Updated September 28, 2026
Yes, but a class action is a different scale of problem than a single pending tenant lawsuit, and treating it the same way in your marketing and disclosures understates what a buyer is actually taking on. One tenant's habitability claim has a knowable, bounded exposure. A proposed or certified class action multiplies that exposure across every current and sometimes former tenant who fits the class definition, and neither you nor the buyer may know the final number until the case resolves.
That uncertainty is the entire story here. Buyers don't walk away from class actions because they're guaranteed to lose money — they walk away, or discount heavily, because nobody can tell them how much the exposure actually is.
A single lawsuit has a plaintiff, a specific claim, and a discoverable range of likely outcomes based on the facts and the claim type. A class action, once certified, represents an entire group of tenants — sometimes the whole building, sometimes a defined subset — and the ultimate liability scales with the class size and the claims per class member. Even a case that hasn't reached certification yet, but has been filed as a proposed class action, signals to a buyer that the exposure could be far larger than the named plaintiffs alone.
This changes how a buyer's counsel evaluates the deal. Instead of pricing one claim, they're pricing a range of outcomes tied to how the court eventually defines the class and what it ultimately awards or settles for.
An active class action is unambiguously a material fact, and it needs to be disclosed clearly and early — not folded into a general mention of "pending litigation" alongside routine matters. Buyers and their attorneys will want the complaint itself, the current stage of the case (filed, certification pending, certified, in settlement talks), and your insurance carrier's position on coverage and defense. Underdisclosing this, even unintentionally, is the fastest way to turn a difficult but workable sale into a legal problem of your own after closing.
Price adjustment reflecting the exposure. Buyer and seller agree on a discount that accounts for the estimated range of liability, informed by legal counsel on both sides. This works best once the case is far enough along to estimate a reasonable range of outcomes.
Escrow holdback tied to case resolution. A portion of proceeds is held until the class action resolves or reaches a defined milestone, then released or applied to the judgment or settlement. Common when the case is too early-stage to price with confidence.
Seller retains the liability. The seller can remain responsible for the outcome even after selling, with the buyer taking the property but not the litigation, if the purchase agreement's indemnification language is clear enough to hold up — courts and plaintiffs' counsel don't automatically respect a private allocation of liability between buyer and seller.
Which structure fits depends on the litigation's stage, the strength of the claims, and what your carrier will do. This is a conversation for your attorney, not something to negotiate on general real estate practice alone.
A single pending lawsuit against the owner, unrelated to title, often doesn't affect the title company's willingness to insure. A class action naming the property or its ownership can prompt more scrutiny, particularly if there's any argument that a judgment could attach to the real property itself rather than remain a claim against the seller personally. Loop in your title company early to understand how they view the specific case, rather than assuming it will be treated the same as an ordinary lawsuit.
This is the one area of a sale where legal counsel needs to be in front of pricing strategy, not behind it. Your attorney can assess where the case realistically lands, what your insurance actually covers, and what disclosure language protects you without overstating or understating the exposure. A broker can price a building around a known, bounded risk. A broker cannot tell you what a class action is actually worth — that's a legal judgment, not a market one.
An active class action doesn't take your building off the market, but it does put a legal question in front of every other question about price and marketing. Sellers who get their attorney's read on exposure early, disclose plainly, and structure the deal around real uncertainty — through a discount, a holdback, or a retained liability — close deals that a poorly disclosed class action would otherwise blow up in escrow. Full disclosure requirements for LA multifamily sales generally are covered in what disclosures are required, and the broader sale process is in how to sell an apartment building in Los Angeles.
Does a class action have to be certified to affect my sale?
No — even a proposed, uncertified class action signals a wider potential exposure than a single lawsuit, and serious buyers will treat it as a material risk long before certification.
Will my insurance cover a tenant class action?
It depends on your policy and the specific claims alleged. Confirm your carrier's position on coverage and defense early, since it directly affects how the sale gets structured.
Can I just wait until the case resolves before selling?
You can, and some sellers do, but class actions can take years to resolve, and waiting has its own cost if the market moves against you in the meantime. That tradeoff is worth discussing with both your attorney and your broker.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap.
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