Does a Foreclosure Sale Need to be Disclosed to a Tenant?

Full question:

is there a full disclosure law in California relative to a rental agreement? Signed a rental agreement and paid rent, security deposit before signing and now informed trustee sale of property 6-11-11. Have not moved in yet. Can i get my money back?

• Category: Real Property
• Subcategory: Foreclosure
• Date: 04/07/2025
• State: California

Answer:

Landlords are generally not required to tell prospective tenants about a pending foreclosure. One potential issue tenants face after a foreclosure is termination of the utilities, as the defaulting landlord has likely fallen behind in their PG & E payments and the foreclosing bank is unlikely to pay those back bills. If that happens, tenants have a couple of options: First, the state Public Utilities Commission requires utility companies to give tenants the right to assume the utilities in their own name, without having to pay any of the back bills owned by the landlord. Rent controlled tenants would then be able to get a decrease in rent from the Rent Board to compensate for now having to pay the utilities themselves.

The federal Protecting Tenants at Foreclosure Act is more protective of tenants’ rights in foreclosure than is California state law with respect to the potential for a tenant to remain until the expiration of the lease term even after foreclosure, and as or more protective with respect to advance notice required before a tenant can be forced to vacate the property (California law generally requires 60 days’ notice to vacate for tenants (or 90 days for Section 8 tenants) after a foreclosure). California law, however, provides certain rights to tenants that go beyond the scope of the PTFA, as described above. Further, certain local ordinances requiring “just cause” for eviction of tenants after foreclosure add a layer of protection not contemplated by the PTFA.

Please see the following CA statutes:

1940.7. (a) The Legislature finds and declares that the December
10, 1983, tragedy in Tierra Santa, in which lives were lost as a
result of a live munition exploding in a residential area that was
formerly a military ordnance location, has demonstrated (1) the
unique and heretofore unknown risk that there are other live
munitions in former ordnance locations in California, (2) that these
former ordnance locations need to be identified by the federal,
state, or local authorities, and (3) that the people living in the
neighborhood of these former ordnance locations should be notified of
their existence. Therefore, it is the intent of the Legislature that
the disclosure required by this section is solely warranted and
limited by (1) the fact that these former ordnance locations cannot
be readily observed or discovered by landlords and tenants, and (2)
the ability of a landlord who has actual knowledge of a former
ordnance location within the neighborhood of his or her rental
property to disclose this information for the safety of the tenant.
(b) The landlord of a residential dwelling unit who has actual
knowledge of any former federal or state ordnance locations in the
neighborhood area shall give written notice to a prospective tenant
of that knowledcge prior to the execution of a rental agreement. In
cases of tenancies in existence on January 1, 1990, this written
notice shall be given to tenants as soon as practicable thereafter.
(c) For purposes of this section:
(1) "Former federal or state ordnance location" means an area
identified by an agency or instrumentality of the federal or state
government as an area once used for military training purposes and
which may contain potentially explosive munitions.
(2) "Neighborhood area" means within one mile of the residential
dwelling.

1940.8. A landlord of a residential dwelling unit shall provide
each new tenant that occupies the unit with a copy of the notice
provided by a registered structural pest control company pursuant to
Section 8538 of the Business and Professions Code, if a contract for
periodic pest control service has been executed.