Legal Question in Real Estate Law in California

Re: Home Loan Contract

The reason it says they can pay the taxes, is because the lender does not want to lose his security interest, the property you are on, simply because you failed to pay the property taxes and the property was sold at a tax foreclosure sale. That's not a contractual agreement for your lender to pay your taxes for you, but a safeguard to protect the lender's security interest.

Very truly yours,

Re: Home Loan Contract

Are you sure it says they WILL pay the property taxes? My guess is that if you look at the loan closely, it will say that they MAY pay the property taxes, or that they have the right to do so.

If I'm wrong, and the loan contract says what you believe it says, then the facts you describe do indeed sound like a breach of contract and if you feel strongly enough about it, you could sue for damages. I do not believe you would succeed in sueing to get an order (i.e., an injunction) requiring the lender to honor the promise to pay the taxes and add the amount to the loan principal, but as I say, if you can show a dollar amount by which you were damaged by the breach, the court might award you such proven money damages.

Frankly, I think such a suit would be a big waste of time and money.

Re: Home Loan Contract

I would be willing to bet that the contract says that YOU will pay the taxes, and that if you do not, the lender will pay and then add to the amount you owe. They will also charge you interest for that payment, which is ordinarily considered an "advance." If you look at your deed of trust, which is the recorded document which secures the loan, you will undoubtedly see that the failure to pay taxes is a defualt under the terms of the loan; as a default, the lender can initiate foreclosure. It is likely that you, and not the lender are in breach of the contract.