BACKGROUND

The Servicemembers Civil Relief Act of 2003 (50 App. U.S.C. § 501 et seq.) acts as the modern extension of the Soldiers’ and Sailors’ Civil Relief Act of 1940 (together referred to as "the Act"), which was passed by the U.S. Congress to provide protection for individuals called to active duty in the military service.  

Members of the Army, Navy, Air Force, Marine Corps, Coast Guard, and National Guard are protected under this act while on active duty and for a period beyond.  The protection begins with the date of entering active duty and generally terminates within 30 to 90 days after the date of discharge from active duty.  Under California law, "servicemember" also refers to members of the National Guard ordered into active state service by the Governor (Cal. Mil. & Vet. Code § 400).
 
This legal article is a brief summary of those particular sections of the Act of concern to REALTORS® when a real estate transaction involves those currently in the military service.

I.  TO WHOM THE ACT APPLIES

The act applies to an action by or against “any person in military service."  The term "any person in military service" includes a servicemember who is a member of the Army, Navy, Air Force, Marine Corps,or Coast Guard and a member of the National Guard under a call to active service authorized by the President or the Secretary of Defense for a period of more than 30 consecutive days for purposes of responding to a national emergency declared by the President.  Under certain circumstances, it may also include a servicemember who is a commissioned officer of the Public Health Service or the National Oceanic and Atmospheric Administration.  (50 App. U.S.C. § 511.)

In addition, the Act expressly extends its benefits to the heirs, personal representatives, and assigns of the servicemember, and, in general, the courts have given it a liberal construction in order to extend the benefits of the statute to a servicemember who might be affected, even though not directly a party to the action (Am. Jur. 2d Military and Civil Defense § 427).

Furthermore, a citizen of the United States who is serving with the forces of a nation with which the United States is allied in the prosecution of a war or military action may be entitled to the relief and protections provided under this Act (50 App. U.S.C. § 514).

II.  TERMINATION OF LEASES

1)  A lease covering premises occupied or intended to be occupied by a servicemember or a servicemember's dependents for residential, professional, business, agricultural or similar purpose may be terminated by a servicemember if the following two conditions are met:

a)  The lease was executed by the servicemember before he or she entered military service; or

b)  The servicemember while in military service executes the lease and then later receives military orders for a permanent change of station or to deploy with a military unit, or as an individual in support of a military operation, for at least 90 days duration. 

(50 App. U.S.C. § 535(a) and (b).)

2)  To terminate a lease described under (1) above, the servicemember must deliver written notice to the landlord at any time after entry on active duty or receipt of orders for active duty. Oral notice is not sufficient. The effective date of termination is determined as followed:

a)  For month to month rentals, the termination becomes effective 30 days after the first date on which the next rental payment is due subsequent tothe date when the notice of termination is delivered. For example, if the rent is due on the first day of each month, and notice is mailed on August 10, then the next rental payment is due and payable on September 1. Thirty days after that date would be October 1, the effective date of termination.

b)  For all other leases, termination becomes effective on the last day of the month following the month in which proper notice is delivered. For example, if the lease requires a yearly rental and proper notice of termination is given on July 20, the effective date of termination would be August 31.

(50 App. U.S.C. § 535(d)(1).)

3)  The servicemember is required to pay rent for only those months before the lease is terminated. If rent has been paid in advance, the landlord must prorate and refund the unearned portion within 30 days of effective date of the termination of the lease. If a security deposit was required, it must be returned to the servicemember upon termination of the lease.  (50 App. U.S.C. § 535(f).)

4)  Under California law, no eviction of a servicemember can take place during the period of military service or until 30 days after the servicemember is released from active duty.  This provision applies only if the premises are occupied primarily for dwelling purposes by the spouse, children, or other dependents of a service member.  In this case the court may stay any proceedings that affect the possession of the property.  However, rather than granting a complete stay, the court may require the tenant to make regular partial payments during the service member's period of military service, or the court may make any other order that it finds to be just. But when a stay is granted by the court, the owner of the premises is entitled to relief.  (Cal. Mil. & Vet. Code § 406.)

III.  INSTALLMENT CONTRACTS AND MORTGAGE FORECLOSURES

1)  A servicemember who, prior to entering active duty, signed an installment contact for the purchase, lease, or bailment of real or personal property, will be protected under the Act if the servicemember’s ability to make the payments is "materially affected" by the service (50 App. U.S.C. § 532).

a)  The servicemember must have paid, prior to entry into active duty, a deposit or installment under the contract (50 App. U.S.C. § 535(a)(2)).

b)  The vendor is then prohibited from exercising any right or option under the contract to rescind or terminate the contract, to resume possession of the property for nonpayment of any installment due, or to breach the terms of the contract, unless authorized by the court (50 App. U.S.C. § 532(a)(1)). 

c)  Whether a servicemember's ability to comply with the contract is "materially effected" by military service is determined by the court (50 App. U.S.C. § 532(c)(2)).

2)  Servicemembers are protected against foreclosures of mortgages, as long as the following facts are established:

a)  The relief is sought on an obligation secured by a mortgage, trust deed, or other security in the nature of a mortgage on either real or personal property;

b)  The obligation originated prior to entry into active duty;

c)  The property was owned by the servicemember prior to entry into active duty;

d)  The property is still owned by the servicemember at the time relief is sought;

e)  The ability to meet the financial obligation is "materially affected" (see III(1)(c) above) by the servicemember’s active duty obligation;

f)  The action is filed during or within 9 months after a servicemember's period of military service.

(50 App. U.S.C. § 533.)

Note: Family members receive the same benefits under this law upon application to a court, unless in the opinion of the court, the dependant’s ability to perform has not been materially impacted (50 App. U.S.C. § 538). 

IV.  ENFORCEMENT OF STORAGE LIENS

1)  A person holding a lien on the property or effects of a servicemember may not, during any period of military service of the servicemember and for 90 days thereafter, foreclose or enforce any lien on such property or effects without a court order granted before foreclosure or enforcement (50 App.U.S.C.  § 537(a)(1)).

2)   For the purposes of paragraph (1), the term "lien" includes a lien for storage, repair, or cleaning of the property or effects of a servicemember or a lien on such property or effects for any other reason (50 App.U.S.C.  § 53&(a)(2)).

V.  CIVIL JUDICIAL PROCEEDINGS

1)  A servicemember who is involved in a civil judicial proceeding, as either a plaintiff or defendant, and he or she has received notice of the proceeding, is entitled to a stay of that proceeding if it is determined that the servicemember’s ability to prosecute an action or defend an action is "materially affected" by reason of his/her active duty service (50 App. U.S.C.  §§ 502(2), 522).

a)  A servicemember may request a stay of proceedings during the period of active duty or within 90 days after termination of or release from military service (50 App. U.S.C.  § 522(a)(1));

b)  The stay can be granted at any stage before final judgment (50 App. U.S.C.  § 522(b)(1));

c)  An application for a stay must include (1) a letter setting forth the facts how the current miliary duty requirements materially affect the servicemember's ability to appear and stating a date when the servicemember will be available to appear, and (2) a letter from the servicemenber's commanding officer stating that the current military duty prevents the servicemember's appearance and that mililary leave is not authorized for the servicemember at the time of the letter(50 App. U.S.C.  § 522(b)(2)).

d)  "Material effect" is usually shown when the soldier can prove that military duties prevent him/her from appearing in court at the designated time. However, courts require servicemembers to be diligent in their attempts to appear in court, and will be reluctant to grant long-term stays of proceedings.

2)  If a default judgment is entered against a servicemember, who is a defendant in an action but hadn't received notice of the action, for an action filed during the servicemember's period of military service, or within 60 days after termination or release from the military service, the court may reopen the judgment if it appears that

a)  the servicemember was materially affected by reason of the military service in making a defense to the action; and

b)  the servicemember has a meritorious or legal defense to the action or some part of it.

(50 App. U.S.C.  § 521(g));

VI.  MAXIMUM RATE OF INTEREST ON DEBTS

1)  The maximum rate of interest (including service charges) on debts incurred by servicemembers and their spouses prior to entering active duty is 6 percent per year during the period of active duty.  This applies to all financial obligations and liabilities, including credit card debts, and automobile loans (50 App. U.S.C.  § 527(a)(1)(B)).  However, for mortgages (obligations under trust deeds) this period of time extends to one year beyond active duty (50 App. U.S.C.  § 527(a)(1)(A)).  Interest at a rate in excess of the 6 percent is forgiven  (50 App. U.S.C.  § 527(a)(2)). 

2)  The court may grant a creditor relief if the creditor convinces the court that the servicemember’s ability to pay a greater amount of interest is not materially affected by the military service (50 App. U.S.C.  § 527(c)).

VII.  LANDLORD/TENANT - EVICTIONS

1)  A landlord may not evict a servicemember or his or her dependents from their home while the servicemember is on active duty or has received orders to report for active duty, if the rent does not exceed $2,400 per month (2003 amount--to be adjusted for housing price inflation  using the CPI housing component), without obtaining a court order authorizing the eviction (50 App. U.S.C.  § 531(a)).

2)  The court hearing the case must determine whether the servicemember’s military service has materially affected his or her ability to pay the rent. If the court determines that it has, the court may stay the eviction proceedings (50 App. U.S.C.  § 531(b)).

VIII.  REAL ESTATE TAXES AND ASSESSMENTS 

1)  The Act applies to a tax or assessment (other than a tax on personal income) on a servicemember's real property occupied for dwelling, professional, business, or agricultural purposes by a servicemember or the servicemember's dependents or employees and occupied before the servicemember's entry into military service and during the time the tax or assessment remains unpaid.  (50 App. U.S.C. § 561(a)(2)).

2)  The property, described in VIII(1), may not be sold to enforce the collection of such tax or assessment except by court order and upon the determination by the court that military service does not materially affect the servicemember's ability to pay the unpaid tax or assessment (50 App. U.S.C. § 561(b)(1)).

3)  A court may stay a proceeding to enforce the collection of such tax or assessment, or sale of such property, duringa period of military service of the servicemember and for a period not more than 180 days after the termination of, or release of the servicemember from, military service  (50 App. U.S.C. § 561(b)(2)).

4)  When such property is sold or forfeited to enforce the collection of a tax or assessment, the servicemember has a right to redeem the property during the period of military service or within 180 days after termination (or release from) military service  (50 App. U.S.C.  § 527(c)). 

5)  When a servicepmember doesn't pay a tax or assessment on such property, when due, the interest on the tax or assessment is limited to 6 percent per year.  No additional penalties or interest may be assessed.   (50 App. U.S.C.  § 527(d)).   

IX.  WAIVER OF PROTECTION BY SERVICEMEMBERS

1)  A servicemember may waive certain rights and protections provided by this Act (vacation or set-aside of judgments, actions stayed, postponed, or suspended) (50 App. U.S.C.A. § 513(d)). 

2)  Any such waiver is effective only if it is a writen instrument separate from the obligation or liability to which it applies (50 App. U.S.C. § 513(d)(1)).

3)  In the case of a waiver that permits an action, the waiver is effective only if made during or after the servicemember's period of military service.  Any waiver executed prior to the military service is not valid unless it was executed by a reservist, at the time he or she is ordered to report to duty (50 App. U.S.C. § 513(d)(2)).

X.  MORE INFORMATION

Additional information about the Servicemembers Civil Relief Act of 2003 can be found on various goverment websites.  In particular, see the U.S Military Web site article  http://usmilitary.about.com/od/sscra/l/blscramenu.htm.

This article is just one of the many legal publications and services offered by C.A.R. to its members. For a complete listing of C.A.R.'s legal products and services, please visit C.A.R. Online at www.car.org.

Readers who require specific advice should consult an attorney. C.A.R. members requiring legal assistance may contact C.A.R.'s Member Legal Hotline at 213.739.8282, Monday through Friday, 9:00 A.M. to 6:00 P.M. C.A.R. members who are broker-owners, office managers or Designated REALTORS® may contact the Member Legal Hotline at 213.739.8350 to receive expedited service. Members may also fax or e-mail inquiries to the Member Legal Hotline at 213.480.7724 or legal_hotline@car.org.  Written correspondence should be addressed to:

California Association of REALTORS®
Member Legal Services
525 South Virgil Avenue
Los Angeles, California 90020