If we owner financed the sale of a piece of property, can we be held liable for anything that our buyer is foing on the property?

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If we owner financed the sale of a piece of property, can we be held liable for anything that our buyer is foing on the property?

Payments have been made on time every month and everything has been great. Yet today we got a phone call from a neighbor threating to sue us for something the purchaser is doing. We have no control over the new owner so can we be sued?

Asked on January 30, 2016 under Real Estate Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

If you are not the owner of the property any more, you would not be liable for  what the new owner is doing, any more than if the new owner had a bank mortgage, the bank would be liable. However, this would require that the title be in the new owner's name and not yours. If you still retain title until the purchase price is paid in full, then you are still the owner, even if everything (e.g. the payment history and that the new owner is honoring his/her obligations) indicates that the new owner will honor his/her obligations and ultimately pay everything and get title--until that happens, if the title is in your name, you are still the owner. And if you are still the owner, you can be held liable for what persons you allow to be on/live in/use the property--like the person(s) buying it--do. So if you have not transferred title yet, you could potentially be successfully sued. 
If you have transferred title already, then explain that to the neighbor, who may not be aware of this fact (you may also want to provide a copy of the documents showing that title is in the new owner's name). 
If you have not transferred title, explain to the people buying from you that if they cause you to incur any costs or liabilty, you will sue them to recover the money.


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