Legal Question in Real Estate Law in California
A lender received communication from the court that my Chapter 11 bankruptcy was confirmed and that the final decree was issued. Against the terms of the confirmation plan, they went ahead and posted a notice of trustee sale at my property because the property was in the foreclosure process before the bankruptcy. The notice has caused discord with the tenants at the property because the tenants are unsure of what who the true owner of the property will be within 30 days. The lender has sent a letter to myself and the tenants indicating that they have withdrawn the sale date, after I informed them that they misinterpreted the communication from the court as the case being dismissed, rather than the lender having to comply with the terms of the confirmation plan. The lender has withdrawn the trustee sale. However, I am still having trouble with my tenants because they are not threatening to move because of what they perceive as an instability of ownership. The erroneously recorded notice of trustee sale also makes it difficult for me to refinance the property. Might I have a case for slander of title against the lender and if so what might my damages be if the tenant has not yet moved?
2 Answers from Attorneys
I think there is a typo in your question -- you must mean the tenants are "now threatening" rather than "not threatening" to move out. Here is a brief and incomplete discussion of a couple of issues your question raises. Maybe another LawGuru attorney will chime in:
1. May the tenants move out? There is a possible argument that you have breached the covenant of quiet enjoyment by allowing the tenants' right to continued possession fall into question, if only briefly. If they left and you sued them, a clever lawyer (or a tenant himself in small claims court) might argue that the tenant shouldn't have to figure out whether the lender or the landlord is right, and even if the landlord is right and there will be no foreclosure now, who knows about next month? I'm not saying this is a winning defense, I'm only suggesting that it should be anticipated and might have merit.
2. Do you have a case for slander of title? Based on very limited information, I'd think so. However, as you point out, an economic problem for you would be proof of sufficient damages to make a suit worth while....even if the tenants did move out.
I would add that I suggest speaking to your bankruptcy attorney about the lender's violation of a confirmed plan. You may have better remedies in bankruptcy.
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