California Foreclosure Law - Home Equity Sales Contracts
HOME EQUITY SALES CONTRACTS
Investors must carefully follow the law when purchasing a
home of a troubled borrower in foreclosure.
Purpose
1695. (a) The Legislature finds and declares that homeowners
whose residences are in foreclosure have been subjected to fraud,
deception, and unfair dealing by home equity purchasers. The
recent rapid escalation of home values, particularly in the urban
areas, has resulted in a significant increase in home equities which
are usually the greatest financial asset held by the homeowners of
this state. During the time period between the commencement of
foreclosure proceedings and the scheduled foreclosure sale date,
homeowners in financial distress, especially the poor, elderly, and
financially unsophisticated, are vulnerable to the importunities of
equity purchasers who induce homeowners to sell their homes for
a small fraction of their fair market values through the use of
schemes which often involve oral and written misrepresentations,
deceit, intimidation, and other unreasonable commercial practices.
(b) The Legislature declares that it is the express policy of the state
to preserve and guard the precious asset of home equity, and the
social as well as the economic value of homeownership.
(c) The Legislature further finds that equity purchasers have a
significant impact upon the economy and well-being of this state
and its local communities, and therefore the provisions of this
chapter are necessary to promote the public welfare.
(d) The intent and purposes of this chapter are the following:
(1) To provide each homeowner with information necessary to make
an informed and intelligent decision regarding the sale of his or her
home to an equity purchaser; to require that the sales agreement
be expressed in writing; to safeguard the public against deceit and
financial hardship; to insure, foster, and encourage fair dealing in
the sale and purchase of homes in foreclosure; to prohibit
representations that tend to mislead; to prohibit or restrict unfair
contract terms; to afford homeowners a reasonable and meaningful
opportunity to rescind sales to equity purchasers; and to preserve
and protect home equities for the homeowners of this state.
(2) This chapter shall be liberally construed to effectuate this intent
and to achieve these purposes.
Definitions
1695.1. The following definitions apply to this chapter:
(a) “Equity purchaser” means any person who acquires title to any
residence in foreclosure, except a person who acquires such title
as follows:
(1) For the purpose of using such property as a personal residence.
(2) By a deed in lieu of foreclosure of any voluntary lien or
encumbrance of record.
(3) By a deed from a trustee acting under the power of sale
contained in a deed of trust or mortgage at a foreclosure sale
conducted pursuant to Article 1 (commencing with Section 2920) of
Chapter 2 of Title 14 of Part 4 of Division 3.
(4) At any sale of property authorized by statute.
(5) By order or judgment of any court.
(6) From a spouse, blood relative, or blood relative of a spouse.
(b) “Residence in foreclosure” and “residential real property in
foreclosure” means residential real property consisting of one- to
four-family dwelling units, one of which the owner occupies as his
or her principal place of residence, and against which there is an
outstanding notice of default, recorded pursuant to Article 1
(c) “Equity seller” means any seller of a residence in foreclosure.
(d) “Business day” means any calendar day except Sunday, or the
following business holidays: New Year’s Day, Washington’s
Birthday, Memorial Day, Independence Day, Labor Day, Columbus
Day, Veterans’ Day, Thanksgiving Day, and Christmas Day.
(e) “Contract” means any offer or any contract, agreement, or
arrangement, or any term thereof, between an equity purchaser and
equity seller incident to the sale of a residence in foreclosure.
(f) “Property owner” means the record title owner of the residential
real property in foreclosure at the time the notice of default was
recorded.
Contract – Type Size – Language – Execution
1695.2. Every contract shall be written in letters of a size equal to
10-point bold type, in the same language principally used by the
equity purchaser and equity seller to negotiate the sale of the
residence in foreclosure and shall be fully completed and signed
and dated by the equity seller and equity purchaser prior to the
execution of any instrument of conveyance of the residence in
foreclosure.
Terms of Contract
1695.3. Every contract shall contain the entire agreement of the
parties and shall include the following terms:
(a) The name, business address, and the telephone number of the
equity purchaser.
(b) The address of the residence in foreclosure.
(c) The total consideration to be given by the equity purchaser in
connection with or incident to the sale.
(d) A complete description of the terms of payment or other
consideration including, but not limited to, any services of any
nature which the equity purchaser represents he will perform for
the equity seller before or after the sale.
(e) The time at which possession is to be transferred to the equity
purchaser.
(f) The terms of any rental agreement.
(g) A notice of cancellation as provided in subdivision (b) of Section
1695.5.
(h) The following notice in at least 14-point boldface type, if the
contract is printed or in capital letters if the contract is typed, and
completed with the name of the equity purchaser, immediately
above the statement required by Section 1695.5(a):
“NOTICE REQUIRED BY CALIFORNIA LAW
Until your right to cancel this contract has ended,
_______________________________________
(Name)
or anyone working for ____________________
(Name)
CANNOT ask you to sign or have you sign any deed or any other
document.”
The contract required by this section shall survive delivery of any
instrument of conveyance of the residence in foreclosure, and
shall have no effect on persons other than the parties to the
contract.
Right of Cancellation – Time and Manner
1695.4. (a) In addition to any other right of rescission, the equity
seller has the right to cancel any contract with an equity purchaser
until midnight of the fifth business day following the day on which
the equity seller signs a contract that complies with this chapter or
until 8 a.m. on the day scheduled for the sale of the property
pursuant to a power of sale conferred in a deed of trust, whichever
occurs first.
(b) Cancellation occurs when the equity seller personally delivers
written notice of cancellation to the address specified in the
contract or sends a telegram indicating cancellation to that address.
(c) A notice of cancellation given by the equity seller need not take
the particular form as provided with the contract and, however
expressed, is effective if it indicates the intention of the equity
seller not to be bound by the contract.
Cancellation Right – Time and Notice
1695.5. (a) The contract shall contain in immediate proximity to the
space reserved for the equity seller’s signature a conspicuous
statement in a size equal to at least 12-point bold type, if the
contract is printed or in capital letters if the contract is typed, as
follows:
“You may cancel this contract for the sale of your house without
any penalty or obligation at any time before
_________________________.
(Date and time of day)
See the attached notice of cancellation form for an explanation of
this right.” The equity purchaser shall accurately enter the date and
time of day on which the rescission right ends.
(b) The contract shall be accompanied by a completed form in
duplicate, captioned “notice of cancellation” in a size equal to 12-
point bold type, if the contract is printed or in capital letters if the
contract is typed, followed by a space in which the equity purchaser
shall enter the date on which the equity seller executes any
contract. This form shall be attached to the contract, shall be easily
detachable, and shall contain in type of at least 10-point, if the
contract is printed or in capital letters if the contract is typed, the
following statement written in the same language as used in the
contract:
“NOTICE OF CANCELLATION
_______________________________________
(Enter date contract signed)
You may cancel this contract for the sale of your house, without any
penalty or obligation, at any time before
_____________________________.
(Enter date and time of day)
To cancel this transaction, personally deliver a signed and dated
copy of this cancellation notice, or send a telegram to
_______________,
(Name of purchaser)
at _____________________________________
(Street address of purchaser’s place of business)
NOT LATER THAN _____________________.
(Enter date and time of day)
I hereby cancel this transaction_____________. (Date)
_____________________________________”
(Seller’s signature)
(c) The equity purchaser shall provide the equity seller with a copy
of the contract and the attached notice of cancellation.
(d) Until the equity purchaser has complied with this section, the
equity seller may cancel the contract.
Responsibility of Equity Purchaser – Prohibitions
1695.6. (a) The contract as required by Sections 1695.2, 1695.3, and
1695.5, shall be provided and completed in conformity with those
sections by the equity purchaser.
(b) Until the time within which the equity seller may cancel the
transaction has fully elapsed, the equity purchaser shall not do any
of the following:
(1) Accept from any equity seller an execution of, or induce any
equity seller to execute, any instrument of conveyance of any
interest in the residence in foreclosure.
(2) Record with the county recorder any document, including, but
not limited to, any instrument of conveyance, signed by the equity
seller.
(3) Transfer or encumber or purport to transfer or encumber any
interest in the residence in foreclosure to any third party, provided
no grant of any interest or encumbrance shall be defeated or
affected as against a bona fide purchaser or encumbrancer for
value and without notice of a violation of this chapter, and
knowledge on the part of any such person or entity that the
property was “residential real property in foreclosure” shall not
constitute notice of a violation of this chapter. This section shall
not be deemed to abrogate any duty of inquiry which exists as to
rights or interests of persons in possession of the residential real
property in foreclosure.
(4) Pay the equity seller any consideration.
(c) Within 10 days following receipt of a notice of cancellation given
in accordance with Sections 1695.4 and 1695.5, the equity
purchaser shall return without condition any original contract and
any other documents signed by the equity seller.
(d) An equity purchaser shall make no untrue or misleading
statements regarding the value of the residence in foreclosure, the
amount of proceeds the equity seller will receive after a
foreclosure sale, any contract term, the equity seller’s rights or
obligations incident to or arising out of the sale transaction, the
nature of any document which the equity purchaser induces the
equity seller to sign, or any other untrue or misleading statement
concerning the sale of the residence in foreclosure to the equity
purchaser.
(e) Whenever any equity purchaser purports to hold title as a result
of any transaction in which the equity seller grants the residence in
foreclosure by any instrument which purports to be an absolute
conveyance and reserves or is given by the equity purchaser an
option to repurchase such residence, the equity purchaser shall
not cause any encumbrance or encumbrances to be placed on such
property or grant any interest in such property to any other person
without the written consent of the equity seller. Nothing in this
subdivision shall preclude the application of paragraph (3) of
subdivision (b).
Violations by Equity Purchaser – Damages
1695.7. An equity seller may bring an action for the recovery of
damages or other equitable relief against an equity purchaser for a
violation of any subdivision of Section 1695.6 or Section 1695.13.
The equity seller shall recover actual damages plus reasonable
attorneys’ fees and costs. In addition, the court shall award
exemplary damages or equitable relief, or both, if the court deems
such award proper, but in any event shall award exemplary
damages in an amount not less than three times the equity seller’s
actual damages for any violation of paragraph (3) of subdivision (b)
of Section 1695.6 or Section 1695.13. Any action brought pursuant to
this section shall be commenced within four years after the date of
the alleged violation.
Violation – Criminal Penalties
1695.8. Any equity purchaser who violates any subdivision of
Section 1695.6 or who engages in any practice which would operate
as a fraud or deceit upon an equity seller shall, upon conviction, be
punished by a fine of not more than ten thousand dollars ($10,000),
by imprisonment in the county jail for not more than one year, or in
the state prison, or by both that fine and imprisonment for each
violation.
Provisions of This Chapter Not Exclusive
1695.9. The provisions of this chapter are not exclusive and are in
addition to any other requirements, rights, remedies, and penalties
provided by law.
Waiver Void and Unenforceable
1695.10. Any waiver of the provisions of this chapter shall be void
and unenforceable as contrary to the public policy.
Severability
1695.11. If any provision of this chapter, or if any application thereof
to any person or circumstance is held unconstitutional, the
remainder of this chapter and the application of its provisions to
other persons and circumstances shall not be affected thereby.
Repurchase Option – Loan Transaction
1695.12. In any transaction in which an equity seller purports to
grant a residence in foreclosure to an equity purchaser by any
instrument which appears to be an absolute conveyance and
reserves to himself or herself or is given by the equity purchaser
an option to repurchase, such transaction shall create a
presumption affecting the burden of proof, which may be overcome
by clear and convincing evidence to the contrary that the
transaction is a loan transaction, and the purported absolute
conveyance is a mortgage; however, such presumption shall not
apply to a bona fide purchaser or encumbrancer for value without
notice of a violation of this chapter, and knowledge on the part of
any such person or entity that the property was “residential real
property in foreclosure” shall not constitute notice of a violation of
this chapter. This section shall not be deemed to abrogate any duty
of inquiry which exists as to rights or interests of persons in
possession of the residential real property in foreclosure.
Prohibited Acts
1695.13. It is unlawful for any person to initiate, enter into,
negotiate, or consummate any transaction involving residential real
property in foreclosure, as defined in Section 1695.1, if such
person, by the terms of such transaction, takes unconscionable
advantage of the property owner in foreclosure.
Rescission
1695.14. (a) In any transaction involving residential real property in
foreclosure, as defined in Section 1695.1, which is in violation of
Section 1695.13 is voidable and the transaction may be rescinded
by the property owner within two years of the date of the
recordation of the conveyance of the residential real property in
foreclosure.
(b) Such rescission shall be effected by giving written notice as
provided in Section 1691 to the equity purchaser and his successor
in interest, if the successor is not a bona fide purchaser or
encumbrancer for value as set forth in subdivision (c), and by
recording such notice with the county recorder of the county in
which the property is located, within two years of the date of the
recordation of the conveyance to the equity purchaser. The notice
of rescission shall contain the names of the property owner and the
name of the equity purchaser in addition to any successor in
interest holding record title to the real property and shall
particularly describe such real property. The equity purchaser and
his successor in interest if the successor is not a bona fide
purchaser or encumbrancer for value as set forth in subdivision
(c), shall have 20 days after the delivery of the notice in which to
reconvey title to the property free and clear of encumbrances
created subsequent to the rescinded transaction. Upon failure to
reconvey title within such time, the rescinding party may bring an
action to enforce the rescission and for cancellation of the deed.
(c) The provisions of this section shall not affect the interest of a
bona fide purchaser or encumbrancer for value if such purchase or
encumbrance occurred prior to the recordation of the notice of
rescission pursuant to subdivision (b). Knowledge that the property
was residential real property in foreclosure shall not impair the
status of such persons or entities as bona fide purchasers or
encumbrancers for value. This subdivision shall not be deemed to
abrogate any duty of inquiry which exists as to rights or interests of
persons in possession of the residential real property in
foreclosure.
(d) In any action brought to enforce a rescission pursuant to this
section, the prevailing party shall be entitled to costs and
reasonable attorneys fees.
(e) The remedies provided by this section shall be in addition to any
other remedies provided by law.
Liability for Acts of Representative
1695.15. (a) An equity purchaser is liable for all damages resulting
from any statement made or act committed by the equity purchaser’
s representative in any manner connected with the equity
purchaser’s acquisition of a residence in foreclosure, receipt of
any consideration or property from or on behalf of the equity seller,
or the performance of any act prohibited by this chapter.
(b) “Representative” for the purposes of this section means a
person who in any manner solicits, induces, or causes any property
owner to transfer title or solicits any member of the property owner’
s family or household to induce or cause any property owner to
transfer title to the residence in foreclosure to the equity
purchaser.
Contract Cannot Limit Liability
1695.16. (a) Any provision of a contract which attempts or purports
to limit the liability of the equity purchaser under Section 1695.15
shall be void and shall at the option of the equity seller render the
equity purchase contract void. The equity purchaser shall be liable
to the equity seller for all damages proximately caused by that
provision. Any provision in a contract which attempts or purports to
require arbitration of any dispute arising under this chapter shall
be void at the option of the equity seller only upon grounds as exist
for the revocation of any contract.
(b) This section shall apply to any contract entered into on or after
January 1, 1991.
Representative Must Be Licensed and Bonded
1695.17. (a) Any representative, as defined in subdivision (b) of
Section 1695.15, deemed to be the agent or employee, or both the
agent and the employee of the equity purchaser shall be required
to provide both of the following:
(1) Written proof to the equity seller that the representative has a
valid current California Real Estate Sales License and that the
representative is bonded by an admitted surety insurer in an
amount equal to twice the fair market value of the real property
which is the subject of the contract.
(2) A statement in writing, under penalty of perjury, that the
representative has a valid current California Real Estate Sales
License, is bonded by an admitted surety insurer in an amount
equal to at least twice the value of the real property which is the
subject of the contract and has complied with paragraph (1). The
written statement required by this paragraph shall be provided to
all parties to the contract prior to the transfer of any interest in the
real property which is the subject of the contract.
(b) The failure to comply with subdivision (a) shall at the option of
the equity seller render the equity purchase contract void and the
equity purchaser shall be liable to the equity seller for all damages
proximately caused by the failure to comply.
Investors must carefully follow the law when purchasing a
home of a troubled borrower in foreclosure.
Purpose
1695. (a) The Legislature finds and declares that homeowners
whose residences are in foreclosure have been subjected to fraud,
deception, and unfair dealing by home equity purchasers. The
recent rapid escalation of home values, particularly in the urban
areas, has resulted in a significant increase in home equities which
are usually the greatest financial asset held by the homeowners of
this state. During the time period between the commencement of
foreclosure proceedings and the scheduled foreclosure sale date,
homeowners in financial distress, especially the poor, elderly, and
financially unsophisticated, are vulnerable to the importunities of
equity purchasers who induce homeowners to sell their homes for
a small fraction of their fair market values through the use of
schemes which often involve oral and written misrepresentations,
deceit, intimidation, and other unreasonable commercial practices.
(b) The Legislature declares that it is the express policy of the state
to preserve and guard the precious asset of home equity, and the
social as well as the economic value of homeownership.
(c) The Legislature further finds that equity purchasers have a
significant impact upon the economy and well-being of this state
and its local communities, and therefore the provisions of this
chapter are necessary to promote the public welfare.
(d) The intent and purposes of this chapter are the following:
(1) To provide each homeowner with information necessary to make
an informed and intelligent decision regarding the sale of his or her
home to an equity purchaser; to require that the sales agreement
be expressed in writing; to safeguard the public against deceit and
financial hardship; to insure, foster, and encourage fair dealing in
the sale and purchase of homes in foreclosure; to prohibit
representations that tend to mislead; to prohibit or restrict unfair
contract terms; to afford homeowners a reasonable and meaningful
opportunity to rescind sales to equity purchasers; and to preserve
and protect home equities for the homeowners of this state.
(2) This chapter shall be liberally construed to effectuate this intent
and to achieve these purposes.
Definitions
1695.1. The following definitions apply to this chapter:
(a) “Equity purchaser” means any person who acquires title to any
residence in foreclosure, except a person who acquires such title
as follows:
(1) For the purpose of using such property as a personal residence.
(2) By a deed in lieu of foreclosure of any voluntary lien or
encumbrance of record.
(3) By a deed from a trustee acting under the power of sale
contained in a deed of trust or mortgage at a foreclosure sale
conducted pursuant to Article 1 (commencing with Section 2920) of
Chapter 2 of Title 14 of Part 4 of Division 3.
(4) At any sale of property authorized by statute.
(5) By order or judgment of any court.
(6) From a spouse, blood relative, or blood relative of a spouse.
(b) “Residence in foreclosure” and “residential real property in
foreclosure” means residential real property consisting of one- to
four-family dwelling units, one of which the owner occupies as his
or her principal place of residence, and against which there is an
outstanding notice of default, recorded pursuant to Article 1
(c) “Equity seller” means any seller of a residence in foreclosure.
(d) “Business day” means any calendar day except Sunday, or the
following business holidays: New Year’s Day, Washington’s
Birthday, Memorial Day, Independence Day, Labor Day, Columbus
Day, Veterans’ Day, Thanksgiving Day, and Christmas Day.
(e) “Contract” means any offer or any contract, agreement, or
arrangement, or any term thereof, between an equity purchaser and
equity seller incident to the sale of a residence in foreclosure.
(f) “Property owner” means the record title owner of the residential
real property in foreclosure at the time the notice of default was
recorded.
Contract – Type Size – Language – Execution
1695.2. Every contract shall be written in letters of a size equal to
10-point bold type, in the same language principally used by the
equity purchaser and equity seller to negotiate the sale of the
residence in foreclosure and shall be fully completed and signed
and dated by the equity seller and equity purchaser prior to the
execution of any instrument of conveyance of the residence in
foreclosure.
Terms of Contract
1695.3. Every contract shall contain the entire agreement of the
parties and shall include the following terms:
(a) The name, business address, and the telephone number of the
equity purchaser.
(b) The address of the residence in foreclosure.
(c) The total consideration to be given by the equity purchaser in
connection with or incident to the sale.
(d) A complete description of the terms of payment or other
consideration including, but not limited to, any services of any
nature which the equity purchaser represents he will perform for
the equity seller before or after the sale.
(e) The time at which possession is to be transferred to the equity
purchaser.
(f) The terms of any rental agreement.
(g) A notice of cancellation as provided in subdivision (b) of Section
1695.5.
(h) The following notice in at least 14-point boldface type, if the
contract is printed or in capital letters if the contract is typed, and
completed with the name of the equity purchaser, immediately
above the statement required by Section 1695.5(a):
“NOTICE REQUIRED BY CALIFORNIA LAW
Until your right to cancel this contract has ended,
_______________________________________
(Name)
or anyone working for ____________________
(Name)
CANNOT ask you to sign or have you sign any deed or any other
document.”
The contract required by this section shall survive delivery of any
instrument of conveyance of the residence in foreclosure, and
shall have no effect on persons other than the parties to the
contract.
Right of Cancellation – Time and Manner
1695.4. (a) In addition to any other right of rescission, the equity
seller has the right to cancel any contract with an equity purchaser
until midnight of the fifth business day following the day on which
the equity seller signs a contract that complies with this chapter or
until 8 a.m. on the day scheduled for the sale of the property
pursuant to a power of sale conferred in a deed of trust, whichever
occurs first.
(b) Cancellation occurs when the equity seller personally delivers
written notice of cancellation to the address specified in the
contract or sends a telegram indicating cancellation to that address.
(c) A notice of cancellation given by the equity seller need not take
the particular form as provided with the contract and, however
expressed, is effective if it indicates the intention of the equity
seller not to be bound by the contract.
Cancellation Right – Time and Notice
1695.5. (a) The contract shall contain in immediate proximity to the
space reserved for the equity seller’s signature a conspicuous
statement in a size equal to at least 12-point bold type, if the
contract is printed or in capital letters if the contract is typed, as
follows:
“You may cancel this contract for the sale of your house without
any penalty or obligation at any time before
_________________________.
(Date and time of day)
See the attached notice of cancellation form for an explanation of
this right.” The equity purchaser shall accurately enter the date and
time of day on which the rescission right ends.
(b) The contract shall be accompanied by a completed form in
duplicate, captioned “notice of cancellation” in a size equal to 12-
point bold type, if the contract is printed or in capital letters if the
contract is typed, followed by a space in which the equity purchaser
shall enter the date on which the equity seller executes any
contract. This form shall be attached to the contract, shall be easily
detachable, and shall contain in type of at least 10-point, if the
contract is printed or in capital letters if the contract is typed, the
following statement written in the same language as used in the
contract:
“NOTICE OF CANCELLATION
_______________________________________
(Enter date contract signed)
You may cancel this contract for the sale of your house, without any
penalty or obligation, at any time before
_____________________________.
(Enter date and time of day)
To cancel this transaction, personally deliver a signed and dated
copy of this cancellation notice, or send a telegram to
_______________,
(Name of purchaser)
at _____________________________________
(Street address of purchaser’s place of business)
NOT LATER THAN _____________________.
(Enter date and time of day)
I hereby cancel this transaction_____________. (Date)
_____________________________________”
(Seller’s signature)
(c) The equity purchaser shall provide the equity seller with a copy
of the contract and the attached notice of cancellation.
(d) Until the equity purchaser has complied with this section, the
equity seller may cancel the contract.
Responsibility of Equity Purchaser – Prohibitions
1695.6. (a) The contract as required by Sections 1695.2, 1695.3, and
1695.5, shall be provided and completed in conformity with those
sections by the equity purchaser.
(b) Until the time within which the equity seller may cancel the
transaction has fully elapsed, the equity purchaser shall not do any
of the following:
(1) Accept from any equity seller an execution of, or induce any
equity seller to execute, any instrument of conveyance of any
interest in the residence in foreclosure.
(2) Record with the county recorder any document, including, but
not limited to, any instrument of conveyance, signed by the equity
seller.
(3) Transfer or encumber or purport to transfer or encumber any
interest in the residence in foreclosure to any third party, provided
no grant of any interest or encumbrance shall be defeated or
affected as against a bona fide purchaser or encumbrancer for
value and without notice of a violation of this chapter, and
knowledge on the part of any such person or entity that the
property was “residential real property in foreclosure” shall not
constitute notice of a violation of this chapter. This section shall
not be deemed to abrogate any duty of inquiry which exists as to
rights or interests of persons in possession of the residential real
property in foreclosure.
(4) Pay the equity seller any consideration.
(c) Within 10 days following receipt of a notice of cancellation given
in accordance with Sections 1695.4 and 1695.5, the equity
purchaser shall return without condition any original contract and
any other documents signed by the equity seller.
(d) An equity purchaser shall make no untrue or misleading
statements regarding the value of the residence in foreclosure, the
amount of proceeds the equity seller will receive after a
foreclosure sale, any contract term, the equity seller’s rights or
obligations incident to or arising out of the sale transaction, the
nature of any document which the equity purchaser induces the
equity seller to sign, or any other untrue or misleading statement
concerning the sale of the residence in foreclosure to the equity
purchaser.
(e) Whenever any equity purchaser purports to hold title as a result
of any transaction in which the equity seller grants the residence in
foreclosure by any instrument which purports to be an absolute
conveyance and reserves or is given by the equity purchaser an
option to repurchase such residence, the equity purchaser shall
not cause any encumbrance or encumbrances to be placed on such
property or grant any interest in such property to any other person
without the written consent of the equity seller. Nothing in this
subdivision shall preclude the application of paragraph (3) of
subdivision (b).
Violations by Equity Purchaser – Damages
1695.7. An equity seller may bring an action for the recovery of
damages or other equitable relief against an equity purchaser for a
violation of any subdivision of Section 1695.6 or Section 1695.13.
The equity seller shall recover actual damages plus reasonable
attorneys’ fees and costs. In addition, the court shall award
exemplary damages or equitable relief, or both, if the court deems
such award proper, but in any event shall award exemplary
damages in an amount not less than three times the equity seller’s
actual damages for any violation of paragraph (3) of subdivision (b)
of Section 1695.6 or Section 1695.13. Any action brought pursuant to
this section shall be commenced within four years after the date of
the alleged violation.
Violation – Criminal Penalties
1695.8. Any equity purchaser who violates any subdivision of
Section 1695.6 or who engages in any practice which would operate
as a fraud or deceit upon an equity seller shall, upon conviction, be
punished by a fine of not more than ten thousand dollars ($10,000),
by imprisonment in the county jail for not more than one year, or in
the state prison, or by both that fine and imprisonment for each
violation.
Provisions of This Chapter Not Exclusive
1695.9. The provisions of this chapter are not exclusive and are in
addition to any other requirements, rights, remedies, and penalties
provided by law.
Waiver Void and Unenforceable
1695.10. Any waiver of the provisions of this chapter shall be void
and unenforceable as contrary to the public policy.
Severability
1695.11. If any provision of this chapter, or if any application thereof
to any person or circumstance is held unconstitutional, the
remainder of this chapter and the application of its provisions to
other persons and circumstances shall not be affected thereby.
Repurchase Option – Loan Transaction
1695.12. In any transaction in which an equity seller purports to
grant a residence in foreclosure to an equity purchaser by any
instrument which appears to be an absolute conveyance and
reserves to himself or herself or is given by the equity purchaser
an option to repurchase, such transaction shall create a
presumption affecting the burden of proof, which may be overcome
by clear and convincing evidence to the contrary that the
transaction is a loan transaction, and the purported absolute
conveyance is a mortgage; however, such presumption shall not
apply to a bona fide purchaser or encumbrancer for value without
notice of a violation of this chapter, and knowledge on the part of
any such person or entity that the property was “residential real
property in foreclosure” shall not constitute notice of a violation of
this chapter. This section shall not be deemed to abrogate any duty
of inquiry which exists as to rights or interests of persons in
possession of the residential real property in foreclosure.
Prohibited Acts
1695.13. It is unlawful for any person to initiate, enter into,
negotiate, or consummate any transaction involving residential real
property in foreclosure, as defined in Section 1695.1, if such
person, by the terms of such transaction, takes unconscionable
advantage of the property owner in foreclosure.
Rescission
1695.14. (a) In any transaction involving residential real property in
foreclosure, as defined in Section 1695.1, which is in violation of
Section 1695.13 is voidable and the transaction may be rescinded
by the property owner within two years of the date of the
recordation of the conveyance of the residential real property in
foreclosure.
(b) Such rescission shall be effected by giving written notice as
provided in Section 1691 to the equity purchaser and his successor
in interest, if the successor is not a bona fide purchaser or
encumbrancer for value as set forth in subdivision (c), and by
recording such notice with the county recorder of the county in
which the property is located, within two years of the date of the
recordation of the conveyance to the equity purchaser. The notice
of rescission shall contain the names of the property owner and the
name of the equity purchaser in addition to any successor in
interest holding record title to the real property and shall
particularly describe such real property. The equity purchaser and
his successor in interest if the successor is not a bona fide
purchaser or encumbrancer for value as set forth in subdivision
(c), shall have 20 days after the delivery of the notice in which to
reconvey title to the property free and clear of encumbrances
created subsequent to the rescinded transaction. Upon failure to
reconvey title within such time, the rescinding party may bring an
action to enforce the rescission and for cancellation of the deed.
(c) The provisions of this section shall not affect the interest of a
bona fide purchaser or encumbrancer for value if such purchase or
encumbrance occurred prior to the recordation of the notice of
rescission pursuant to subdivision (b). Knowledge that the property
was residential real property in foreclosure shall not impair the
status of such persons or entities as bona fide purchasers or
encumbrancers for value. This subdivision shall not be deemed to
abrogate any duty of inquiry which exists as to rights or interests of
persons in possession of the residential real property in
foreclosure.
(d) In any action brought to enforce a rescission pursuant to this
section, the prevailing party shall be entitled to costs and
reasonable attorneys fees.
(e) The remedies provided by this section shall be in addition to any
other remedies provided by law.
Liability for Acts of Representative
1695.15. (a) An equity purchaser is liable for all damages resulting
from any statement made or act committed by the equity purchaser’
s representative in any manner connected with the equity
purchaser’s acquisition of a residence in foreclosure, receipt of
any consideration or property from or on behalf of the equity seller,
or the performance of any act prohibited by this chapter.
(b) “Representative” for the purposes of this section means a
person who in any manner solicits, induces, or causes any property
owner to transfer title or solicits any member of the property owner’
s family or household to induce or cause any property owner to
transfer title to the residence in foreclosure to the equity
purchaser.
Contract Cannot Limit Liability
1695.16. (a) Any provision of a contract which attempts or purports
to limit the liability of the equity purchaser under Section 1695.15
shall be void and shall at the option of the equity seller render the
equity purchase contract void. The equity purchaser shall be liable
to the equity seller for all damages proximately caused by that
provision. Any provision in a contract which attempts or purports to
require arbitration of any dispute arising under this chapter shall
be void at the option of the equity seller only upon grounds as exist
for the revocation of any contract.
(b) This section shall apply to any contract entered into on or after
January 1, 1991.
Representative Must Be Licensed and Bonded
1695.17. (a) Any representative, as defined in subdivision (b) of
Section 1695.15, deemed to be the agent or employee, or both the
agent and the employee of the equity purchaser shall be required
to provide both of the following:
(1) Written proof to the equity seller that the representative has a
valid current California Real Estate Sales License and that the
representative is bonded by an admitted surety insurer in an
amount equal to twice the fair market value of the real property
which is the subject of the contract.
(2) A statement in writing, under penalty of perjury, that the
representative has a valid current California Real Estate Sales
License, is bonded by an admitted surety insurer in an amount
equal to at least twice the value of the real property which is the
subject of the contract and has complied with paragraph (1). The
written statement required by this paragraph shall be provided to
all parties to the contract prior to the transfer of any interest in the
real property which is the subject of the contract.
(b) The failure to comply with subdivision (a) shall at the option of
the equity seller render the equity purchase contract void and the
equity purchaser shall be liable to the equity seller for all damages
proximately caused by the failure to comply.
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Recommended
Reading:
Reading:
NEW LAW FOR LOAN
MODIFICATIONS
A MUST READ FOR
THOSE FACING
FORECLOSURE
MODIFICATIONS
A MUST READ FOR
THOSE FACING
FORECLOSURE