Neighbors losing their homes have heard all kinds of rumors related to ‘cash for keys’ but much of it is based on just that, rumors. The California Department of Real Estate (“DRE”) has put together an informative article for foreclosed owners, tenants, and agents outlining the real facts involved. The following are the key points you should know. To read the full article, go to:

When a lender takes a home back as a result of a foreclosure action, it becomes responsible for that property. The longer the lender has to wait to sell the property, and the more money it has to spend to repair damage and/or to maintain the property, the greater will be its ultimate loss. They must also deal with the occupants remaining after the foreclosure which may be the former owner or a tenant. If the lender can make a deal with a tenant to pay for the tenant’s security and utility deposits, moving expenses, and maybe even temporary living expenses, and perhaps a bonus for a quick moving date, it would be in the lender’s interest to do so to avoid the inevitable minimum 3 to 6 month delay associated with formal legal eviction proceedings. In the many circumstances, the lender would most certainly prefer that the tenant agree to vacate the property within a certain number of days, leave the property in “broom-swept condition”, remove all debris from the interior and the yard, leave all fixtures and landscaping intact, and turn over the keys and garage door openers.

Laws Protecting Tenants’ Rights With Respect to Foreclosed Properties

As recently as early 2008, in the absence of a written lease agreement requiring greater notice, California law required that an owner provide only a 30-day notice to a tenant to vacate the property for any reason (other than the failure to pay rent, which required a 3-day notice). However, recent legislation has changed the rules. Signed as an urgency measure in 2008, Senate Bill 1137 gives tenants at least 60 days after a foreclosure before they can be asked to vacate the property. The provisions of SB 1137 are due to sunset (be repealed) on January 1, 2013. To review a copy of the bill and get more details, please visit Federal legislation was enacted effective May 20, 2009, requiring property owners who have taken a residential property by foreclosure, to give their tenants at least a 90 day notice to vacate the property before beginning the eviction process. That federal law is applicable nationwide, and it is known as “Protecting Tenants At Foreclosure Act”. The law is found at Title 7 US Code section 701 (“the Act”). See It seeks to help protect tenants who would otherwise have a negative mark on their rental history by prohibiting the release of court records in a foreclosure-related eviction unless the plaintiff landlord prevails. Whether the bill is signed into law will not be known until October 2010.

What Renters and Resident Owners Can Do to Protect Themselves

Tenants and resident owners of foreclosed properties must take a significant amount of personal responsibility in this matter. They should become acquainted with federal and State law concerning foreclosures and tenant evictions, and also with local laws which apply to their particular situation. For example, in the City of Los Angeles, beginning December 17, 2008, tenants who are current in their rent payments can not be evicted because of a foreclosure. Many cities in California, including Santa Monica, West Hollywood, Beverly Hills, Oakland, and Berkeley, are subject to local “rent control” and/or “just cause for eviction” ordinances, which may provide even greater protections. Without a working knowledge of applicable local law, a tenant is at a distinct disadvantage. Tenants and resident owners should make sure that any “cash for keys” offer is coming from the new owner of the property, which is often a lender or a government sponsored mortgage investor, such as Fannie Mae or Freddie Mac. Tenants and resident owners should insist on verifying the identification and authority of the person making the “cash for keys” offer. They must insist on receiving a written “cash for keys” agreement, and carefully read and understand that agreement. They should have a trusted and competent attorney, real estate licensee, family member or friend review the agreement and provide counsel concerning its duties and obligations.

Before signing the agreement, a resident owner should call his or her lender directly to confirm the authority of the person making the “cash for keys” offer. A tenant must be especially careful. The tenant should call his or her landlord and ask about the foreclosure and the identity and contact information for the new owner. It would not be unusual for the landlord to tell the tenant to continue to make rent payments directly to the landlord. That should not be done if the landlord is no longer the owner of the property. And finally, a tenant or resident owner should never hand the keys over unless the money is delivered. Cash is best. If paid by check, the tenant or resident owner should make certain the check is good and/or clears. If the keys are handed over, and the owner fails to pay the money, or if the owner’s check bounces, the written agreement should be sufficient to allow the tenant to prevail in a small claims action against the owner. But obtaining a judgment is far easier than collecting it. Without a written agreement, the chances of obtaining a judgment are substantially reduced.

Is A Real Estate License Required to Solicit “Cash For Keys?

There is no way to generalize and declare that a real estate license is, or is not, required to solicit “cash for keys”. The particular facts of each transaction will determine the answer to that question. For resident owners and tenants in foreclosed properties, your only real safety lies in your taking the responsibility to protect yourself. Get the agreement and all other communications in writing. Have someone you trust look the written documents over. Make sure the solicitor is authorized to act for the real owner of the property. And do not give up the keys before you get the cash.

Additional Resources

The office of the California Attorney General issued a News Release on June 28, 2010, entitled “Brown Investigates Whether Tenants’ Rights Are Violated in Foreclosures”. You may wish to consult that Release for more information. If you are a tenant or resident owner and believe your rights have been violated, you can contact the California Attorney General at, and/or the California Department of Real Estate at

If you have specific questions about landlord-tenant law in California or about short sales, foreclosure, or any legal issues, feel free to contact us at We offer a $200 flat fee consultation to evaluate your liabilities and strategize a resolution. This can be done in person or by phone. If interested, please call us at 916-966-2260.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are upside-down on your loan(s), especially if you’re facing a lender lawsuit, get competent legal advise in your State immediately so that you can determine your best options.

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