California Supreme Court Adopts New Rule Related Timing of Service of a Notice to Quit
Last year the Supreme Court interpreted CCP 1161 which governs when an investor has the right to commence an eviction. Until this new case the law allowed the notice to quit to be served before the perfection, however, under the recent Supreme Court decision, if you serve a notice to quit prior to recording your deed, your suit will be dismissed as untimely. As always, understanding the timing considerations is important when commencing any legal process.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing me at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation related to estate planning, please contact me to setup a date and time.
California Supreme Court Adopts New Rule Related Timing of Service of a Notice to Quit
By: Adem A. Balikci, Esq.
The California Supreme Court in Dr. Leevil, LLC v. Westlake Health Care Center, 6 Cal. 5th 474 (Cal. 2018) addressed a split in authority on the issue of when a new owner, who has acquired title to property after a trustee’s sale, may serve a three-day notice to quit on a tenant. The Supreme Court, reversing the Second District Court of Appeal, determined that the new owner must perfect title by recording a trustee’s deed before serving a three-day notice on the tenant.
Westlake Village Property, L.P. (“Westlake Village”) owned property containing a skilled nursing facility. Westlake Village leased the facility to Westlake Health Care Center (“Westlake Health”). The lease was for a 20-year term, and contained an automatic subordination clause, as many commercial leases do.
Six years later, Westlake Village took out a bank loan executing a promissory note and a deed of trust on the property. After Westlake Village defaulted on the loan, the bank sold the promissory note and the deed of trust to Dr. Leevil, LLC (“Dr. Leevil”). Dr. Leevil instituted a nonjudicial foreclosure sale, and purchased the property at a trustee sale. After the sale was concluded but before the trustee’s deed was recorded, Dr. Leevil served Westlake Health with a three-day notice to quit. Westlake Health refused to vacate the property, and Dr. Leevil sued for unlawful detainer. Westlake Health claimed that its lease was senior to the deed of trust and that the notice to quit was invalid because it was served before the Trustee’s Deed was recorded. The trial court found the three-day notice to quit valid and ordered the eviction. Westlake Health appealed, but the court of appeals affirmed the judgment, finding that Dr. Leevil had complied with the requirements of Code of Civil Procedure §1161a(b).
The Court of Appeal held that CCP §1161a(b) allows a post-foreclosure owner to serve a three-day notice to quit before perfecting the title as long as the trustee’s deed is recorded before the owner filed an unlawful detainer action, reasoning that the Court has jurisdiction over the parties when an unlawful detainer action is filed not when a three day notice is served. Westlake Health then petitioned the California Supreme Court to review the matter.
The California Supreme Court in a unanimous decision reversed the Court of Appeal’s judgment and decided that Dr. Leevil had to perfect title before serving the three-day notice to quit on Westlake Health. The California Supreme Court first looked into CCP §1161a(b) and stated that the code identifies five circumstances under which a tenant in possession of a real property may be evicted, one of which is where [A] a property has been sold in accordance with Civil Code §2924, [B] under a power of sale contained in deed of trust, and [C] the title under the sale has been duly perfected. the Court concluded that since the language in the provision is in the past tense, the conditions must have taken place before the new owner can serve a notice to quit. The Court further concluded that because all three conditions are connected by the conjunctive word “and,” all three must be satisfied.
Accordingly, in strict compliance with unlawful detainer statutes, the Court found the three-day notice was premature and void because the title was not perfected when the three-day notice was served, that is the notice was served before the trustee’s deed was recorded. In reaching its conclusion, the Supreme Court reasoned that, among other things, its interpretation of the statute eliminated a tenant’s potential uncertainty regarding whether the new owner validly held title and was authorized to serve the three-day notice. While this case specifically, dealt with property acquired at a non-judicial foreclosure sale. Under CCP 1161a(b)(4), the same requirement would likely be placed upon an investor who purchases a property in an arm’s length transaction with a seller. While the Court placed an emphasis on the word “and” in its decision, the ruling was narrowly tailored to focus on the requirement of the perfection of the deed that allows for the unlawful detainer process to start.
As such, in California, a new owner who acquires title through a nonjudicial foreclosure (CCP 1161a(b)(3)) or an investor acquires a property in an arm’s length transaction (CCP 1161a(b)(4)), they must record the trustee’s deed or grant deed before serving the tenant with a notice to quit.
If you are an investor looking to understand your rights related to properties you own or acquire, the attorneys at BPE Law Group are well versed in landlord rights and remedies and can assist you. To schedule an appointment contact BPE Law Group at 916-966-2260.
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The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.
ice in your State immediately so that you can determine your best options.
Last year the Supreme Court interpreted CCP 1161 which governs when an investor has the right to commence an eviction. Until this new case the law allowed the notice to quit to be served before the perfection, however, under the recent Supreme Court decision, if you serve a notice to quit prior to recording your deed, your suit will be dismissed as untimely. As always, understanding the timing considerations is important when commencing any legal process.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing me at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation related to estate planning, please contact me to setup a date and time.
California Supreme Court Adopts New Rule Related Timing of Service of a Notice to Quit
By: Adem A. Balikci, Esq.
The California Supreme Court in Dr. Leevil, LLC v. Westlake Health Care Center, 6 Cal. 5th 474 (Cal. 2018) addressed a split in authority on the issue of when a new owner, who has acquired title to property after a trustee’s sale, may serve a three-day notice to quit on a tenant. The Supreme Court, reversing the Second District Court of Appeal, determined that the new owner must perfect title by recording a trustee’s deed before serving a three-day notice on the tenant.
Westlake Village Property, L.P. (“Westlake Village”) owned property containing a skilled nursing facility. Westlake Village leased the facility to Westlake Health Care Center (“Westlake Health”). The lease was for a 20-year term, and contained an automatic subordination clause, as many commercial leases do.
Six years later, Westlake Village took out a bank loan executing a promissory note and a deed of trust on the property. After Westlake Village defaulted on the loan, the bank sold the promissory note and the deed of trust to Dr. Leevil, LLC (“Dr. Leevil”). Dr. Leevil instituted a nonjudicial foreclosure sale, and purchased the property at a trustee sale. After the sale was concluded but before the trustee’s deed was recorded, Dr. Leevil served Westlake Health with a three-day notice to quit. Westlake Health refused to vacate the property, and Dr. Leevil sued for unlawful detainer. Westlake Health claimed that its lease was senior to the deed of trust and that the notice to quit was invalid because it was served before the Trustee’s Deed was recorded. The trial court found the three-day notice to quit valid and ordered the eviction. Westlake Health appealed, but the court of appeals affirmed the judgment, finding that Dr. Leevil had complied with the requirements of Code of Civil Procedure §1161a(b).
The Court of Appeal held that CCP §1161a(b) allows a post-foreclosure owner to serve a three-day notice to quit before perfecting the title as long as the trustee’s deed is recorded before the owner filed an unlawful detainer action, reasoning that the Court has jurisdiction over the parties when an unlawful detainer action is filed not when a three day notice is served. Westlake Health then petitioned the California Supreme Court to review the matter.
The California Supreme Court in a unanimous decision reversed the Court of Appeal’s judgment and decided that Dr. Leevil had to perfect title before serving the three-day notice to quit on Westlake Health. The California Supreme Court first looked into CCP §1161a(b) and stated that the code identifies five circumstances under which a tenant in possession of a real property may be evicted, one of which is where [A] a property has been sold in accordance with Civil Code §2924, [B] under a power of sale contained in deed of trust, and [C] the title under the sale has been duly perfected. the Court concluded that since the language in the provision is in the past tense, the conditions must have taken place before the new owner can serve a notice to quit. The Court further concluded that because all three conditions are connected by the conjunctive word “and,” all three must be satisfied.
Accordingly, in strict compliance with unlawful detainer statutes, the Court found the three-day notice was premature and void because the title was not perfected when the three-day notice was served, that is the notice was served before the trustee’s deed was recorded. In reaching its conclusion, the Supreme Court reasoned that, among other things, its interpretation of the statute eliminated a tenant’s potential uncertainty regarding whether the new owner validly held title and was authorized to serve the three-day notice. While this case specifically, dealt with property acquired at a non-judicial foreclosure sale. Under CCP 1161a(b)(4), the same requirement would likely be placed upon an investor who purchases a property in an arm’s length transaction with a seller. While the Court placed an emphasis on the word “and” in its decision, the ruling was narrowly tailored to focus on the requirement of the perfection of the deed that allows for the unlawful detainer process to start.
As such, in California, a new owner who acquires title through a nonjudicial foreclosure (CCP 1161a(b)(3)) or an investor acquires a property in an arm’s length transaction (CCP 1161a(b)(4)), they must record the trustee’s deed or grant deed before serving the tenant with a notice to quit.
If you are an investor looking to understand your rights related to properties you own or acquire, the attorneys at BPE Law Group are well versed in landlord rights and remedies and can assist you. To schedule an appointment contact BPE Law Group at 916-966-2260.
——————————————————————————————————————
The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.
ice in your State immediately so that you can determine your best options.