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2004 SESSION

041764296
HOUSE BILL NO. 1367
Offered January 22, 2004
A BILL to amend the Code of Virginia by adding a section numbered 55-59.5, relating to foreclosures generally; removal of occupants.
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Patron-- Drake
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Referred to Committee for Courts of Justice
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Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia is amended by adding a section numbered 55-59.5 as follows:

§ 55-59.5. Removal of occupants after foreclosure.

A. The successful bidder at a foreclosure sale may and a bidder who has closed (hereinafter referred to as "the purchaser") shall provide a five-day notice to any occupant remaining in the property as provided in this section. The five-day notice shall include (i) a statement as to whether the purchaser has closed or is waiting to close on the property, (ii) the name of the trustee and his telephone number to allow the occupant to discuss the status of the property, and (iii) a statement that the right to evict the occupant by the purchaser shall not occur until the closing is completed.

Usage value shall accrue from the date of the foreclosure sale. Any money paid by an occupant to a purchaser shall not be considered rent. However, no money shall be collected by the purchaser prior to closing unless the money is treated as prepaid rent. A landlord and tenant relationship shall only be created if the purchaser and occupant enter into a new rental agreement.

Failure to close by the successful bidder or his assignee creates no liability on the secured party, the trustee, the successful bidder, or any assignee.

B. A deed of foreclosure executed by the trustee or a copy of such deed at the court date shall be sufficient evidence of ownership for the purchaser to obtain possession. The purchaser shall also provide a copy of the notice required by subsection A and proof that such notice was sent to the occupant, which proof shall include the requirements of subdivisions B 2 and 3 of § 55-248.6.

The purchaser may request immediate possession of the premises in default cases by appearance where there is a failure to vacate following appropriate written notice of the foreclosure sale.

C. In the event that the former owner contests the foreclosure action, the case shall be continued for no more than 30 days to allow the defendant to file a motion in circuit court to set aside the foreclosure. If a motion to set aside the foreclosure is not filed, the general district court shall order possession. If a motion to set aside the foreclosure is filed, the bond as provided in subsection D shall be required to be paid to the circuit court, and the general district court shall dismiss the unlawful detainer.

In the event that the occupant, other than the former owner, contests possession, an expedited hearing shall be held within 15 days of the original return date unless the parties mutually agree to another date.

D. In the event that an appeal to circuit court is filed either by a former owner or occupant after an order of possession has been awarded to the purchaser, a bond shall be required. The occupant or purchaser or his duly authorized agent shall provide an affidavit as to the assessed value of the property, the former monthly mortgage payment, the former rent amount, or a statement as to the fair monthly rental value to help the court determine the value of the bond. Such bond shall include at least two months' usage value to be treated as security against damages or waste to the property, and may include up to six months' usage value to allow for adequate time for the appeal to be heard. The appeal bond shall be posted within ten calendar days of filing of the appeal. If the occupant fails to post the bond, possession shall be granted to the purchaser.

E. When a motion to set aside the foreclosure is filed or an unlawful detainer was dismissed or appealed by the occupant pursuant to this section, a purchaser may request, by motion to the circuit court, that possession shall be awarded primarily based upon a completed foreclosure sale. The court shall presume that the purchaser is the proper possessor of the property absent compelling evidence by the former owner that the foreclosure was improperly conducted. In the event the court awards possession to the purchaser, the court shall enter an order of possession as provided in § 8.01-127.1. In the event that the former owner does not file a motion to set aside the pending foreclosure, the court may determine the distribution of the appeal bond.

F. In the event that an appeal or a motion to set aside the foreclosure is filed, the purchaser shall have the right to inspect the property and take pictures to verify the condition of the property. The occupant shall not commit waste to the property. In the event an appeal is filed, an expedited hearing shall take place within 90 days. If the purchaser prevails, he shall be entitled to the usage value of the property from the date of the foreclosure sale. Attorneys' fees shall be awarded to the prevailing party.

G. Except as provided in subsection A, no landlord tenant obligation shall be created unless the purchaser enters into such an agreement with the occupant.

H. The trustee may provide a notice to any occupants in the property as to the day and time of the foreclosure sale. The notice, if given, shall also include the notice that the former owner may redeem the property up to the time of sale.

I. Any lease created before the foreclosed deed of trust note is executed shall be deemed subordinate to the deed of trust note unless it has been recorded in accordance with law prior to the recordation of the foreclosed deed of trust note.

J. For the purposes of this section:

"Former owner" means the owner of the property before a foreclosure sale.

"Former tenant" means a tenant of the former owner whose right to the property was extinguished by the foreclosure sale.

"Occupant" means anyone who possesses the property after a foreclosure sale, including the former owner or former tenant.

"Usage value" means the value an occupant owes to a purchaser for possessing the property, which amount may be the rental value, mortgage payment, or in the absence of any such evidence, the monthly amount of one percent of the property value assessed by the locality in which the property is located.