Governor Newsom Approves SB 79: High-Density Transit-Oriented Housing Development Projects
On October 10, 2025, Governor Newsom signed SB 79 (Wiener) into law, which effectively eliminates single-family zoning districts within a half-mile of a qualifying transit-oriented development (TOD) stop by imposing state-mandated minimum density requirements. SB 79 imposes (i) on-site affordable housing requirements and (ii) labor standards on buildings over 85 feet in height, including prevailing wage and skilled and trained workforce requirements.
SB 79 will not be effective until July 1, 2026, unless a local agency proactively adopts an implementing ordinance or local TOD alternative plan that is approved by the California Department of Housing and Community Development (HCD) before that date. SB 79 will not apply within an unincorporated area of a county until the seventh regional housing needs allocation (RHNA) cycle.
The following summary applies to privately owned property. There are separate SB 79 provisions that apply to projects on land owned by a transit agency.
What qualifies as a TOD stop?
A TOD stop means a major transit stop (as defined in Public Resources Code § 21064.3) or a stop on a route designated as a preferred alternative (not defined) or in a regional transportation improvement plan that is served by heavy rail transit, very high frequency commuter rail, high frequency commuter rail, light rail transit, or bus service within an urban transit county meeting the standards of Public Resources Code § 20160.2(a)(1) (as each term is defined).
There are exceptions. The California High-Speed Rail and Amtrak Long Distance Service do not qualify. If the TOD stop is identified in the regional transportation improvement plan after January 1, 2026, it will not be eligible unless the stop otherwise qualifies as a Tier 1 TOD stop (defined below). If a county becomes an urban transit county after July 1, 2026, bus service in that county will not qualify as a TOD stop.
What are the threshold requirements?
The project must include at least five dwelling units and meet the greater of a minimum of at least 30 dwelling units per acre or the minimum density required under local zoning (if applicable).
The average total floor area for the dwelling units cannot exceed 1,750 net habitable square feet (defined to exclude garages, carports, parking spaces, cellars, half-stories, and unfinished attics and basements).
The project must qualify as a “housing development project,” meaning that the project must dedicate at least two-thirds of the square footage for residential use, unless the project proposes at least 500 net new residential units and qualifies for 50% residential pursuant to Gov. Code § 65589.5(h)(2). Projects with a hotel, motel, or other transient lodging use are generally excluded, as specified.
The project site must be “zoned for residential, mixed, or commercial development.” Although not specified in SB 79, the zoning applicable to the project site when an SB 330 preliminary application is filed for the project would be vested (locked in).
The project site must be within at least a half-mile of a qualifying Tier 1 or Tier 2 TOD stop. “Tier 1” is defined to mean a TOD stop within an urban transit county served by heavy rail transit or very high frequency commuter rail (e.g., BART). “Tier 2” is defined to mean a TOD stop (that is not a Tier 1 TOD stop) within an urban transit county served by light rail transit, high frequency commuter rail, or bus service meeting the requirements of Public Resources Code § 21060.2(a)(1) (e.g., SF Muni).
The project must comply with applicable airport land use plan and statewide fire safety standards, as specified.
What on-site affordability, anti-displacement, and labor requirements apply?
If the project includes more than 10 dwelling units, on-site affordable housing must be provided. The “base” project (prior to any density bonus under the State Density Bonus Law) must designate: (i) 7% of the total units as extremely low income; (ii) 10% of the total units as very low income; or (iii) 13% of the total units as lower income (as each is defined in the Health and Safety Code). Notwithstanding the foregoing, if a local inclusionary housing requirement mandates a higher percentage or a deeper level of affordability, the local requirement shall apply.
The project cannot require the demolition of rent-controlled or price-controlled housing if there are (or were) more than two units on the project site and the units (i) have been occupied within the past seven years or (ii) were demolished within seven years before a development application is submitted.
The project must comply with anti-displacement requirements under the Housing Crisis Act of 2019 (Gov. Code § 66300.6), any local implementation program, and any applicable local demolition and anti-displacement standards established through a local ordinance.
For any building over 85 feet in height, most (but not all) of the labor requirements under SB 35/SB 423 must be met, including prevailing wage and skilled and trained workforce requirements. (See Gov. Code § 65913.4(a)(8)(A), (B), (C), (D), (F) and (G).)
What development standards apply?
For projects within one-quarter mile of a Tier 1 TOD stop, the local agency cannot do any of the following: (i) impose a maximum building height of less than 75 feet; (ii) impose a maximum density of less than 120 dwelling units per acre; or (iii) enforce any other local development standard (or combination of standards) that would physically preclude a residential FAR of up to 3.5.
For projects within a half-mile of a Tier 1 TOD stop or one-quarter mile of a Tier 2 TOD stop – and within a city with a population of at least 35,000 – the local agency cannot do any of the following: (i) impose a maximum building height of less than 65 feet; (ii) impose a maximum density of less than 100 dwelling units per acre; or (iii) enforce any other local development standard (or combination of standards) that would physically preclude a residential FAR of up to 3.0.
For projects within a half-mile of a Tier 2 TOD stop – and within a city with a population of at least 35,000 – the local agency cannot do any of the following: (i) impose a maximum building height of less than 55 feet; (ii) impose a maximum density of less than 80 dwelling units per acre; or (iii) enforce any other local development standard (or combination of standards) that would physically preclude a residential FAR of up to 2.5.
Notwithstanding the foregoing, SB 79 provides for an “adjacency intensifier” for projects adjacent to a Tier 1 or Tier 2 TOD stop, in which case the height limit will be increased by an additional 20 feet, the maximum density will be increased by an additional 40 dwelling units per acre, and available residential FAR will be increased by an additional 1.0. The term “adjacent” is defined to mean within 200 feet of any pedestrian access point to a TOD stop.
The distance of a project from a TOD stop shall be measured in a straight line from the nearest edge of the parcel containing the proposed project to a pedestrian access point for the TOD stop.
Can the State Density Bonus Law also be utilized?
A qualifying SB 79 project will also be eligible for a density bonus incentives/concessions, waivers or reductions of development standards, and reduced parking ratios under the State Density Bonus Law (or a local density bonus program), and the density allowed under SB 79 will serve as the “base” density.
However, if the proposed height exceeds the local height limit, the local agency shall not be required to grant a waiver (or incentive/concession) for additional height beyond that specified in SB 79. There is an exception for 100% affordable housing projects that qualify for an automatic height increase under the State Density Bonus Law, as specified in Gov. Code § 65915(d)(2)(D).
One to three additional incentives/concessions must be granted for qualifying SB 79 projects that meet specified minimum density requirements and provide on-site affordable housing for low, very low, or extremely low-income households.
Do HAA protections apply?
Qualifying SB 79 projects are eligible for protections under the Housing Accountability Act (Gov. Code § 65589.5) (HAA).
SB 79 provides that for purposes of Gov. Code § 65589.5(j), a project that is consistent with SB 79 standards and applicable local objective general plan and zoning standards (that do not alone or in concert prevent achieving SB 79 standards), as modified by any incentive/concession or waiver under the State Density Bonus Law, “shall be deemed consistent, compliant, and in conformity with an applicable plan, program, policy, ordinance, standard, requirement, or other similar provision” for purposes of the HAA.
To summarize, this means that the local agency cannot disapprove or impose a condition that the project be developed at a lower density unless it makes specified findings based on the preponderance of the evidence (i.e., that the project would have a specific, adverse impact upon the public health and safety that cannot be mitigated). This creates a high threshold for the local agency.
Furthermore, beginning on January 1, 2027, a local agency that denies a qualifying SB 79 project that is located in a high-resource area (as defined) shall be presumed to be in violation of the HAA and immediately liable for penalties under the HAA, unless the local agency demonstrates that there is a health, life, or safety reason for denying the project pursuant to Gov. Code § 65589.5(j) and (o).
What other local agency constraints apply?
The local agency may enact and enforce standards, including inclusionary housing requirements, that do not (alone or in concert) prevent achieving the SB 79 development standards. However, the local agency cannot adopt any requirements, including, but not limited to, increased fees or inclusionary housing requirements, that apply to a project solely or partially on the basis that the project is seeking approval under SB 79.
The term “objective” is not included in the foregoing provision but is later referenced in the context of a potential local implementing ordinance, which “may include objective development standards, conditions, and policies” that apply to SB 79 projects.
What is the project approval process?
SB 79 does not mandate a streamlined ministerial (i.e., no CEQA) approval process but does provide for modified criteria for streamlined ministerial approval of qualifying SB 79 projects under SB 35/SB 423 (Gov. Code § 65913.4), as summarized below.
If the project does not qualify for streamlined ministerial approval, it “shall be reviewed according to the jurisdiction’s development review process” and the HAA, except that any local zoning standard conflicting with SB 79 requirements shall not apply.
To qualify for streamlined ministerial approval, the SB 79 project must comply with most SB 35/SB 423 requirements, including thatspecified labor standards must be met (e.g., prevailing wage requirements, which apply to all projects regardless of the building height).
Among other requirements, the project site must meet the SB 35 siting criteria under Gov. Code § 65913.4(a)(6). SB 35 siting criteria prohibits projects within environmentally sensitive areas, including certain coastal zone areas, habitat for protected species, wetland, very high fire hazard severity zone, hazardous waste site, delineated earthquake fault zone, special flood hazard area, regulatory floodway, land dedicated for conservation in an adopted natural community conservation plan, or conservation easement (as defined and specified and subject to certain exceptions).
However, a qualifying SB 79 project will be exempt from specified requirements under Gov. Code § 65913.4(a), meaning that the project (i) does not have to be located in a jurisdiction that is otherwise subject to SB 35/SB 423 streamlining (due to insufficient RHNA progress) and (ii) does not have to be consistent with local objective standards (but see above). See Gov. Code § 65913.4(a)(4)(A), (a)(5).
The project must comply with the affordability requirements under Gov. Code § 65913.4(a)(4)(B)(i)(I)-(III). For example, for-rent projects must dedicate at least 10% of the total number of units (prior to calculating any density bonus) as very low-income households (below 50% AMI), unless the local ordinance requires a greater percentage of very low-income units or the project is located in the nine-county Bay Area, in which case there is an alternate option for compliance (as specified). Please recall that threshold affordable housing requirements would need to be met to qualify under SB 79 in the first instance (see above).
If the project site is zoned for commercial or light industrial uses, the requirements of SB 35/SB 423 necessitate that the applicable general plan or zoning designation also allows residential or residential mixed-uses (or the project must separately qualify under SB 6: the Middle-Class Housing Act of 2022).
Could my property be excluded or permitted density modified?
The local agency may adopt an SB 79 implementing ordinance, subject to review by HCD, that excludes an otherwise qualifying site from SB 79. To do so, the local agency must make a finding that there is no walking path providing access to a TOD stop within less than one mile from the site. See also the exclusion provision related to large industrial employment hubs.
The local agency may also adopt a local TOD alternative plan, subject to review by HCD, to reduce the permitted residential density on SB 79 sites. However, that plan cannot reduce the SB 79 residential density for any individual site by more than 50%, unless the site is (i) within a very high fire hazard zone, (ii) vulnerable to one foot of sea level rise, or (iii) a designated local historic resource, as specified.
Any local TOD alternative plan must maintain at least (i) the same total net zoned capacity (total units and residential floor area) across all TOD development zones within the jurisdiction and (ii) 50% of the development capacity in any individual TOD development zone (total units and residential floor area). Any commensurate increase in permitted density cannot exceed 200% of the SB 79 density for the applicable site.
Additional exclusion provisions apply prior to one year following the adoption of the seventh cycle housing element update. For example, up until that time, the local agency may also exclude certain sites within low-resource areas, as specified. See Gov. Code § 65912.161(b)(1) for more information.
Where is SB 79 most likely to apply?
As explained in a recent California Planning and Development Report, SB 79 is expected to impact the Bay Area most significantly since virtually all BART and Caltrain stations qualify as Tier 1 TOD stops.
Los Angeles, San Diego, and Sacramento are also expected to be impacted since there are qualifying Tier 2 TOD stops in those jurisdictions, along with the Bay Area.
California’s SB 415 Amends AB 98: New Standards for Logistics and Warehouse Projects
California’s landmark Assembly Bill 98 (AB 98), authored by Carrillo and Reyes in 2024, established the state’s first comprehensive standards for the siting and operation of logistics developments, including warehouses, distribution centers, and similar freight operations.
While AB 98 aimed to address environmental and equity concerns in regions with a high density of warehouses, the broad and often ambiguous mandates imposed on local governments and developers across California led to more problems than solutions. From the beginning, both legislators and advocates acknowledged the need for a “cleanup” bill to provide a more precise and balanced approach to regulating logistics developments while still maintaining the original intent behind AB 98.
On Friday, October 3, 2025, Governor Newsom signed Senate Bill 415 (SB 415), introduced by Reyes in 2025. This new bill addresses several recognized issues with AB 98 but still leaves some questions unanswered. For a more detailed discussion about AB 98, please refer to our legal alert and webinar on the topic.
The amendments in SB 415 are generally favorable to developers and local agencies.
Developers
Clarifying Definitions
Defining Logistic Use Developments. AB 98 included a definition for “logistics use,” but it also used terms such as “logistics use development” and “logistics facility” when discussing various development standards and conditions. This mixing of similar but distinct terms created uncertainty regarding the interpretation of the bill. SB 415 addresses this uncertainty by consistently using the term “logistics use development” throughout the law.
Logistics Use Development Exemptions. The exemptions listed in AB 98 were ambiguous regarding whether a manufacturing or agricultural use qualified as a logistics use development. SB 415 clarifies that manufacturing uses with ancillary distribution do not qualify as logistics use developments. It also provides an exception for buildings that are primarily used for agricultural operations when the use is limited to a single period of 90 consecutive days or less each year.
Defining Sensitive Receptors. SB 415 adds two exceptions to AB 98’s sensitive receptor definition: (1) land used to ensure the public’s right of access to the sea, or other public access, pursuant to the California Coastal Act or the McAteer-Petris Act; (2) Land developed at or adjacent to an airport or seaport for the express purpose of creating a buffer area between sensitive receptors and an airport or seaport facility.
Defining Warehouse Concentration Region. AB 98 defined the Warehouse Concentration Region to include the Counties of Riverside and San Bernardino, as well as several cities within those two counties. SB 415 clarifies that the reference to the Counties of Riverside and San Bernardino was to the unincorporated areas of those counties.
Multi-Building Projects. AB 98 did not distinguish between projects that contained a single building and those that contained multiple buildings. The lack of differentiation created issues in determining whether specified AB 98 development standards applied on a building-by-building or project-by-project basis. SB 415 adds a “Logistics Park” definition to distinguish standards applicable to multi-building projects. Most development standards will now apply on a building-by-building basis, but (as explained below) the separate truck entrance requirement can be satisfied on a building-by-building or project-by-project basis.
Rezone Clarification. AB 98 imposed additional development standards on logistics use developments within 900 feet of a sensitive receptor that are: (1) “on land not zoned industrial; or (2) on “land that needs to be rezoned.” SB 415 clarifies that annexing land into a jurisdiction does not qualify as rezoning the property if the zoning in the annexing jurisdiction is similar to the zoning applicable to the property in the prior jurisdiction.
Clarifying Standards
Access Requirements. Beginning January 1, 2026, all new logistics use developments will need to be sited on specified roadways. One of the roadways permitted under AB 98 was local roadways that predominantly served commercial uses. SB 415 expands the types of local roadways that can accommodate logistic use developments to include roadways that predominantly serve agricultural or industrial uses in addition to commercial uses.
Separate Truck Entrance. AB 98 required a logistics use development within 900 feet of a sensitive receptor that is 250,000 square feet or larger, or requires a zone change to have a separate truck entrance. SB 415 clarifies that a driveway with a lane dedicated to heavy trucks qualifies as having a separate truck entrance. It also clarifies that projects with more than one building need only include a single separate entrance for the entire project, not one for each building.
Truck Bay Orientation. AB 98 required a logistics use development within 900 feet of a sensitive receptor to orient truck loading bays on the opposite side of the sensitive receptor (to the extent feasible). SB 415 makes two notable changes to this development standard. First, it softens the orientation requirement by requiring the loading docks to be located “away from” the sensitive receptor, rather than on the “opposite side” of the sensitive receptor. Second, it clarifies what to do if there are multiple sensitive receptors on different sides of the logistics use development by requiring the loading docks to be located away from the nearest sensitive receptor (to the extent feasible).
Buffer Area. AB 98 required specified buffer areas for logistics use developments within 900 feet of a sensitive receptor, but it was unclear what could be included in the buffer area. SB 415 clarifies that the buffer area may include landscaping, access, hardscape, and improvements for passenger vehicle parking. It also clarifies that the buffer area may include “any landscaped areas within a public-right-of-way or public or private pedestrian walkways.”
Idling Standards. AB 98 required a logistics use development within 900 feet of a sensitive receptor to prohibit idling or using auxiliary engine power for climate control equipment if the truck is capable of plugging in at the loading dock. SB 415 provides an exception to this prohibition if sufficient power is not available.
Timing of Energy Standards. AB 98 required a logistics use development within 900 feet of a sensitive receptor to comply with the most current building energy efficiency standards in CalGreen. However, it was unclear whether a developer must comply with the standards in effect at the project approval stage or the building permit stage. SB 415 clarifies that a logistics use development must comply with the energy efficiency standards in effect at the time the building permit is issued.
Clarifies Small Off-Road Engine. AB 98 required logistics use developments within 900 feet of a sensitive receptor that either: (1) are 250,000 square feet or larger; or (2) require a zone change to use only zero-emission small off-road engines (subject to strict feasibility exceptions). SB 415 clarifies the definition of a small off-road engine to mean spark-ignition engines rated at 19 kilowatts or less, or 25 horsepower or less.
Housing Replacement Obligation. SB 415 clarifies that the AB 98 housing replacement obligation is supplemental to the housing replacement obligation outlined in the Housing Crisis Act of 2019.
Cities and Counties
Alternative Compliance for Truck Route Requirements. AB 98 required all cities and counties to amend their respective circulation element to include a truck route that avoids residential communities. SB 415 permits jurisdictions outside the Warehouse Concentration Region to adopt an ordinance rather than adopting a full general plan circulation element amendment.
Timing for Truck Route Compliance. AB 98 required all jurisdictions in the Warehouse Concentration Region to amend their circulation elements by January 1, 2026, and all jurisdictions outside the Warehouse Concentration Region to amend their circulation elements by January 1, 2028. SB 415 extends the compliance date by two years (i.e., January 1, 2030) for smaller jurisdictions outside the Warehouse Concentration Region. Smaller jurisdictions” include cities with a population of 50,000 or less and counties with a population of 100,000 or less. SB 415 also exempts cities and counties with no existing or approved logistics facilities until they approve their first logistics project. Once such a project is approved, the jurisdiction has two years to complete its ordinance or plan update.
Enforcement Officer. SB 415 requires cities and counties that must adopt a truck route to appoint at least one enforcement officer who has completed specified training provided by the California Highway Patrol, assuming such training is available and at no cost.
Attorney General Enforcement. AB 98 permitted the Attorney General to impose a fine of up to $50,000 every six months for a jurisdiction’s failure to comply with the truck route requirement. SB 415 now requires the Attorney General to file a lawsuit before levying a fee for noncompliance with the truck route requirement. SB 415 also softens enforcement by allowing a judge to consider whether the city or county “is making a good faith effort” to comply with the truck routing requirement.
Preemption. SB 415 prohibits cities and counties from adopting or enforcing any rule or standard that would prevent a logistics use development from complying with the standards outlined in AB 98 (as amended by SB 415).
SB 415 represents an important step toward refining California’s approach to regulating logistics use developments.
Best Practices for New York Foreclosure Actions: A Guide for Banking and Workout Officers
Navigating the pre-foreclosure phase of a commercial property loan requires careful attention to both contractual obligations and statutory requirements. Before initiating foreclosure proceedings, lenders must conduct thorough due diligence, beginning with a detailed review of the loan documents to ensure compliance with all notice provisions and procedural prerequisites. Inaccuracies or oversights in this stage—such as failing to serve proper default notices, overlooking critical documentation, or neglecting statutory requirements—can delay or even derail a foreclosure action. This guide outlines the key steps and legal considerations that lenders and their counsel must address during the pre-foreclosure process, including notice requirements, document possession, title searches, and New York-specific procedural rules.
Critical Pre-Foreclosure Considerations: Notices, Loan Documentation, Title Verification and Record Searches
Pre-Foreclosure Notices and Due Diligence
The initiation of foreclosure proceedings upon a commercial loan default necessitates rigorous adherence to the contractual and legal requirements governing notice. As a preliminary matter, lenders must conduct a detailed review of the loan documents to identify any provisions concerning notice of default, including requirements related to the timing, content, method of delivery, and designated recipients. Failure to comply with these provisions may result in significant procedural defects, including the inability to accelerate the loan or judicial invalidation of the default itself.
In most commercial loan agreements, payment defaults are deemed incurable and typically do not require prior written notice. These defaults commonly provide lenders with immediate grounds to accelerate the indebtedness without further demand. In contrast, covenant defaults—such as failure to submit required financial documentation or violations of loan-to-value covenants—generally necessitate advance written notice. The required notice period often ranges from ten (10) to thirty (30) days, depending on the specific terms of the loan agreement.
Given the technical nature of these requirements, lenders are strongly advised to engage legal counsel prior to issuing any default or demand notices. Counsel can ensure proper identification of notice recipients, verify the accuracy of addresses, and confirm the method and content of the notice. Procedural missteps—such as providing insufficient notice or failing to serve it in the contractually mandated manner—can render the default ineffective and result in dismissal of a subsequent foreclosure action.
Demand vs. Acceleration
Where a lender seeks to accelerate the outstanding loan balance, it is essential that the default notice not only identify the basis for the default but also include an unequivocal demand for immediate payment in full. Importantly, there is a legal distinction between merely declaring a default and declaring a default in conjunction with acceleration. Lenders must be deliberate in their language to ensure the intent to accelerate is clearly expressed, as courts will scrutinize the wording for sufficiency.
Possession and Production of Original Loan Documents
Prior to initiating foreclosure proceedings, a lender must verify its possession of all original loan documents, including the promissory note and mortgage. Under New York law, to establish a prima facie entitlement to foreclosure judgment, the lender must produce the mortgage, the unpaid note, and admissible evidence of the borrower’s default. Where the loan was originated by the foreclosing lender, establishing possession is typically straightforward. However, in cases involving assigned loans, the lender must also demonstrate that it received physical delivery of the original note prior to the commencement of the foreclosure action. Failure to establish standing through proper documentation may result in dismissal.
Title and Public Records Examination
An essential component of pre-foreclosure due diligence involves conducting comprehensive title and public records searches. These searches serve to confirm the proper recording of the lender’s mortgage and any assignments of leases and rents. Additionally, they verify the priority of the lender’s lien against competing claims. The nature and extent of the search may vary depending on the location of the property—particularly between properties situated within and outside New York City.
Lenders must also confirm the existence and perfection of any Uniform Commercial Code (UCC) security interests by reviewing filings at both the county and state levels. Establishing a properly perfected lien is critical to preserving the lender’s rights in any associated personal property or fixtures and may impact the outcome of both foreclosure and subsequent enforcement proceedings.
Statutory and Procedural Considerations in New York Commercial Foreclosure Actions
In addition to the contractual notice provisions typically found within commercial loan documents, lenders must also navigate the distinctive statutory framework that governs foreclosure proceedings in the State of New York. The state imposes several unique procedural requirements that can significantly affect both the timing and viability of foreclosure actions, particularly where real estate is the primary collateral.
The “One Action Rule” Under RPAPL § 1301
A critical statutory constraint on lenders in New York is the “One Action Rule,” codified in Real Property Actions and Proceedings Law (RPAPL) § 1301. This provision mandates that a lender may not simultaneously pursue both a mortgage foreclosure action and an independent action for money damages on the underlying debt. Instead, the statute requires the lender to elect a single remedy: to either (i) foreclose on the mortgage or (ii) sue for a money judgment on the promissory note or guaranty. Once a course of action is chosen, the lender must fully exhaust all available remedies under that path before initiating the alternative remedy, unless leave of court is obtained.
This procedural election has substantial strategic implications. Unlike jurisdictions such as New Jersey—where concurrent pursuit of foreclosure and money damages is permitted—New York’s more restrictive approach necessitates early and deliberate analysis of the borrower’s financial position. Specifically, lenders must assess the sufficiency of the real estate collateral, the potential collectability of a monetary judgment against the borrower and any guarantors, and the existence of other security interests or enforcement mechanisms (such as replevin of business assets). If a lender initiates a collection action and subsequently discovers that the borrower’s only significant asset is the mortgaged property, it may be barred from pursuing foreclosure, thereby jeopardizing its recovery and wasting significant legal resources.
RPAPL § 1303: Tenant Notice Requirements for Commercial Foreclosures
Another critical—and often overlooked—statutory requirement involves mandatory notice to tenants residing in properties subject to commercial foreclosure. Pursuant to RPAPL § 1303, a foreclosing party must provide specific notices to tenants occupying residential “dwelling units,” even when the subject property is owned by a commercial entity or subject to a commercial mortgage.
The statute differentiates the method of notice based on the size of the building. For properties with fewer than five dwelling units, the lender must serve the requisite notice via certified and/or regular mail. For properties with five or more dwelling units, RPAPL § 1303 mandates that a copy of the notice be physically posted at each entrance and exit to the building. The statute imposes strict requirements as to the timing, content, and form of the notice—including detailed specifications regarding font size, typeface, and paper color—underscoring the Legislature’s intent to ensure tenant awareness of the foreclosure process.
Compliance with RPAPL § 1303 is not a mere procedural formality. New York courts have consistently held that proper service or posting of the notice constitutes a condition precedent to the commencement of a foreclosure action. Failure to comply with this requirement can result in dismissal of the foreclosure complaint, irrespective of the merits of the underlying default. Consequently, lenders and their counsel must exercise particular diligence in identifying properties that contain residential units and ensuring that the statutory notice obligations are fulfilled in their entirety.
Alternatives to Judicial Foreclosure in New York: Workouts, Modifications, and Strategic Agreements
Given the protracted and costly nature of New York’s judicial foreclosure process, commercial lenders are increasingly incentivized to explore non-litigation alternatives, such as loan workouts and negotiated settlements, to protect and enforce their interests.
Loan Modification
In circumstances where a loan is not in default and prior to the initiation of litigation, lenders may consider negotiating a loan modification. Such modifications can include extending the maturity date, restructuring monthly payment obligations, adjusting the interest rate, and/or requiring additional collateral or guarantors. These measures may enhance the borrower’s ability to perform under the loan, while preserving the lender’s security position and improving the likelihood of repayment.
Forbearance Agreements
A commercial loan forbearance agreement is a negotiated contract between the lender and the obligors in which the lender agrees to temporarily forgo enforcement of its remedies—such as foreclosure—for a limited duration (typically between three and six months). In exchange, the obligors undertake to make defined payments and/or comply with certain performance obligations.
Key components of a forbearance agreement often include:
Acknowledgment and waiver provisions confirming the validity and enforceability of the loan documents, the occurrence of defaults, and the amounts due;
Defined borrower obligations during the forbearance period; and
Clarification of the consequences of any further default, including the lender’s right to proceed with enforcement.
Lenders may also consider incorporating additional protective measures, including:
Consent Orders and Judgments of Foreclosure. Depending on the procedural stage of the foreclosure, the lender may obtain a borrower-executed consent order held in escrow. This order would waive the borrower’s right to contest liability and authorize the matter to proceed directly to the referee stage under New York’s statutory foreclosure process. However, due to the requirement that a court-appointed referee must calculate and certify the amount due, a fully pre-executed judgment of foreclosure is not enforceable in advance.
Deed in Lieu of Foreclosure. As additional security for the borrower’s compliance with the forbearance agreement, the lender may request a pre-executed deed in lieu of foreclosure to be held in escrow. In the event of default under the agreement, the deed may be recorded, transferring title to the lender. It should be noted, however, that a deed in lieu does not extinguish subordinate liens or encumbrances, and lenders must carefully assess the financial, environmental, and legal risks associated with taking title to the property before proceeding with such a remedy.
Appointment of a Rent Receiver. A rent receiver is a court-appointed third party authorized to collect rents and manage income-producing property during the pendency of a foreclosure action. In New York, receiverships can become costly due to the statutory and practical obligations imposed on the receiver, including tenant notification requirements, accounting and reporting duties, and the retention of legal and property management professionals.
Confession of Judgment. New York law permits a borrower to execute an affidavit confessing judgment in a specified sum. This affidavit, once filed with the appropriate county clerk, results in the immediate entry of judgment against the borrower. Lenders may hold such affidavits in escrow, to be filed only upon default, thereby enabling expedited enforcement without the need for full litigation.
Refinancing, Sales, and the Use of CEMAs
Commercial real estate transactions in New York are subject to a substantial mortgage recording tax—currently up to 2.8% for loans over $500,000 in New York City. To mitigate this cost, lenders and borrowers often utilize Consolidation, Extension, and Modification Agreements (CEMAs). Through a CEMA, the original mortgage is assigned to the new lender and consolidated with a new note and mortgage, allowing the transaction to avoid payment of mortgage tax on the full principal amount.
Effective use of CEMAs requires precise legal coordination, including:
The transfer of original notes, allonges, and mortgage documents;
The preparation of new assignment and modification documents; and
Meticulous coordination of document exchange and fund transfers at closing.
It is important to note that a commercial lender is not obligated to consent to a mortgage assignment. A refusal to do so may jeopardize a transaction or depress the property’s purchase price due to the added cost of full mortgage tax liability.
In certain cases, where the existing mortgage secures multiple properties but the refinance involves only a subset thereof, the original mortgage cannot be assigned without transferring the lender’s interest in unrelated collateral. In such instances, legal counsel may structure a mortgage “splitter,” severance, and modification agreement. This approach involves the separation and redistribution of the original mortgage obligations among the secured properties, potentially preserving CEMA eligibility for part of the transaction.
Conclusion
The pre-foreclosure phase in New York presents complex legal and procedural challenges that demand thorough preparation and strategic foresight. Lenders must ensure strict compliance with both contractual obligations and statutory requirements, as errors can delay or undermine enforcement efforts. At the same time, alternatives to litigation—such as loan modifications, forbearance agreements, and CEMAs—offer viable paths to resolution that may preserve value and reduce costs. By engaging experienced counsel and conducting diligent pre-foreclosure review, lenders can protect their rights, streamline enforcement, and position themselves for a more effective recovery.
New California Law on Servicing of Second Mortgages Causes Confusion Among Lenders and Servicers
On June 30, Governor Newsom signed into law AB 130, which includes a new provision to the California Civil Code, Section 2924.13. The new law (previously discussed here) became effective on July 1. The purpose of the law was purportedly to make it more difficult for loan servicers to non-judicially foreclose on so-called “zombie mortgages.”
The section of AB 130 that created the new Civil Code provision was an add-on to a lengthy budget trailer bill, and there is no legislative history to fall back on with respect to certain vague or confusing provisions in the new law. After three months of attempting to service junior liens under the new law, loan servicers are discovering that there are problems associated with servicing loans under the new law. For example:
The law states that it is an unlawful practice for servicers not to provide borrowers with written communication on the loan for three years. However, does this prohibit the servicer from collecting on the debt if the home is sold after three years?
Response: Nothing in the statute states that a debt becomes uncollectible when the statute is violated. Accordingly, even if the lender/servicer has not provided any written correspondence to a borrower for more than three years, the lender/servicer should not be prohibited from collecting on the debt. However, servicers still face a risk that a borrower might choose to seek injunctive relief from a court seeking to prevent proceeds from being distributed to the lender/servicer.
Section 2924.13(b)(4) states it is an unlawful practice if “[t]he mortgage servicer conducted or threatened to conduct a foreclosure sale after providing a form to the borrower indicating that the debt had been written off or discharged, including, but not limited to, an Internal Revenue Service Form 1099.” Is the intent of the law to include loans discharged through bankruptcy, regardless if they are written off?
Response: The language is unclear. It appears to apply to loans written off or charged off; however, as noted, the phrase “or discharged” would appear to include loans that were not charged off. Moreover, even if a loan is charged off, it should not mean the lien is extinguished, i.e., a lender should still have the right to go after the collateral. AB 130 seems to suggest otherwise.
In section 4(b) the law states that it is an unlawful practice if “the mortgage servicer conducted or threatened to conduct a foreclosure sale after providing a form to the borrower indicating that the debt had been written off or discharged.” Per TILA, once a loan has been charged-off, the lender/servicer will typically stop sending periodic statements after sending a notice tiled “Suspension of Statements & Notice of Charge Off – Retain This Copy for Your Records.” Even though the lender/servicer is complying with TILA, does this mean it cannot foreclose since it is providing a form to the borrower indicating that the debt had been written off?
Response: While the law is not clear, it appears that once a mortgage lender provides a notice to the borrower pursuant to Section 1026.41(e)(6) of Regulation Z stating that the debt has been written off, the new law will prohibit the lender from thereafter conducting a foreclosure sale on the property.
Section 2924.13(c) states the lender/servicer cannot “threaten to conduct a non-judicial foreclosure” until it simultaneously records a notice of default (NOD) and the new “certification” form. If the lender/servicer sends pre-foreclosure notices (required by California law prior to an NOD being recorded), does the new law consider the pre-foreclosure notices a “threat to conduct a non-judicial foreclosure”?
Response: It is hard to imagine that sending a pre-foreclosure notice as required by law prior to the delivery of a recorded notice of default would constitute a “threat of foreclosure.” It seems like the answer is no. Unfortunately, the law is decidedly unclear.
Putting It Into Practice: These questions likely just scratch the surface of the issues that will arise going forward with respect to servicing junior liens in California. We will continue to monitor the space for developments, but some of these issues may just require a legislative fix.
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Contractors – Know Your Lien Rights
Preserving lien rights can be important in any type of economy, but is even more important when the economy is uncertain. Taking the following important steps can protect your lien rights on projects located in Wisconsin.
Step 1 – Give Your Initial Lien Notice. On wholly residential projects involving up to four family living units, contractors who have a contract directly with the owner (i.e., prime contractors) who will contract with any subcontractors or suppliers for labor or materials on the project have to provide a statutory notice using substantially the following language:
“As required by the Wisconsin construction lien law, claimant hereby notifies owner that persons or companies performing, furnishing, or procuring labor, services, materials, plans, or specifications for the construction on owner’s land may have lien rights on owner’s land and buildings if not paid. Those entitled to lien rights, in addition to the undersigned claimant, are those who contract directly with the owner or those who give the owner notice within 60 days after they first perform, furnish, or procure labor, services, materials, plans or specifications for the construction. Accordingly, owner probably will receive notices from those who perform, furnish, or procure labor, services, materials, plans, or specifications for the construction, and should give a copy of each notice received to the mortgage lender, if any. Claimant agrees to cooperate with the owner and the owner’s lender, if any, to see that all potential lien claimants are duly paid.” Wis. Stat. § 779.02(2)(a).
If a prime contractor has a written contract with the owner, the notice has to be included in or attached to the contract. If a prime contractor’s contract with the owner is not written, the notice has to be “served” on the owner within 10 days after first providing labor, services, materials, plans or specifications for the project (whether by the prime contractor or any of its subcontractors or suppliers). “Serve” or “served” under the lien law means either personal delivery, delivery by registered or certified mail, any other means of delivery where there is written confirmation of delivery, or service consistent with how you serve a lawsuit.
Regardless of whether a prime contractor’s notice is in a contract or separately served on the owner, the law requires the notice to “be in at least 8-point bold type, if printed, or in capital letters, if typewritten…” Wis. Stat. § 779.02(2)(a). Whether any particular contract or notice form would be considered “printed” or “typewritten” is always a question, so the best practice is to format the notice in at least 8-point type, all capitals, and bold. That way, you cover your bases.
If you do not have a contract directly with the owner (i.e., you are a subcontractor or supplier) on a wholly residential project involving up to four family living units, the timing and content of your initial lien notice will be different. A subcontractor or supplier has to serve (same service methods as noted above) two signed copies of a subcontractor identification notice on the owner within 60 days after first providing labor or materials on the project, using substantially the following language (filling-in the blanks as appropriate):
“As a part of your construction contract, your prime contractor or claimant has already advised you that those who perform, furnish, or procure labor, services, materials, plans, or specifications for the work will be notifying you. The undersigned first performed, furnished, or procured labor, services, materials, plans, or specifications on …. (give date) for the improvement now under construction on your real estate at …. (give legal description, street address or other clear description). Please give your mortgage lender the extra copy of this notice within 10 days after you receive this, so your lender, too, will know that the undersigned is included in the job.” Wis. Stat. § 779.02(2)(b).
There are no specific font size or similar format requirements for a subcontractor identification notice, but the best practice is to use a font size and format that make the notice stand out.
A prime contractor who was required to give an initial notice but did not do so may still be able to file a lien as long as all of its subcontractors and suppliers were paid and did not give subcontractor identification notices, or as long as all subcontractors and suppliers have waived their lien rights in full.
If a subcontractor identification notice was required but not given on time, a late subcontractor identification notice will save lien rights only for labor or materials provided after the owner actually receives the notice.
Initial notices and subcontractor identification notices are not required on wholly residential projects involving more than four family living units or on projects that are partly or wholly nonresidential.
Step 2 – Give Your Notice of Intent to File Claim for Lien. A written notice of intent to file claim for lien has to be given on all projects by all types of lien claimants (prime contractors, subcontractors and suppliers). The notice of intent has to be served on the owner at least 30 days before you can file a claim for lien, and “shall briefly describe the nature of the claim, its amount and the land and improvement to which it relates.” Wis. Stat. § 779.06(2).
Because a claim for lien has to be filed within 6 months after the last date you provided labor or materials on the project, that means a notice of intent has to be served within approximately 5 months of the last date you provided labor or materials on the project. Given intervening weekends and potential holidays, it is best practice to plan for at least a few extra days to make sure your notice of intent is served on time. You will have no lien rights if you do not timely serve the notice of intent.
Step 3 – File Your Claim for Lien. As noted above, a claim for lien has to be filed within 6 months after the last date you provided labor or materials on the project.
A claim for lien has to be signed by the lien claimant (or its attorney), and “shall contain a statement of the contract or demand upon which it is founded, the name of the person against whom the demand is claimed, the name of the claimant and any assignee, the last date of performing, furnishing, or procuring any labor, services, materials, plans, or specifications, a legal description of the property against which the lien is claimed, a statement of the amount claimed and all other material facts in relation thereto.” Wis. Stat. § 779.06(3). Copies of any required initial lien notice/subcontractor identification notice and the notice of intent also have to be attached to the claim for lien.
A claim for lien gets filed with the circuit court in the county where the project is located, and there is a $5.00 filing/docketing fee. You then have to serve a copy of the filed claim on the owner within 30 days after the lien was filed.
In order to enforce a claim for lien, you will have to file a lawsuit to foreclose the lien within 2 years from the date you filed the lien.
Different notice, claim, and other rules apply on private bonded projects and public projects.
A claim for lien does not guarantee payment, but it does provide a measure of security for payment depending on the value of the property and the existence of other liens that may have priority. Notices of intent and claims for lien also often provide incentives for owners to pay.
HUD and Ginnie Mae Explore Major Changes to the Reverse Mortgage Industry
The U.S. Department of Housing and Urban Development (HUD) published a request for information (RFI) on October 2, 2025 titled “Future of the HECM and HMBS Programs and Opportunities for Innovation in Accessing Home Equity.” The title alone underscores the RFI’s importance for all participants in HUD’s Home Equity Conversion Mortgage (HECM) program, including lenders, servicers and investors.
The RFI acknowledges a recent downturn in borrower participation in the HECM program, noting that “HECM endorsements declined by 59 percent since 2022.” It further highlights that Ginnie Mae’s HECM mortgage-backed securities (HMBS) program has seen a decrease in the total dollar amount of HECMs securitized since 2022, “with only $6.3 billion in [unpaid principal balance] being securitized in 2024, nearly the same level as that of a decade ago.” The RFI’s release indicates that HUD recognizes the HECM and HMBS programs may need updates to better facilitate their goal of providing “access to home equity for senior homeowners.”
Following the initial framing of the issue, the RFI solicits general feedback from interested parties regarding “the appropriate role of the HECM and HMBS programs and enhancements to these programs.” The RFI also provides a list of 21 questions related to the current and future state of the HECM and HMBS programs that “HUD is particularly interested in receiving input from interested parties.” The questions are grouped into the following topics:
Program Performance, Market Role, and Emerging Risks
Consumer Interest and Demand
Origination Volumes
Liquidity
Program Improvements
The questions range from very broad – “Are there any statutory changes that would improve the HECM or HMBS programs?” – to more specific to certain aspects of each program – “Does the Life Expectancy Set Aside (LESA) adequately cover borrowers’ actual property charges throughout the life of the HECM?” Overall, the RFI provides any party associated with the HECM or HMBS programs the opportunity to comment on how to reshape those programs going forward. Comments are due by December 1, 2025, and may be submitted electronically through the Federal eRulemaking Portal or by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development at 451 7th Street SW, Room 10276, Washington, D.C. 20410-0500.
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Saudi Arabia’s New Expropriation Law: Key Features and Implications
Saudi Arabia has introduced a new framework for expropriation. The new Law on Expropriation for Public Interest and Temporary Possession of Real Estate, issued by Royal Decree No. (M/56) dated 12/3/1447H (Sept. 4, 2025), and approved by Council of Ministers Resolution No. (177) dated 3/3/1447H (Aug. 26, 2025), creates a detailed legal structure for compulsory acquisition and temporary possession of real estate for public interest purposes. This law replaces the 2003 framework and is generally regarded as a significant change in the regulation of expropriation.
The Royal Decree (M/56) includes transitional measures, such as a 120-day period before the law becomes effective. This interval is intended to allow for the finalization of implementing regulations and preparation of administrative systems. This law also addresses continuity by confirming that existing cases approved under the previous framework will remain in place in order to avoid disruption to ongoing projects. Additionally, it introduces changes to utilities billing: within one year, the Ministries of Environment, Water & Agriculture, and Energy must shift electricity and water bills from property owners to actual occupants, a structural reform intended to align costs with actual use. Until this reform is implemented, the Diriyah billing mechanism, Royal Decree No. (M/74), applies to expropriated properties. Core Features of the New Framework
Public Interest as a Threshold: The law defines what constitutes a public interest project, covering areas such as infrastructure, utilities, health, education, heritage protection, national security, and projects connected to the Two Holy Mosques. The law requires authorities to demonstrate that state-owned land cannot meet public interest requirements before converting it to private property.
Funding Discipline: Projects generally may not proceed without approved funding or substitute land. This measure is designed to prevent unfunded commitments and protect owners from uncertainty.
Strict Timelines: The procedure is structured into phases commonly referred to as “60–60–90–90”: review of applications, publication and notification, valuation, and compensation with title transfer. Eviction is barred until compensation is paid. If payment is delayed more than three years, the owner may request a revaluation, which cannot result in a lower compensation amount.
Independent Valuation and Compensation: Valuations are conducted by three accredited valuers overseen by the Saudi Public Governance Authority (SPGA). Compensation is set at fair market value plus a 20% premium and direct damages. This differs from some jurisdictions where only market value is provided.
Temporary Possession: Authorities may take temporary possession, paying rental value plus 20% and damages. This is capped at three years, extendable once with owner consent and SPGA approval. If the need persists, full expropriation is required under the law.
Other Measures: The law allows for non-cash compensation (land or project shares); tax and fee relief, including Real Estate Transaction Tax exemptions for reinvestment within five years; explicit rights for tenants, mortgagees, and usufruct holders; conflict-of-interest prohibitions with penalties; and reacquisition rights if projects are cancelled.
Considerations
While the new law adds clarity to the expropriation process, it also raises several points for further observation:
Dispute Risk: The law seeks to reduce ambiguity, but the compensation structure may lead to increased valuation disputes.
Investor Considerations: The law introduces greater predictability, though developers may need to factor potentially higher acquisition costs into project planning.
Utilities Reform: The shift to occupant-based billing represents a structural change, with implementation potentially requiring significant coordination among government entities.
Administrative Capacity: The SPGA has been assigned extensive responsibilities. Its ability to manage applications, valuations, and enforcement on a nationwide scale may be a key factor in the law’s effectiveness.
Fiscal Impact: The 20% premium may raise the cost of large infrastructure projects. As a consequence, investor confidence may be reduced.
Conclusion
The new law introduces a revised framework for compulsory acquisition and temporary possession of real estate in Saudi Arabia. Key elements include defined public interest thresholds, specified timelines, enhanced compensation mechanisms, and centralized oversight. The effectiveness of the new framework may depend on the development of implementing regulations, the administrative capacity of the SPGA, and the transition to the new utilities billing system.
California Enacts Mortgage Forbearance Act, Effective Immediately; Will Pose Compliance Challenges for Servicers
On September 22, 2025, California Gov. Gavin Newsom signed the Mortgage Forbearance Act into law, with an immediate effective date. The law, designed to provide emergency relief to California mortgage loan borrowers impacted by the various wildfires that occurred earlier in 2025, is in many ways reminiscent of the CARES Act forbearance framework from 2020. However, given that it is a state law, it has limitations compared to its predecessor. On the other hand, in situations where it does apply, the Mortgage Forbearance Act imposes additional burdens that will create compliance challenges for servicers.
High-Level Framework
At a high level, the California law will remind servicers of the 2020 COVID-19-era CARES Act forbearance framework. At its core, the act establishes forbearance procedures for any “borrower who is experiencing financial hardship that prevents the borrower from making timely payments on a residential mortgage loan due directly to the wildfire disaster.” To receive forbearance, the borrower must (1) submit a request to the borrower’s mortgage servicer, and (2) affirm “that the borrower is experiencing a financial hardship due to the wildfire disaster.” From there, the borrower may be eligible to receive up to 12 months of forbearance in total, allocated in 90-day increments. While in forbearance, the law prohibits dual tracking and the assessment of late fees and specifies how a servicer should report an account’s status to the credit reporting agencies. Forbearance requests made under the act must be submitted before January 7, 2027, or six months after the state of emergency is terminated, if that date is earlier.
Beyond the CARES Act
While clearly resembling the COVID-19-era forbearance framework, the California Mortgage Forbearance Act goes further than the CARES Act and also governs the back-and-forth interactions between the servicer and the borrower, aspects that were previously only addressed by investor guidelines and Regulation X. The California law specifies, for example, that a servicer must notify the borrower within 10 business days whether a request for forbearance has been approved. If forbearance cannot be offered because the borrower’s request is incomplete or there is a “defect” that is “curable,” the 10-business day notice must specify the “curable defect” and “[p]rovide 21 calendar days from the mailing date of the written notice for the borrower to cure any identified defect.” The servicer must accept any “revised request for forbearance” during the 21-calendar day period and must respond within five business days to any such request that is received.
To further complicate things, if a servicer is unable to approve a borrower’s forbearance request, the servicer must provide a denial notice that includes “the specific reason for denial.” While that concept is already familiar to servicers, the act specifies that the servicer must actually provide “[a] clear and concise explanation of the specific investor provision that is the basis for the denial,” and “[t]he text of the specific investor guideline or contractual provision that is the basis for the denial of the borrower’s forbearance request.”
If a borrower is approved for, and has been granted, wildfire disaster forbearance, the servicer must disclose at the beginning of the forbearance period “that the forborne mortgage payments are required to be repaid.” Moreover, the act prohibits requiring lump sum repayment of forborne amounts if the borrower was current when entering the forbearance period.
While a borrower is in a wildfire disaster forbearance, the Mortgage Forbearance Act will require outreach on the part of the servicer. “No later than 30 calendar days before the end of an initial forbearance period,” the servicer will have to send a written notice specifying “[a]ny documentation or forms” that the borrower must fill out or submit to get additional forbearance, and any applicable deadlines for requesting additional forbearance.
Scope and Applicability
The Mortgage Forbearance Act is an urgency statute under the California Constitution and, therefore, it went into effect immediately upon being passed into law. It generally applies to bank and nonbank mortgage servicers and subservicers of residential mortgage loans, which is defined to mean any loan that is secured by residential real property with one-to-four residential units. The forbearance requirements do not apply, however, to “an individual who has a recorded notice of default recorded against the real property that is secured by the residential mortgage loan before the beginning of the wildfire disaster unless the notice of default was rescinded.”
Finally, and perhaps most importantly, the law specifically states that it does not require servicers to “take any action that would require the mortgage servicer to breach the terms of an existing contract with the investor that owns or insures the residential mortgage loan.” In other words, servicers must still follow applicable investor and insurer guidelines. Additionally, with respect to federally backed loans, the law suggests that a servicer does not have to do anything that would “conflict[] with the servicing guidelines applicable to the federally backed loan.” And for any other non-federally backed loan, servicers do not have to take any action under the California law if it would “conflict[] with the servicing guidelines issued by Fannie Mae or Freddie Mac.” That exemption would apparently apply even when a particular loan is not subject to Fannie Mae’s or Freddie Mac’s guidelines. However, to “conflict[] with” investor or insurer guidelines, it must be “impossible to comply with [the California law] and the person’s obligation under the applicable servicing guidelines.” Practically, this means that the California law will likely supplement existing forbearance and loss mitigation policies.
Questions and Challenges
California’s new law is sure to cause compliance challenges for mortgage servicers. Some of those issues are due to unanswered questions and ambiguities within the law, while others may arise because of how the law interacts with various federal laws. And, of course, the fact that the law was effective immediately upon Gov. Newsom’s signing will mean that servicers lack an appropriate implementation period.
Below are various issues that may arise as servicers attempt to comply with the Mortgage Forbearance Act:
Investor Guideline Denials – The requirement to disclose actual investor guideline or contractual text in connection with denials is likely to be challenging for many servicers to operationalize, and the consumer benefit likewise appears questionable.
Credit reporting – The law notes, as a starting point, that servicers must report borrowers in compliance with the Fair Credit Reporting Act (FCRA). However, it then specifies exactly how borrowers are to be reported while in forbearance. For example, the California law says that a servicer “shall not furnish information during the forbearance period indicating that the payments are in forbearance” and, if a borrower was current when entering the forbearance period, the servicer must “[r]eport the credit obligation or account as current.” While the CARES Act amended the FCRA with respect to COVID-19 forbearance reporting, California state law does not have the same effect on federal law for wildfire disaster forbearances. This will lead to questions regarding whether following the state law would comply with the FCRA’s accurate reporting mandate.
Borrower Outreach – The act requires outreach to the borrower “before the end of an initial forbearance period.” Does that only apply to the first 90-day forbearance? Or does California intend for servicers to be conducting outreach prior to the expiration of each 90-day forbearance period (both the initial period and any 90-day extensions)?
Lump Sum Repayment Prohibited – The act purports to prohibit lump sum repayment of forborne amounts for borrowers who are current when entering the forbearance period. However, this ignores how a forbearance works, and further, the act does not contemplate or require any type of post-forbearance payment relief. Therefore, it is unclear how servicers can effectuate this provision.
Loans in Foreclosure – The act exempts loans where a notice of default was recorded before the beginning of the wildfire disaster, which was January 7, 2025. This presumably means that loans where a notice of default was recorded after that date, but prior to the passage of the act in September 2025, are subject to the required forbearance framework.
Conflicts with Investor Guidelines – A key question for servicers will be whether the California law “conflicts with” applicable guidelines for federally backed loans and, in particular, whether there are any direct and true conflicts with Fannie Mae and Freddie Mac guidelines.
Interplay with Regulation X – The California law does not completely align with the loss mitigation requirements of Regulation X. Although federal law permits the offering of forbearance when appropriate, the request from the borrower will likely constitute the submission of a loss mitigation application, which will require an acknowledgment letter within five business days. If the request is considered incomplete, California’s new law requires that a servicer give the borrower 21 calendar days to remedy the deficiency. That could conflict with Regulation X’s “reasonable date” framework and the commentary that suggests a reasonable date by which the borrower should return missing information or documentation must never be beyond the next upcoming enumerated milestone, so long as it is seven days or more in the future.
Immediate Effective Date – The fact that the law immediately became effective on September 22, 2025, unfortunately means that servicers are not afforded an implementation period and, therefore, must be ready to comply as quickly as possible.
In light of these challenges, in the short-term servicers should ensure they have (1) a good grasp of the disaster forbearance options that are available under different investor guidelines; (2) a process in place to capture the information necessary for a borrower to request forbearance under the California law; (3) decision letters go out within 10 business days of receiving a request from a borrower; (4) a mechanism to provide required disclosures upon approval of a forbearance; and (5) appropriate denial verbiage, including actual text from investor guidelines, which can be provided as applicable.
Legal Tips For Sellers Starting The Conveyancing Process
Selling a property is never just about finding a buyer. The legal work behind the sale is what ensures everything moves forward smoothly. As a seller, you need to be prepared with the right documents and an understanding of how the process works. That way, you avoid delays, protect your interests, and complete the transaction […]
Illinois Supreme Court to Again Address Section 22.1 of the Condo Act
As discussed in a prior Insight, in November 2022, the Illinois Supreme Court spoke on section 22.1 of the Illinois Condominium Act (765 ILCS 605/22.1), holding that it did not provide condo sellers with a private right of action against their associations’ boards or property managers related to allegedly excessive fees for the production of documents mandated under that section. See, Channon v. Westward Management, Inc., 2022 IL 128040.
In Channon (and numerous similar cases around the state), the plaintiffs sought class certification of their claims about those purportedly excessive fees.
Now, less than three years later, the Illinois Supreme Court will once again address section 22.1, having granted appellant’s petition for leave to appeal in Deborah Greenswag, etc., v. Lieberman Management Services, Inc., (No.: 1-24-0289) on September 24, 2025.
BackgroundIn Channon, the Supreme Court reversed the lower courts and held that section 22.1, which mandates condo sellers produce certain documents to prospective buyers and that boards or their property managers be reimbursed for their reasonable “direct out-of-pocket” costs for doing so, did not contain an implied private right of action to sellers who felt the “direct out-of-pocket” costs were inflated.
After Channon, the Illinois General Assembly amended section 22.1, eliminating the ambiguity created by the prior version’s use of “[a] reasonable fee covering the direct out-of-pocket expenses…” for providing section 22.1 disclosure documents.
Effective January 1, 2023, section 22.1 states “[a] reasonable fee, not to exceed $375, covering direct out-of-pocket costs…” (765 ILCS 605/22.1) (emphasis added). The amendment also provided that an additional $100 for “rush service” constituted a “reasonable fee.”
After Channon, class-action plaintiffs abandoned their section 22.1 claims, but moved forward with claims alleging that the purportedly unreasonable fees violated the Illinois Consumer Fraud and Deceptive Practices Act.
The Dismissal and Appeal of the Greenswag CaseIn Greenswag, after section 22.1 was amended, the defendant moved to the trial court to reconsider its prior denial of its motion to dismiss the consumer fraud claim. The defendant argued that the amendment was retroactive, and since the defendant’s fees were less than the $475 that the General Assembly proscribed as reasonable, dismissal was warranted.
The trial court granted the motion to reconsider, explaining that because the prior version of section 22.1 was ambiguous as to what constituted a “reasonable fee,” the court could properly consider the amendment, which “simply clarifies that a reasonable fee is less than $375 plus $100 for any rush services.” (Cir. Ct. Cook County, Case No.: 16CH15920) (Jan. 26, 2024). Because the consumer fraud claim was predicated on the Condo Act, and because the Condo Act (as amended) expressly permitted the amount of fees that were charged, dismissal of that case was proper.
The First District agreed that dismissal was proper, noting in dicta that the amendment was a relevant consideration. Greenswag v. Lieberman Mgmt. Servs., Inc., 2025 IL App (1st) 240289-U, ¶30.
But, the First District primarily relied on Channon in affirming. The court explained that when plaintiffs use a statutory enactment for a tort action seeking damages, they must demonstrate that a private right of action is either expressly granted or implied in that statute. Id. at ¶28. Because Channon held that section 22.1 contained neither an express nor an implied private right of action for condo sellers, the Greenswag dismissal was affirmed.
The Greenswag Case Before the Supreme CourtThe First District affirming the dismissal of Greenswag led to other such cases being stayed at the trial court level. Now – for the second time in three years – the Supreme Court will speak on section 22.1.
While both lower courts in Greenswag stated that the amendment to section 22.1 was a relevant consideration, neither expressly held that the amendment to section 22.1 was retroactive. Whether the Supreme Court will agree with the trial or intermediate courts’ reasoning, or whether it will go a step further and hold the amendment is retroactive, or reverse the lower courts altogether, remains to be seen.
Whatever the result, both plaintiffs’ attorneys and defense counsel will be tuned in to the Supreme Court’s second impactful decision about section 22.1 in a short timeframe.
Labor Compliance Meets Land Use: What California’s Environmental Law Reforms Mean for Construction Employers
Takeaways
California’s rollback of parts of its environmental law to accelerate housing and infrastructure development is expected to increase demand for construction workers.
The new California Environmental Quality Act exemptions for certain new developments come with strings attached, such as mandatory prevailing wage and skilled workforce rules for construction employers.
Employers could consider incorporating project labor agreements or labor compliance frameworks into RFQs, construction contracts, and zoning applications to reduce risks.
For employers in the construction industry, the need for workers is expected to increase following a significant rollback of parts of the landmark California Environmental Quality Act (CEQA). Intending to accelerate building and development in the state, two new laws exempt certain projects from CEQA’s lengthy environmental reviews.
Framed primarily as tools to boost housing development and infrastructure projects, Assembly Bill 130 (AB 130) and Senate Bill 131 (SB 131) also carry labor compliance implications for employers and contractors — particularly those operating in construction, affordable housing, healthcare, and public services.
Construction industry employers considering CEQA-exempt projects or qualifying for CEQA streamlining must navigate requirements for prevailing wages and the use of a skilled and trained workforce, which carry enforcement risks and operational impacts. One potential tactic for mitigating these compliance risks is utilization of project labor agreements that include payment of prevailing wages and use of a skilled and trained workforce.
Prevailing Wage
AB 130 adds a section to the Public Resources Code, creating a statutory exemption from CEQA for housing development projects up to 20 acres (or five acres for builder’s remedy sites) that meet a strict list of criteria. If “100 percent of the units within the development project are dedicated to lower income households,” then “all construction workers … shall be paid at least the general prevailing rate of per diem wages for the type of work and geographic area ….”
For construction companies and developers looking to participate in building affordable housing, this means all contractors and subcontractors on the job must meet all the prevailing wage requirements, including certifying and documenting prevailing wage payments.
Some recordkeeping requirements and enforcement mechanisms are inapplicable if all contractors and subcontractors performing work on a development are subject to a project labor agreement. A qualifying project labor agreement would require payment of prevailing wages and provide for enforcement of that obligation through arbitration. Your Jackson Lewis attorney could help evaluate whether this approach is a good fit for your project.
Skilled and Trained Workforce
On certain projects, contractors and subcontractors must commit to using a skilled and trained workforce (or STW) for all project or contract work that falls within an apprenticeable occupation. This must be documented in monthly reports that will be public record.
As with prevailing wage requirements, certain compliance issues can be avoided by the use of a qualifying project labor agreement that can be evaluated in cooperation with counsel.
* * *
As California accelerates housing and infrastructure development, these CEQA reforms put labor requirements alongside environmental exemptions. Labor compliance can be part of requests for quotes, construction contracts, and zoning applications. For employers, the message is clear: Future development requires future-ready labor compliance. Employers can consider preparing by being familiar with the prevailing wage requirements and adopting robust compliance programs
Attorney’s Fees in Excess of $1,000 per Hour: The High Cost of Fighting Employment Claims in California
A recent California appellate decision is a stark reminder to employers of just how costly employment litigation has become in the Golden State: Bronshteyn v. California Department of Consumer Affairs.
Diana Bronshteyn, who had been diagnosed with fibromyalgia, sued her former employer, the California Department of Consumer Affairs (the “CDCA”), for disability discrimination and related claims under the California Fair Employment Housing Act—a statute that allows successful plaintiffs to recover their attorneys’ fees.
As the Court of Appeal put it, “the [CDCA] fought the case hard from the start.” Among other things, the CDCA failed to settle the case before the litigation was filed; unsuccessfully opposed Bronshteyn’s motion for leave to amend her pleadings; filed an unsuccessful challenge to the complaint; filed an unsuccessful motion for summary adjudication; and filed, opposed and lost multiple motions to compel discovery responses. To cap it off, after more than three years of hard-fought litigation, the CDCA rejected Bronshteyn’s pretrial settlement demand of $600,000. The case proceeded went to trial, and a Los Angeles jury awarded Bronshteyn in excess of $3.3 million—five-and-a-half times more than Bronshteyn’s pretrial settlement demand that the CDCA had rejected.
In their prevailing-party attorney’s fee application, Bronshteyn’s counsel applied for and was awarded $4.9 million in attorney’s fees, including a 1.75 multiplier for fees incurred up to and including the jury verdict and a 1.25 enhancement for hours worked after the verdict. Over the objection of the defense, the trial court approved fees for Bronshteyn’s counsel in excess of $1,000 per hour, which the appellate court characterized as: “Los Angeles market rates.”
The Court further noted:
When the plaintiff files a case with the prospect of recovering attorney fees, the defense is fully entitled to fight hard. But the defense does so knowing it might end up paying for all the work for both sides. Filing a flood of unselective and fruitless motions can be counterproductive if the plaintiff ultimately prevails, for the bill for that flood will wash up on the defense doorstep. Then the court may look with a wary eye at defense complaints about a whopping plaintiff’s bill.
We will continue to monitor this case for any further developments.