1--If rental property that you are renting was transferred within last 12 months, and owner has defaulted on mortgage payments and bank has placed property in foreclosure ( but not yet completred the foreclosure): are you entitled to stop paying rent until owner brings mortgage payments current.? 2--Does it mean that you could only hold back rent for the first 12 months of owner's default?
No, even assuming the landlord was engaged in rent skimming as defined under Civil Code section 890, it does not legally excuse the tenant from paying rent. The tenant must still pay rent or risk being evicted in an unlawful detainer lawsuit.
In California, it is illegal for a landlord to collect rent from a residential tenant and not pay the mortgage during the first year that the property was acquired. The owner of residential property has a duty to apply rental income to any outstanding loan secured by the property. Failure to apply such rental income may expose the landlord to liability for "rent skimming".
California Civil Code section 890 is a "rent skimming law" enacted to prevent people from buying at foreclosure sales and "skimming the rents off" until the lender forecloses.
Specifically, California Civil Code section 890 defines"rent skimming" to mean using revenue received from the rental of a parcel of residential real property at any time during the first year period after acquiring that property without first applying the revenue or an equivalent amount to the payments due on all mortgages and deeds of trust encumbering that property.
Under California Civil Code section 891(d), tenants may assert claims for rent skimming and recover damages, including attorney fees.
Engaging in a single act of rent skimming subjects a person to civil penalties. However, any person who engages in multiple acts of rent skimming may be held both civilly and criminally liable under Civil Code section 892.
Frank W. Chen has been licensed to practice law in California since 1988. The information presented here is general in nature and is not intended, nor should be construed, as legal advice. This posting does not create any attorney-client relationship with the author. For specific advice about your particular situation, consult your own attorney.
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