1     
FORECLOSURE OF RESIDENTIAL RENTAL PROPERTY

2     
2016 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Wayne A. Harper

5     
House Sponsor: Steve Eliason

6     

7     LONG TITLE
8     General Description:
9          This bill enacts and amends provisions related to foreclosure of residential rental
10     property.
11     Highlighted Provisions:
12          This bill:
13          ▸     under certain circumstances, allows a preexisting tenant to continue to occupy, for a
14     limited amount of time, a residential rental property after a forced sale at public
15     auction;
16          ▸     repeals a sunset provision;
17          ▸     eliminates a sunset repeal date; and
18          ▸     provides a repeal date for certain sections.
19     Money Appropriated in this Bill:
20          None
21     Other Special Clauses:
22          None
23     Utah Code Sections Affected:
24     AMENDS:
25          57-1-25, as last amended by Laws of Utah 2011, Chapter 228
26          63I-1-257, as last amended by Laws of Utah 2015, Chapter 233
27          63I-1-278, as last amended by Laws of Utah 2014, Chapters 247 and 267
28          78B-6-802, as last amended by Laws of Utah 2010, Chapter 66
29          78B-6-901.5, as enacted by Laws of Utah 2010, Chapter 66
30     ENACTS:
31          57-1-25.5, Utah Code Annotated 1953
32          78B-6-802.7, Utah Code Annotated 1953
33     

34     Be it enacted by the Legislature of the state of Utah:
35          Section 1. Section 57-1-25 is amended to read:
36          57-1-25. Notice of trustee's sale -- Description of property -- Time and place of
37     sale.
38          (1) The trustee shall give written notice of the time and place of sale particularly
39     describing the property to be sold:
40          (a) by publication of the notice:
41          (i) (A) at least three times;
42          (B) at least once a week for three consecutive weeks;
43          (C) the last publication to be at least 10 days but not more than 30 days before the date
44     the sale is scheduled; and
45          (D) in a newspaper having a general circulation in each county in which the property to
46     be sold, or some part of the property to be sold, is situated; and
47          (ii) in accordance with Section 45-1-101 for 30 days before the date the sale is
48     scheduled;
49          (b) by posting the notice:
50          (i) at least 20 days before the date the sale is scheduled; and
51          (ii) (A) in some conspicuous place on the property to be sold; and
52          (B) at the office of the county recorder of each county in which the trust property, or
53     some part of it, is located; and
54          (c) if the stated purpose of the obligation for which the trust deed was given as security
55     is to finance residential rental property:
56          (i) by posting the notice, including the statement required under Subsection (3)(b):
57          (A) on the primary door of each dwelling unit on the property to be sold, if the property
58     to be sold has fewer than nine dwelling units; or
59          (B) in at least [two] three conspicuous places on the property to be sold, in addition to
60     the posting required under Subsection (1)(b)(ii)(A), if the property to be sold has nine or more
61     dwelling units; or
62          (ii) by mailing the notice, including the statement required under Subsection (3)(b), to
63     the occupant of each dwelling unit on the property to be sold.
64          (2) (a) The sale shall be held at the time and place designated in the notice of sale.
65          (b) The time of sale shall be between the hours of 8 a.m. and 5 p.m.
66          (c) The place of sale shall be clearly identified in the notice of sale under Subsection
67     (1) and shall be at a courthouse serving the county in which the property to be sold, or some
68     part of the property to be sold, is located.
69          (3) (a) The notice of sale shall be in substantially the following form:
70     
Notice of Trustee's Sale

71          The following described property will be sold at public auction to the highest bidder,
72     payable in lawful money of the United States at the time of sale, at (insert location of sale)
73     ________________on __________(month\day\year), at __.m. of said day, for the purpose of
74     foreclosing a trust deed originally executed by ____ (and ____, his wife,) as trustors, in favor
75     of ____, covering real property located at ____, and more particularly described as:
76     
(Insert legal description)

77          The current beneficiary of the trust deed is ______________________ and the record
78     owners of the property as of the recording of the notice of default are _________________ and
79     ____________________.
80     Dated __________(month\day\year).
_______________

81     
Trustee

82          (b) If the stated purpose of the obligation for which the trust deed was given as security
83     is to finance residential rental property, the notice required under Subsection (1)(c) shall
84     include a statement, in at least 14-point font, substantially as follows:
85          "Notice to Tenant
86          As stated in the accompanying Notice of Trustee's Sale, this property is scheduled to be
87     sold at public auction to the highest bidder unless the default in the obligation secured by this
88     property is cured. If the property is sold, you may be allowed under [federal law] Utah Code
89     Section 57-1-25.5 to continue to occupy your rental unit until your rental agreement expires, or
90     until [90] 45 days after the date you are served with a notice to vacate, whichever is later. If
91     your rental or lease agreement expires after the [90] 45-day period, you may need to provide a
92     copy of your rental or lease agreement to the new owner to prove your right to remain on the
93     property longer than [90] 45 days after the sale of the property.
94          You must continue to pay your rent and comply with other requirements of your rental
95     or lease agreement or you will be subject to eviction for violating your rental or lease
96     agreement.
97          The new owner or the new owner's representative will probably contact you after the
98     property is sold with directions about where to pay rent.
99          The new owner of the property may or may not want to offer to enter into a new rental
100     or lease agreement with you at the expiration of the period described above."
101          (4) The failure to provide notice as required under Subsections (1)(c) and (3)(b) or a
102     defect in that notice may not be the basis for challenging or invaliding a trustee's sale.
103          (5) A trustee qualified under Subsection 57-1-21(1)(a)(i) or (iv) who exercises a power
104     of sale has a duty to the trustor not to defraud, or conspire or scheme to defraud, the trustor.
105          Section 2. Section 57-1-25.5 is enacted to read:
106          57-1-25.5. Foreclosure of residential rental property -- Effect on tenancy.
107          (1) As used in this section:
108          (a) "Bona fide residential rental agreement" means an agreement, for a property
109     secured by a trust deed:
110          (i) that was the result of an arm's-length transaction;
111          (ii) established before:
112          (A) the trustee records a notice of default for the property under Section 57-1-24; or
113          (B) the trustee or beneficiary files an action to foreclose the trust property under Title
114     78B, Chapter 6, Part 9, Mortgage Foreclosure;
115          (iii) that provides an individual the right to exclusive use and occupancy of the
116     residential property:
117          (A) on an at-will basis; or
118          (B) for a period specified by the agreement that is no longer than twelve months; and
119          (iv) that requires the individual to pay rent in an amount that:
120          (A) is not substantially less than fair market rent for the property; or
121          (B) is less than fair market rent due to a federal, state, or local subsidy.
122          (b) "Bona fide tenant" means an individual who:
123          (i) has the right to occupy a residential property under a bona fide residential rental
124     agreement;
125          (ii) is not the trustor; and
126          (iii) is not the trustor's child, spouse, or parent.
127          (c) "Foreclosed rental property" means a property that:
128          (i) is the subject of a bona fide residential rental agreement; and
129          (ii) (A) is the subject of a trustee's sale as provided in this chapter; or
130          (B) is foreclosed under Title 78B, Chapter 6, Part 9, Mortgage Foreclosure.
131          (d) "New owner" means the immediate successor in interest of a foreclosed rental
132     property following a foreclosure or trustee's sale of the property.
133          (2) (a) Except as provided in Subsection (2)(b), a new owner assumes ownership of a
134     foreclosed rental property subject to a bona fide tenant's right to occupy the foreclosed rental
135     property:
136          (i) according to the terms of a bona fide residential rental agreement; and
137          (ii) until the end of the term of the bona fide residential rental agreement.
138          (b) Subject to Subsection (3), a new owner who intends to occupy a foreclosed rental
139     property as the new owner's primary residence may terminate:
140          (i) the bona fide residential rental agreement; and
141          (ii) the bona fide tenant's occupancy of the foreclosed rental property.
142          (3) (a) A new owner who terminates a bona fide tenant's occupancy of a foreclosed
143     rental property shall serve, to the bona fide tenant, a notice to vacate:
144          (i) at least 45 days before the day on which the new owner requires the bona fide tenant
145     to vacate the foreclosed rental property; and
146          (ii) as provided in Section 57-1-25.
147          (b) A notice to vacate under Subsection (3)(a) shall:
148          (i) be in at least 14-point font;
149          (ii) state the new owner's name, address, and contact information;
150          (iii) explain the reason the new owner requires the bona fide tenant to vacate the rental
151     property;
152          (iv) state the date on which the bona fide tenant is required to vacate the rental
153     property; and
154          (v) refer to this section as the law under which the notice to vacate is provided.
155          (4) This section does not modify the requirements for termination of a federally
156     subsidized tenancy.
157          Section 3. Section 63I-1-257 is amended to read:
158          63I-1-257. Repeal dates, Title 57.
159          [(1) Subsections 57-1-25(1)(c), (3)(b), and (4) are repealed December 31, 2016.]
160          (1) Section 57-1-25.5 is repealed on July 1, 2018.
161          (2) Subsection 57-16-4(12), on July 1, 2017, is modified to read as follows:
162          "(12) The mobile home park shall have a copy of this chapter posted at all times in a
163     conspicuous place in a common area of the mobile home park."
164          (3) Title 57, Chapter 16a, Mobile Home Park Helpline, is repealed July 1, 2017.
165          Section 4. Section 63I-1-278 is amended to read:
166          63I-1-278. Repeal dates, Title 78A and Title 78B.
167          (1) The Office of the Court Administrator, created in Section 78A-2-105, is repealed
168     July 1, 2018.
169          (2) Section 78B-3-421, regarding medical malpractice arbitration agreements, is
170     repealed July 1, 2019.
171          (3) Title 78B, Chapter 6, Part 2, Alternative Dispute Resolution Act is repealed July 1,
172     2016.
173           (4) Section 78B-6-802.7 is repealed on July 1, 2018.
174          Section 5. Section 78B-6-802 is amended to read:
175          78B-6-802. Unlawful detainer by tenant for a term less than life.
176          (1) A tenant holding real property for a term less than life, is guilty of an unlawful
177     detainer if the tenant:
178          (a) except as provided in Subsection (1)(i), continues in possession, in person or by
179     subtenant, of the property or any part of it, after the expiration of the specified term or period
180     for which it is let to him, which specified term or period, whether established by express or
181     implied contract, or whether written or parol, shall be terminated without notice at the
182     expiration of the specified term or period;
183          (b) having leased real property for an indefinite time with monthly or other periodic
184     rent reserved and except as provided in Subsection (1)(i):
185          (i) continues in possession of it in person or by subtenant after the end of any month or
186     period, in cases where the owner, the owner's designated agent, or any successor in estate of the
187     owner, 15 calendar days or more prior to the end of that month or period, has served notice
188     requiring the tenant to quit the premises at the expiration of that month or period; or
189          (ii) in cases of tenancies at will, remains in possession of the premises after the
190     expiration of a notice of not less than five calendar days;
191          (c) continues in possession, in person or by subtenant, after default in the payment of
192     any rent or other amounts due and after a notice in writing requiring in the alternative the
193     payment of the rent and other amounts due or the surrender of the detained premises, has
194     remained uncomplied with for a period of three calendar days after service, which notice may
195     be served at any time after the rent becomes due;
196          (d) assigns or sublets the leased premises contrary to the covenants of the lease, or
197     commits or permits waste on the premises after service of a three calendar days' notice to quit;
198          (e) sets up or carries on any unlawful business on or in the premises after service of a
199     three calendar days' notice to quit;
200          (f) suffers, permits, or maintains on or about the premises any nuisance, including
201     nuisance as defined in Section 78B-6-1107 after service of a three calendar days' notice to quit;
202          (g) commits a criminal act on the premises and remains in possession after service of a
203     three calendar days' notice to quit;
204          (h) continues in possession, in person or by subtenant, after a neglect or failure to
205     perform any condition or covenant of the lease or agreement under which the property is held,
206     other than those previously mentioned, and after notice in writing requiring in the alternative
207     the performance of the conditions or covenant or the surrender of the property, served upon the
208     tenant and upon any subtenant in actual occupation of the premises remains uncomplied with
209     for three calendar days after service; or
210          (i) (i) is a bona fide tenant [under a bona fide tenancy as provided in Section 702 of the
211     Protecting Tenants at Foreclosure Act of 2009, Pub. L. 111-22] of a foreclosed rental property,
212     as defined in Section 57-1-25.5 or Section 78B-6-802.7; and
213          (ii) continues in possession after the effective date of a notice to vacate given in
214     accordance with [Section 702 of the Protecting Tenants at Foreclosure Act of 2009, Pub. L.
215     111-22] Subsection 57-1-25.5(3) or Subsection 78B-6-802.7(3).
216          (2) Within three calendar days after the service of the notice, the tenant, any subtenant
217     in actual occupation of the premises, any mortgagee of the term, or other person interested in
218     its continuance may perform the condition or covenant and thereby save the lease from
219     forfeiture, except that if the covenants and conditions of the lease violated by the lessee cannot
220     afterwards be performed, or the violation cannot be brought into compliance, the notice
221     provided for in Subsections (1)(d) through (g) may be given.
222          (3) Unlawful detainer by an owner resident of a mobile home is determined under Title
223     57, Chapter 16, Mobile Home Park Residency Act.
224          (4) The notice provisions for nuisance in Subsections (1)(d) through (g) do not apply to
225     nuisance actions provided in Sections 78B-6-1107 through 78B-6-1114.
226          Section 6. Section 78B-6-802.7 is enacted to read:
227          78B-6-802.7. Foreclosure of residential rental property -- Effect on tenancy.
228          (1) As used in this section:
229          (a) "Bona fide residential rental agreement" means an agreement, for a property
230     secured by a mortgage:
231          (i) that was the result of an arm's-length transaction;
232          (ii) established before the filing of an action to foreclose the mortgage under Part 9,
233     Mortgage Foreclosure;
234          (iii) that provides an individual the right to exclusive use and occupancy of the
235     residential property:
236          (A) on an at-will basis; or
237          (B) for a period specified by the agreement that is no longer than twelve months; and
238          (iv) that requires the individual to pay rent in an amount that:
239          (A) is not substantially less than fair market rent for the property; or
240          (B) is less than fair market rent due to a federal, state, or local subsidy.
241          (b) "Bona fide tenant" means an individual who:
242          (i) has the right to occupy a residential property under a bona fide residential rental
243     agreement;
244          (ii) is not the mortgagor; and
245          (iii) is not the mortgagor's child, spouse, or parent.
246          (c) "Foreclosed rental property" means a property that:
247          (i) is the subject of a bona fide residential rental agreement; and
248          (ii) is foreclosed under Part 9, Mortgage Foreclosure.
249          (d) "New owner" means the immediate successor in interest of a foreclosed rental
250     property following foreclosure of the property.
251          (2) (a) Except as provided in Subsection (2)(b), a new owner assumes ownership of a
252     foreclosed rental property subject to a bona fide tenant's right to occupy the foreclosed rental
253     property:
254          (i) according to the terms of a bona fide residential rental agreement; and
255          (ii) until the end of the term of the bona fide residential rental agreement.
256          (b) Subject to Subsection (3), a new owner who intends to occupy a foreclosed rental
257     property as the new owner's primary residence may terminate:
258          (i) the bona fide residential rental agreement; and
259          (ii) the bona fide tenant's occupancy of the foreclosed rental property.
260          (3) (a) A new owner who terminates a bona fide tenant's occupancy of a foreclosed
261     rental property shall serve, to the bona fide tenant, a notice to vacate:
262          (i) at least 45 days before the day on which the new owner requires the bona fide tenant
263     to vacate the foreclosed rental property; and
264          (ii) as provided in Section 78B-6-805.
265          (b) A notice to vacate under Subsection (3)(a) shall:
266          (i) be in at least 14-point font;
267          (ii) state the new owner's name, address, and contact information;
268          (iii) explain the reason the new owner requires the bona fide tenant to vacate the rental
269     property;
270          (iv) state the date on which the bona fide tenant is required to vacate the rental
271     property; and
272          (v) refer to this section as the law under which the notice to vacate is provided.
273          (4) This section does not modify the requirements for termination of a federally
274     subsidized tenancy.
275          Section 7. Section 78B-6-901.5 is amended to read:
276          78B-6-901.5. Notice to tenant on residential property to be foreclosed.
277          (1) As used in this section, "residential rental property" means property on which a
278     mortgage was given to secure an obligation the stated purpose of which is to finance residential
279     rental property.
280          (2) Within 20 days after filing an action under this part to foreclose property that
281     includes or constitutes residential rental property, the plaintiff in the action shall:
282          (a) post a notice:
283          (i) on the primary door of each dwelling unit on the property that is the subject of the
284     foreclosure action, if the property has fewer than nine dwelling units; or
285          (ii) in at least three conspicuous places on the property that is the subject of the
286     foreclosure action, if the property to be sold has nine or more dwelling units; or
287          (b) mail a notice to the occupant of each dwelling unit on the property that is the
288     subject of the foreclosure action.
289          (3) The notice required under Subsection (2) shall:
290          (a) be in at least 14-point font;
291          (b) include the name and address of:
292          (i) the owner of the property;
293          (ii) the trustor or mortgagor, as the case may be, on the instrument creating a security
294     interest in the property;
295          (iii) the trustee or mortgagee, as the case may be, on the instrument; and
296          (iv) the beneficiary, if the instrument is a trust deed;
297          (c) contain the legal description and address of the property; and
298          (d) include a statement in substantially the following form:
299          "Notice to Tenant
300          An action to foreclose the property described in this notice has been filed. If the
301     foreclosure action is pursued to its conclusion, the described property will be sold at public
302     auction to the highest bidder unless the default in the obligation secured by this property is
303     cured.
304          If the property is sold, you may be allowed under [federal law] Utah Code Section
305     78B-6-802.7 to continue to occupy your rental unit until your rental agreement expires, or until
306     [90] 45 days after the sale of the property at auction, whichever is later. If your rental or lease
307     agreement expires after the [90-day] 45-day period, you may need to provide a copy of your
308     rental or lease agreement to the new owner to prove your right to remain on the property longer
309     than [90] 45 days after the sale of the property.
310          You must continue to pay your rent and comply with other requirements of your rental
311     or lease agreement or you will be subject to eviction for violating your rental or lease
312     agreement.
313          The new owner or the new owner's representative will probably contact you after the
314     property is sold with directions about where to pay rent.
315          The new owner of the property may or may not want to offer to enter into a new rental
316     or lease agreement with you at the expiration of the period described above."
317          (4) The failure to provide notice as required under this section or a defect in that notice
318     may not be the basis for challenging or defending a foreclosure action or for invaliding a sale of
319     the property pursuant to a foreclosure action.