Question

A property leased by Travelers, Inc., from its owner, Smith, is sold at foreclosure sale. The purchaser, Bell Corporation, executes a new mortgage on the property. This mortgage is recorded. Under the priority relationship between mortgages and leases

A. the Travelers lease becomes void when Bell Corporation's mortgage is recorded.

B. Bell Corporation takes the property subject to the Travelers lease.

C. Bell Corporation acquires possession free of the Travelers lease.

D. the Travelers lease must be renegotiated in accordance with the terms of the mortgage executed by Bell Corporation

Answer 1

When a property is sold at foreclosure and a new mortgage is executed and recorded, the leases that were in effect before the foreclosure generally continue to be valid. Bell Corporation takes the property subject to the Travelers lease.

Step-by-step explanation:

In the context of the priority relationship between mortgages and leases, when a property is sold at foreclosure, the leases that were in effect before the foreclosure typically remain valid. If Bell Corporation purchases the property through a new mortgage after foreclosure, it takes the property subject to existing leases, such as the Travelers lease. In this scenario, Bell Corporation steps into the shoes of the previous landlord, effectively becoming the new landlord under the terms of the Travelers lease.

The correct interpretation is indeed that Bell Corporation takes the property subject to the Travelers lease. This means that the terms and conditions of the Travelers lease continue in force, and Bell Corporation assumes the rights and responsibilities associated with being the landlord for the duration of the existing lease agreement. The continuity of the Travelers lease is a result of the established priority relationship in property transactions involving mortgages and leases.