Legislative Changes Affecting Utah Foreclosure and Eviction Laws

The Utah legislature enacted two bills in its recent legislative session which have a significant effect upon Utah foreclosure and eviction laws. Each bill became effective on May 10, 2016. The following is a summary of the most significant changes:

Senate Bill 220 provides that:

a. A party in a legal action involving a deed of trust is not required to join the trustee as a party to the lawsuit unless the legal action pertains to an alleged breach of the trustee’s obligations. (Utah Code Annotated, Section 57-1-22.2 (1))

b. A trustee is required to act in accordance with a court order against the beneficiary of the deed of trust to the extent that the order requires an action that the trustee is authorized to take. (Utah Code Annotated, Section 57-1-22.2(2))

c. If a trustee is sued when there is no alleged breach of the trustee’s obligations, the court shall dismiss the lawsuit against the trustee and award the trustee reasonable attorney fees arising from being sued. (Utah Code Annotated, Section 57-1-22.2(3))

d. The trustee may, in the trustee’s discretion, require a successful bidder at the sale to make a deposit in the amount the trustee has set forth in the Notice of Trustee’s Sale. (Utah Code Annotated, Section 57-1-27(1)(h))

e. If the successful bidder refuses to pay the bid price, the bidder forfeits the deposit, which is then treated as additional sale proceeds when the trustee either sells the property to the second-highest bidder or sells the property at a subsequently-scheduled foreclosure sale. (Utah Code Annotated, Section 57-1-27(1)(j)(iii) and (iv))

f. A trustee sale can be postponed only by public declaration given at the time and place last appointed for the sale. (Utah Code Annotated, Section 57-1-27(2)(b)).

g. No postponement of a foreclosure sale can exceed 45 days from the date designated in the original Notice of Trustee’s Sale. (Utah Code Annotated, Section 57-1-27(2)(c).

h. The six-year statute of limitations for the breach of a written instrument, which includes a promissory note secured by a deed of trust, is satisfied by either the filing of a lawsuit within six years of the breach, or by the recording of a Notice of Default within six years of the breach. The prior law provided only for the commencement of an “action” which was defined as the filing of a lawsuit. This was problematic in Utah because the vast majority of foreclosures are done non-judicially. There was a question under the law as to whether the statute of limitations was satisfied by the filing of a Notice of Default, or whether a lawsuit had to be filed even when a non-judicial foreclosure sale was ongoing. Now the recording of a Notice of Default within six years of the date of breach will clearly satisfy the statute of limitations.

i. Utah Code Annotated, Section 57-1-24.5, which allowed “dual-tracking” so long as certain notice was given to the borrower, was repealed. The repeal of this section of the Code brings Utah law into conformance with federal laws which prevent dual-tracking.

 Senate Bill 0022: The Utah legislature has enacted a “watered-down” version of the federal “Protecting Tenants In Foreclosure” law which terminated at the end of 2014. Under this newly-enacted law, a “bona fide” tenant (not the trustor, or the trustor’s spouse, children or parent) under a “bona-fide residential rental agreement” can continue to rent a residential property following the foreclosure sale of the property for the period of the rental agreement; however, the agreement: (1) must have been entered into before the Notice of Default was recorded; (2) must provide for the payment of a rent which is not substantially below a fair market amount; and (3) cannot be for a period of time exceeding 12 months.

If there is no bona fide residential rental agreement, then to terminate the tenancy, the tenant must be given a Notice to Quit for a period of time not less than 45 days.

When foreclosing a loan which was intended to finance residential rental property, the Notice of Trustee’s Sale must contain a specific “Notice to Tenants” which informs the tenant of his or her rights under the newly-enacted statute.

This new legislation is set forth in both a newly-enacted Section 57-1-25.5 (foreclosure code) and a newly enacted Section 78B-6-802.7 (eviction code).