the lease may survive the foreclosure sale unless the purchaser or his successor at the trustee sale will occupy the unit as their primary residence; or the tenant is a borrower under the defaulted loan or the child, spouse, or parent of the borrower, if the lease was not an arms-length transaction; or if the rent required by the lease is substantially less than fair market rent for the property. California Code of Civil Procedure §1161(B)(a).
What is an eviction lawsuit?
An eviction lawsuit, also known as an unlawful detainer action, is a lawsuit filed in court to terminate the occupancy of a tenant and remove the tenant from the property. An eviction suit can be brought for default by the tenant of his obligation to pay rent or based upon other obligations under the lease. An eviction can be brought against the tenant when the owner loses his title by foreclosure. Depending upon the facts of the particular case, a 3-day notice may be required for default in the obligation to pay rent, a 30-day notice may be required to terminate an at-will tenancy of residential property where occupancy has been less than one year, and a 60-day notice may be required where the residential occupancy has exceeded one year.
If the occupants fail to vacate the premises and surrender possession within the time provided in the notice from the landlord, then the landlord may file a suit for unlawful detainer, and the clerk of the court issues a summons. The summons and complaint are served upon the tenant and normally must be answered within five days after service. Lawsuits for an unlawful detainer receive calendar preference and are usually heard quickly by the court. The tenant or other occupants may have various rights and defenses to an action for unlawful detainer, including a lack of habitability of the premises, an allegation that rent was paid, an allegation that the lease agreement was modified, or that the tenant took advantage of statutes allowing the tenant to make repairs to residential property and deduct the cost from the rent payments.
Once a judgment is issued, the landlord may direct the sheriff to serve a writ of possession and remove occupants from the premises. The law of unlawful detainer is technical and complex and a failure to comply with the strict requirements of law in even the least degree can result in a plaintiff failing to establish his claim at trial, or the loss of a defense by a defendant.
What is a partition lawsuit?
When two or more persons own an interest in land and cannot agree as to the manner in which the real estate will be used, one owner may file a lawsuit with the court seeking that the property be divided. Partition of the land can occur in kind, as for example, where farm or ranch land is physically divided among the owners, or land may be partitioned by sale, where the property is sold and the proceeds are divided among the owners. Property can be partitioned by an appraisal and purchase, where one party purchases the interest of the other party.
What is a quiet title lawsuit?
The rules and procedures for various types of lawsuits concerning land are set forth by statutes and by case law. A quiet title lawsuit asks the court to determine which party or parties are lawfully entitled to the ownership, possession, or other interests in land. A suit for partition asks the court to sell an interest in land that is owned by two or more persons who cannot agree on a voluntary manner of managing or disposing of the land. A suit for ejectment asks the court to remove a person who is not entitled to possession. A suit for adverse possession asks the court to declare that a person who has occupied land, and perhaps paid property taxes on the land for a number of years, should be entitled to a decree that he/she owns a fee interest in a parcel. These types of suits are often common in areas with large parcels of land where the boundary lines may not appear clear from an inspection of the property.
What is an easement?
An easement is the right of one party to use a portion of the land of another party. Typical easements are for ingress and egress, which are commonly referred to as road easements or access easements. There are laws that govern the obligations of the parties concerning the maintenance and repair of easements. Often disputes arise in connection with rural land, such as farms or ranches, as to whether gates or fences may be placed across or along easements
What are equitable rights?
Often a person has rights in real property, although the person’s name is not on legal title of the property. For example, two persons might agree to jointly purchase a parcel of property, but for some reason, the title to the property is only placed in the name of one of the parties, although both parties might have contributed towards the down payment and may have contributed towards the monthly mortgage payments. Sometimes one of the parties will have paid the mortgage payments, and perhaps the other party paid property taxes, insurance, or provided labor or materials to improve the property. The courts can apply certain equitable principles, sometimes referred to as promissory estoppel, the doctrine of constructive trust, or the doctrine of resulting trust, and enter a decree determining the interest of the various parties in the parcel of property. In these types of cases, an accounting is usually required to determine the contributions made by each party towards the acquisition and improvement of the property.
What is a deed of trust?
A deed of trust is a security instrument that is recorded in the records of land title maintained by a county recorder. The deed of trust is a contract by which the owner of land (known as the trustor) grants a security interest in the real property to a beneficiary to secure the performance of an obligation, which is usually the payment of a promissory note. The deed of trust appoints a third person, known as the trustee, with the power to sell the property at public auction in the event a default occurs and the trustor fails to comply with the terms of the secured obligation. The power of sale included within a deed of trust is often referred to as nonjudicial foreclosure, because the foreclosure of the trustor’s interest can occur without any involvement by the courts. If the trustor, often a homeowner, contends that the obligation was modified by the beneficiary, who is often a lender such as a bank, then the trustor has the burden of moving forward and filing a lawsuit to enjoin the foreclosure. Often the trustor will claim there was an agreement to modify the promissory note in some manner, or perhaps the lender has agreed to postpone the foreclosure sale, but then breaches the agreement by either attempting to enforce the original obligation or proceeding with the trustee sale. A court may enjoin, in other words prohibit, the foreclosure sale until the rights and duties between the property owner and the lender are determined by the court.
What is adverse possession?
Often a person is in possession of real property, and perhaps pays the property taxes and insurance, yet the record title to the property is in the name of another person. Under certain circumstances, the occupant can bring suit for a court judgment to determine that the occupant is the rightful owner of the property, where the occupant can show he occupied the property in an open, notorious, continuous, and adverse manner for the statutory period of time under a claim that the occupant was the true owner.
Should agreements between family members concerning real property be in writing?
All agreements concerning real property should be in writing. Uncertainty can result when real estate acquisitions or purchases are handled informally. Sometimes, one family member provides the down payment and another family member obtains financing for a loan, and perhaps another person makes the monthly loan payments, property tax payments, and insurance payments. As time passes, there could be a dispute as to how the parties intended to share ownership, occupancy, and responsibility for the payments secured by the property. The resolution of such disputes is complex and often involves a claim by one party that another party holds only the bare legal title, and suit is filed for a court determination that one party holds the real property in a constructive trust for the intended owner.