If a future interest holder pays off a lien to avoid foreclosure, is he or she entitled to be reimbursed?
Real property rights are sometimes described as a “bundle of sticks”. This analogy stands for the idea that there are numerous rights associated with real property. Oftentimes, one person owns all to a parcel of real property. However, sometimes, real property rights are divided amongst two or more people or entities.
Two “sticks” of property rights are present and future interests. To that end, one person may hold a present interest in a parcel of real property while another may hold a future interest in that same parcel. For example, one person (“Present Interest Holder”) may hold a life estate, while an heir (“Remainderman”) holds the right to the property after the Present Interest Holder dies. Ideally, the Present Interest Holder will take good care of the property and preserve it until his or her death. However, this isn’t always the case. Let’s take this example one step further. Imagine that the Present Interest Holder fails to pay property taxes for a number of years and the County forecloses on the property. What can the Remainderman do?
Luckily, the law vests the Remaindermen with rights to protect his or her future interests in real property. The Remainderman has the right to enforce the duties and obligations of the life tenant to preserve real property. (Restatement First on Real Property, section 117.) In California, the remainder holder may bring an action for an injunction or damages against a life tenant who is committing waste. (Civ. Code section 826) Specifically, “A person having an estate in fee, in remainder or reversion, may bring an action for an injury done to the inheritance…” (Id.)
Waste is broadly defined. Black’s Law Dictionary defines “waste” as “permanent harm to real property committed by a tenant to prejudice” the future interest holder. (“Waste”, Black’s Law Dictionary, 11th ed. 2019.) Often, waste is thought of as tangible destruction to property. However, waste is not limited to physical damage of real property. (Osuna v. Albertson) Indeed, waste may include a present interest holder’s failure to pay a lien. Therefore, if a life tenant fails to pay taxes, a remainder holder who pays them to avoid suffering a forfeiture may be entitled to reimbursement. (Riley v. Turpin.) Further, a remainderman who pays off a lien to avoid a foreclosure sale may have the right to prematurely partition the property. (Id.; Civil Code section 2903)
Indeed, although a future interest holder may not have a present right to possession of real property, he or she is entitled to protect the future interest. Issues involving waste and future interest holders are often complex. The attorneys at Schorr Law have years of experience dealing with issues involving waste and protecting the rights of a future interest holder in real property. Contact Schorr Law to schedule a consultation today.