Legal Question in Real Estate Law in California

Re: title recording question

Are the persons referred to as "a client," the "borrowers," and the "owners" all the same? When was the document signed, and when was it recorded? I wonder about these questions in the context of whether your clients are withholding facts they knew about, or whether this is a surprise to them as well.

Next, as to the recordability of the document in the first place, in order to give you a reliable answer I would have to read it and then, perhaps, do some research in the recording statutes and related laws. My offhand hunch, however, is that this document is an informal attempt to accomplish the purposes of a lis pendens, or perhaps an abstract of judgment, and that the document is improper since it wouldn't comply with the legal requirements for such documents.

A document may be recorded if it affects an interest in ownership or right of possession of real property; there are a few additional categories probably not applicable here. If this document is nothing more than a settlement agreement between the builder and the people that sued it, the document probably contains nothing that entitles it to be recorded.

A case involving similar facts that you might want to look us is Ward v. Superior Court (1997) 55 Cal.App.4th 60. In that case, the Court of Appeal ordered the expungement of an improperly-recorded document that created a cloud on title. Recordation was improper because there was no statutory authority for recording that type of document; it was done by the parties' private agreement. The court cited Civil Code section 3412 and Government Code section 27201.

I could not find any law directing how expungement is actually carried out. My belief is that the offending document remains in the record, but there is a subsequent document added to the record, saying that the earlier one is 'expunged.' The result is that all the negative information therein (i.e., that there was a dispute over construction defects) remains completely visible. I may be wrong; the recorder may be obliged to remove all trace of the document from the record, but this would leave gaps in the numbering and could have other consequences. When a rehabilitated criminal receives expungement of his record of conviction, nothing is physically deleted; the ex-con merely gets an additional entry 'expunging' his conviction and stating that he is now rehabilitated. Big deal.

In your case, I'm afraid the damage has been done, because the lender has been made aware of a construction defect. The news is out. Whether the news will have a chilling effect on the use of the property as collateral is now up the the lender's judgment.

Perhaps your client should consider a slander of title action against the party who recorded this, if it wasn't something he consented to himself.