When a property in California goes into foreclosure, most people picture the owner losing their home. What often gets overlooked is the tenant who may have been paying rent faithfully, unaware that the landlord has defaulted on the mortgage. California Civil Code §2924.18 was written to address this gap, offering critical protections to tenants who might otherwise be blindsided by a foreclosure sale.

Overview of Civil Code §2924.18

At its core, Civil Code §2924.18 restricts the foreclosure process under certain circumstances, primarily designed to ensure that both homeowners and tenants are not displaced prematurely. The law prevents lenders from pursuing foreclosure if the homeowner has submitted a complete application for a loan modification, forbearance, or other foreclosure alternative. While that protection is homeowner-focused, it directly affects tenants too, since foreclosure cannot proceed while these applications are under review.

Tenant Leases After Foreclosure

A central concern for tenants is what happens to their lease once a property is sold at foreclosure. Under California law, and reinforced by federal law through the Protecting Tenants at Foreclosure Act (PTFA), a bona fide lease generally survives the foreclosure. This means:

• Fixed-term leases must be honored by the new owner until the lease expires, unless the buyer intends to move in as their primary residence.

• Month-to-month tenants are entitled to 90 days’ notice before being required to vacate.

• Lease terms must be “bona fide” meaning the tenant is not the landlord’s close family member, the lease was entered into at arm’s length, and rent is consistent with fair market value.

The practical outcome is that a foreclosure does not immediately terminate tenancy. Instead, the new buyer, whether an investor or an owner-occupant, steps into the landlord’s shoes.

Notice Requirements for Tenants

Civil Code §2924.8 requires that tenants receive written notice when their landlord’s property is in foreclosure. This notice must be posted on the property and mailed to tenants, providing them with clear warning of the foreclosure process.

Additionally, when a foreclosure sale is complete, tenants are entitled to written notice of new ownership and, if applicable, notice of termination of tenancy. Importantly, California law requires that tenants receive this communication in a timely and transparent way, giving them the opportunity to plan rather than face sudden eviction.

Interaction Between Tenant Rights and Foreclosure Procedures

Foreclosure timelines in California typically move quickly once a Notice of Default is filed. For tenants, this means their housing stability is tied to the legal and procedural steps taken between the lender, borrower, and trustee. Civil Code §2924.18 slows that process if the homeowner is pursuing foreclosure alternatives, indirectly giving tenants additional time.

However, once foreclosure is finalized, the balance of tenant rights depends heavily on lease status. Fixed-term leases give tenants stronger protections, while month-to-month arrangements rely on the 90-day minimum notice period. If the buyer intends to occupy the property, even a fixed-term lease may be shortened, though tenants still retain the right to receive proper notice.

Implications for Property Managers and Buyers

For property managers in California, foreclosure protections require careful communication with tenants, especially when managing distressed properties. Investors acquiring foreclosed homes must understand that tenancy obligations do not vanish at auction. Failing to respect lease terms or notice requirements can lead to legal disputes and financial penalties.

In short, Civil Code §2924.18, combined with related statutes, ensures that tenants are not collateral damage in the foreclosure process. It reinforces California’s broader housing stability policies, requiring that both landlords and new owners account for tenant rights during property transitions.

Key Takeaways

• Civil Code §2924.18 restricts foreclosure while loan modification or foreclosure alternative applications are pending, indirectly protecting tenants.

• Bona fide leases generally survive foreclosure, with fixed-term leases binding on new owners.

• Month-to-month tenants must receive at least 90 days’ notice before vacating.

• Notices must be provided to tenants at multiple stages, including foreclosure initiation and change of ownership.

• Buyers of foreclosed properties inherit landlord responsibilities and must comply with tenant protections.