Ordinances and Mandates Throughout California That Restrict
Trustees’ Sales Proliferate

A series of new aggressive tactics have greeted UTA members this summer from a variety of cities in California.

Los Angeles

Los Angeles’ new ordinance 181185 (LA Municipal Code Section 164.00 et seq.), passed by the Los Angeles City Council on June 24th and effective July 8th, requires Trustees pay an annual registration fee of $155 with the Los Angeles Housing Department and inspect properties before recording a Notice of Default with a civil penalty of $250 per day for non-compliance.  Fines for vacant structures can be $1,000 per day up to $100,000.

The ordinance is a purported attempt to address neighborhood blight and applies to all residential properties. The L.A. Ordinance does not appear to distinguish between 1-4 unit residential properties, large apartment building or mixed use properties.

The issue of local distressed property ordinances has been thoroughly covered in past UTA annual conferences and in the UTA Quarterly Newsletter.  While the L.A. Ordinance to some extent adopts the ill-conceived language in many other local distressed property ordinances, it appears to add elements that go beyond anything seen to date.  Phil Adleson, corporate counsel for the UTA as well as for the California Mortgage Association has observed that, while he is not speaking on behalf of UTA or CMA: “The L.A. ordinance is fraught with ambiguity and is likely unconstitutionally uncertain.  Other elements of the statute may be preempted by state law.  Among other things, the L.A. Ordinance confuses a number of definitions including confusing “assignment of rents” with an assignment of the “deed of trust”.  The ordinance shows a complete lack of understanding of the role and responsibilities of the trustee and beneficiary under deeds of trust.  Many of the provisions of the ordinance are internally inconsistent.  Most significantly, the L.A. Ordinance fails to recognize that a lender (and certainly a trustee) under a deed of trust have no obligation to maintain or protect the security even though the deed of trust may permit them to take actions to protect the security.  Under state law, a lender can walk away from the secured property at any time up until it acquires the property at a foreclosure sale.  This is particularly true of junior lienholders who, in this economy, may have little or no equity to protect.  Since the state legislature has failed to act, it may be time for trustees and lenders to stand up for their rights.  The L.A. Ordinance goes too far and I believe it is time for trustees and lenders to take action in court to stop this nonsense.”

Read the Los Angeles Ordinance now

Bakersfield

After initially placing restrictions on crying sales by City Hall to the South Side of the City Hall building, the City of Bakersfield, as of June 25th, has increased their aggressive stance and has now “denied the request by companies wanting to hold trustee sale auctions on County property.”  The city has informed UTA members that “these auctions are no longer compatible with the current use of City Hall South.”

Kern County’s General Services Division reaffirmed this decision.

Read letter from City of Bakersfield
Read a letter from the Kern County Administrative Office

Corona

The city of Corona has disallowed sales at the Corona Historic Civic Center on Sixth Street.  Effective June 14th, the city allows auction sales in front of 847 W. Sixth Street, which is 150 feet from the previous location, with a 45-day grace period.

Read letter from City of Corona

Placentia

The city of Placentia has “requested” that trustees no longer hold auctions at the Placentia Civic Center but have offered the courtyard in front of Kraemer Park on North Bradford Avenue as an alternate location.

Read letter from City of Placentia

Desert Hot Springs

The city of Desert Hot Springs has passed a series of Ordinances that require trustees to inspect property upon default prior to recording an NOD.  If the property is found vacant, the trustee must register the property.  If the property is occupied, but in default, the trustee must provide monthly inspections.  The City imposed an annual registration fee on trustees.