➤ Key Highlights
A new law reportedly makes it tougher to access capital due to restrictions, causing jitters from banks.
The California Mortgage Association, California Credit Union League, United Trustees Association and several businesses and individuals contend that Section 2924.13 and California housing regulations unconstitutionally impair existing contracts, strip away established property rights and violate due process and equal protection.
Buchalter and Wright, Finlay & Zak sued the California Attorney General Rob Bonta to challenge the constitutionality of the Golden State's newly enacted statute – Civil Code Section 2924.13.
On Dec. 15, plaintiffs moved for a preliminary injunction to preserve the status quo while the court considers the serious constitutional and federal law concerns raised by the statute.
The challenged provisions of AB 130 were intended to address abandoned loans known as “Zombie Mortgages."
Section 2924.13 broadly reduces—and, in many cases, eliminates—the enforceability of virtually all loans secured by subordinate liens on residential property.
Section 2924.13 redefines routine loan servicing practices as “unlawful” and imposes new restrictions on foreclosure rights, creating serious risks for junior lienholders and borrowers in need of foreclosure prevention alternatives.
Logistics real estate is increasingly viewed as a platform for energy innovation, not just supply chain support. Site selection is now influenced as much by energy readiness as by proximity to transportation and labor. Companies are adopting on-site energy solutions and forming partnerships to enhance energy resilience.
Multiple industry groups and law firms have filed suit against California’s new Civil Code Section 2924.13, citing constitutional and federal law concerns. Plaintiffs are seeking a preliminary injunction as courts consider arguments that the law impairs contracts and alters property rights. The law targets issues related to “Zombie Mortgages” but also imposes new restrictions on lending and foreclosure practices.
This event illustrates the persistent challenge of balancing legislative efforts to address emerging property-related concerns with established legal protections. The lens here is the tension between new regulatory frameworks and pre-existing standards of property rights and fairness. Regulatory interventions often seek to solve specific market failures but must align with broader constitutional principles to avoid legal pushback. Such developments reflect the ongoing negotiation between policy goals and the legal rights of market participants.
⚠️ Why it matters
For CRE professionals, shifts in regulatory frameworks can introduce significant uncertainty regarding property rights, contract enforceability, and access to capital. The lens of regulatory alignment underscores the importance of understanding how new policies might conflict with established norms, potentially affecting transactions, underwriting, and risk assessment. Monitoring these dynamics is crucial for anticipating compliance challenges and maintaining operational stability.
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➤ TAKEAWAY
Legal proceedings could clarify or reshape the boundaries between new policy initiatives and longstanding property rights. Stakeholders may need to adapt practices as courts determine whether the law aligns with constitutional standards. Continued debate and legal review are likely as parties seek greater certainty in the regulatory environment.
