BEWARE OF PREVIOUSLY RECORDED GOVERNMENTAL AGREEMENTS (February 2026)

A recent case, Rodriguez v. City of Los Angeles, gives good reason, when purchasing income property, to be wary of agreements with governmental agencies recorded on the title of the property.  In that case, the City granted a building permit application that sought a density bonus, from 2 to 3 units, in exchange for the developer’s agreement to dedicate one of the units to low-income housing for 30 years.  These terms were memorialized in a written agreement, which was recorded against the property.  Eight years later, the mortgage lender foreclosed on its lien that was recorded before the City agreement was recorded.  Six years after the foreclosure, new owners purchased the property without being aware of the City agreement, and the City demanded that they comply with the agreement.

The new owners argued that because the mortgage lender’s lien was recorded first, it was senior to the City agreement, and the foreclosure extinguished the City agreement.  The court disagreed, viewing the City agreement as a permit condition that runs with the land and remains enforceable against successor owners, even though they are not parties to the permit and even if they acquire the property after a foreclosure.  The court noted that the City agreement exists only because of the permit, to aid in implementing the permit’s requirements.  Therefore, the court held that the City agreement survived the foreclosure, and the new owners are obligated to comply with it.