Title Quandaries Created by Foreclosures During the Great Recession
By Heather C. Johnston
©2014 All Rights Reserved.
While the law regarding priority of easements and deeds of trust is well established in California, the surge in foreclosures during the Great Recession1 has started to reveal that this body of law has been widely misunderstood or ignored, especially with respect to the potential consequences on subordinate interests, such as easements, that may be eliminated by foreclosure. As the California real estate market recovers from an unprecedented number of property foreclosures, it is clear that many real estate practitioners and lenders have failed to adequately address existing deeds of trust when recording easements or failed to consider the effect on easements and other subordinate rights when foreclosing on real property. As the next generation of ownership takes title following the outbreak of nonjudicial foreclosures in California, subsequent owners, adjacent property owners, and their respective real estate practitioners are encountering more and more title issues, many of which could have been avoided had the parties considered the effects of a foreclosure upon beneficial subordinate interests that might automatically (and inadvertently) be extinguished as a result of a foreclosure.