The coronavirus pandemic has shuttered municipal buildings across the Bay Area. Courthouses are mostly shut down, with jury trials on pause. Evictions and foreclosures are banned until at least 90 days after the lockdown is lifted.
Yet outside of courthouses and city halls across the Bay Area, one obscure legal proceeding continues to unfold: the auctioning off of foreclosed properties. Every week more than a dozen such auctions are taking place from San Francisco to Redwood City to Oakland, as auctioneers holding iPads rattle off addresses and prices, and would-be investors gather around and bid for a chance to take ownership of a home where the previous owner has fallen behind on loan payments.
The persistence of these privately run, extrajudicial auctions — San Francisco has two a week, Alameda County has five, and San Mateo County three — has prompted criticism from elected officials who argue that selling foreclosed homes is not an essential service.
And some who are defaulted on their loans and face losing their property argue that the auctions should be put off because legal avenues typically available to delay such sales — court-ordered enjoinments — are not available because of the health orders.
“I think it is totally inappropriate to be having auctions of foreclosed properties in the middle of this crisis,” said San Mateo County Supervisor David Canepa. “The timing couldn’t be worse.”
Over the past week in San Francisco, auctioneers twice clashed with sheriff’s deputies. On Tuesday, an auctioneer and about a half-dozen bidders were kicked off the steps of City Hall along Van Ness Avenue. They eventually decamped to the corner of Van Ness and Grove, where the auction continued. On Thursday, deputies shut down the auction altogether, saying that the auctioneers working for Superior Default Services would need to establish and post social distancing rules to continue.
Nonjudicial foreclosure is the most common type of foreclosure in California. The process starts with the lender giving the borrower 90 days to pay what is owed. If the borrower doesn’t come up with the money, the lender files a 21-day notice of trustee’s sale, and the borrower has another five days to pay up. After the 21 days, the house is sold at auction.
John Coté, spokesman for San Francisco City Attorney Dennis Herrera, said that while evictions are prohibited during the pandemic, the stay-at-home order allows for services “that enable residential real estate transactions.” Those deals should be conducted “remotely, if possible.” If they do have to happen in person, the auctioneer must have a “completed social distancing protocol” with signs enforcing 6-foot physical separation between participants, who must all wear masks.
On Thursday, attorney Tom LaLanne showed up to City Hall on behalf of a client who had been in negotiation with the lender on a forbearance agreement. He had planned to ask the court to temporarily enjoin the sale to allow more time to work out a deal, refinance the debt or sell. “Superior Court is so bogged down we couldn’t get a hearing,” he said.
LaLanne said that foreclosures of this kind often result in evictions — either of the previous owner or a tenant — which is not what the Bay Area needs during the shelter-in-place mandate.
“There is a dispute between him and the lenders about whether the loan should be due. The lender has been playing hardball with my guy. They seem to have all the cards,” he said. “This is not an essential service. It needs to be stopped.”
Superior Default Services did not return a phone call or email seeking comment.
Supervisor Matt Haney, who represents the Civic Center neighborhood, said such auctions should be put on hold.
“Something like that has a permanent impact on somebody’s life and their ability to navigate the legal process and get protection is going to be much more limited,” he said. “We should be putting these things on hold.”
While it’s legal to sell off a foreclosed property during the health crisis, the buyer will have a much harder time getting the current residents out, according to real estate attorney Daniel Bornstein.
“If the owner is in occupancy, there is not a way to remove them through the court system,” Bornstein said. “It’s one thing to lose ownership of your home. It’s another thing to lose occupancy. Once you have ownership, the question becomes, ‘What are you going to do next?’ The investor is going to have to be very, very patient.”
J.K. Dineen is a San Francisco Chronicle staff writer. Email: firstname.lastname@example.org Twitter: @sfjkdineen