Dr. Leevil, LLC v. Westlake Health Care Center
Facts: A landlord defaults on the mortgage encumbering their commercial property. The property is occupied by a tenant under a lease containing an automatic subordination clause. The property is later sold to a buyer at a trustee’s sale. The buyer serves the tenant with a three-day notice to quit prior to recording the transfer with the county and perfecting title. The tenant holds over and is evicted in an unlawful detainer (UD) action.
Claim: The tenant seeks to regain possession of the property, claiming the notice to quit and subsequent UD action are invalid since the notice was served prior to the buyer perfecting title.
Counter claim: The buyer claims the tenant’s lease is wiped out by the trustee’s sale since the lease is automatically subordinate to the buyer’s trust deed, and the buyer only needs to have possession of the property before serving a notice to quit.
Holding: A California court of appeals holds the notice to quit is valid and the tenant cannot regain possession since the tenant’s lease is subordinate to the buyer’s trust deed, and the buyer does not need to perfect title prior to serving a notice to quit. [Dr. Leevil, LLC v. Westlake Health Care Center (March 7, 2017) _CA4th_]
Editor’s Note — Although the buyer of a foreclosed property does not need to perfect title to serve an occupant a three-day notice to quit, the buyer needs to perfect title before removing an occupant from the property under a UD action. [See RPI Form 578]