Legal Question in Real Estate Law in California

Almost every real-property lease or rental agreement contains an implied warranty of quiet enjoyment. "Quiet enjoyment" has nothing to do with loud noise from an adjoining unit. It means freedom from anyone challenging your right to occupy the rented or leased space. The landlord has probably committed a fraud by not informing you of the foreclosure, and the threat of foreclosure is, or will become, a breach of the covenant of quiet enjoyment. If and when necessary, calculate your money damages and consider a small-claims suit. One of the problems here is that a landlord facing foreclosure is likely not to be able to pay a judgment. You might want to consider your security deposit at risk and let the landlord use it up rather than staying 100% current on rent payments.

While Mr. Whipple has superior knowledge to me as to landlord tenant law, I do not fully agree with his answer.

This is s very misunderstood area of the law. By in foreclosure I assume you mean that the landlord has been informed by the lender that they intend to foreclose on the property if overdue payments are not made. The process takes about 120 days from the date notice first goes out to the landlord. Actual foreclosure does not occur until the foreclosure sale, which may be 5 or many more months after the landlord has fallen behind in payments. Until the sale occurs, the landlord still clearly is the legal owner of the property entitled to collect rents from the tenants. Once the sale occurs, the lender or highest bidder at the foreclosure sale becomes the owner and, subject to challenge as to some error in the sale or notice, becomes the owner entitled to collect rents. The tenant may wish to place the rent money into trust to avoid multiple claims as to who is entitled to payment [especially the security deposit], but it is clear that the tenant has no right to live in the property without paying rent. The obligation to pay rent is totally separate from the obligation to pay a loan; if the landlord had already paid off the entire loan on the property would or should that have any effect upon the tenant?

The issue of whether you have suffered recoverable damages becomes one whether the trier of fact can be convinced that the tenant did suffer a loss of future quiet enjoyment that is not speculative. Judges do tend to be pro- tenant. Certainly if you sign a one year lease and the landlord does not tell you that the foreclosure sale is set for 4 months from the lease signing date, you have been intentionally mislead and are entitled to at least the cost of moving to a new location and perhaps some other foreseeable damages. But if you are on a month to month lease/tenancy and the landlord is told the sale date is in four months, are there damages when the landlord can during that time just give you a 30 day notice of non-renewal of the month to month tenancy? You had a speculative ability to stay as a tenant in that unit; normally you have the opportunity to lock in a full year's stay by signing a one year lease. If you reserve the right to leave within 30 days by not signing a long term lease, does the landlord owe you any greater duty than you owe him/her? Does the landlord have to tell you about their financial situation but you do not have to mention that the job you list on your rental application seems unlikely to last longer than the next 4 months?

What the answer will be as to whether you have recoverable damages will greatly depend upon the facts of the case and who you get as a trier of fact. The law often turns on the facts of the case, and that is even more true in landlord-tenant cases. In your case, the landlord should have told you that he was in danger of losing ownership and it is reasonable to assume that you planned to stay there at least 6 months, so you likely do have a claim for damages.

I actually agree with Mr. Shers on this one. Your enjoyment of the premises has not disturbed, and is determinative by a future event. Your landlord may be negotiating a loan modification. Many people desiring loan modifications were told by mortgage brokers and lenders that they had to be in default to qualify for loan modifications. While I don't agree with that advice, your landlord may be able to cure the default, in which case you have not suffered any interference with your rental of the property.

A great deal of whether or not you have a case depends on your lease, its terms, when the landlord defaulted, etc.