[WSBARP] Condo HOA Lien Foreclosure

Tue Feb 24 15:36:21 PST 2015

Well now I read the Summerhill summary and I get a different take on this.
If the lender, CitiMortgage was notified of the non-payment of HOA dues and
was also notified of the redemption period after the Sheriff's Sale, then it
looks like they were certainly not "diligent" in protecting their interest
and it is now gone, at least as far as the security goes.  

Am I reading this correctly?

Here is the Summerhill Village summary:  Date: March 27, 2012  /  Author:
Larry Glosser  /  Categories: Liens/Bond Claims
<http://www.ac-lawyers.com/news/category/liens-bond-claims>   /  Comments
(0)
<http://www.ac-lawyers.com/news/2012/03/27/super-priority-lien-of-homeowners
-associations#comments>   /  Back to Blog
<http://www.ac-lawyers.com/news/2012/03/27/super-priority-lien-of-homeowners
-associations>  

In Summerhill Village Homeowners Association v. Roughly and JP Morgan Chase
Bank
<http://www.courts.wa.gov/opinions/?fa=opinions.disp&filename=664557MAJ> ,
the Washington State Court of Appeals upheld a foreclosure sale of a
condominium unit based on the homeowner's failure to pay Homeowner's
Association ("HOA") assessments over the claims of the first lien lender's
mortgage lien. By statute, a condominium association or HOA has a "super"
priority lien over all other liens where the homeowner failed to pay HOA
assessments for six months.  In most cases, when a lender is notified of a
foreclosure for the unpaid HOA assessments, the lender pays the six months
of past assessments (the super-lien amount) and preserves its position as
the first lien holder.  In this case, the lender's lien was recorded in 2006
but the delinquent assessments did not accrue until 2008.  Yet, the six
months of unpaid HOA assessments in 2008 had a super priority over the 2006
mortgage lender. 

In this case, the lender, after being notified of the pending foreclosure by
the homeowner's association, failed to pay the six months of past HOA
assessments.  Consequently, the HOA foreclosed and the unit was sold at
auction to a third party for $10,302.00.  After the sale, the lender
attempted to invoke redemption rights, which allow certain persons or
entities (including junior lien holders who acquired a lien "subsequent in
time" to the foreclosing lien) to redeem the property by payment to the
successful bidder of that bidder's costs.  However, the appellate Court held
that since the lender's deed of trust was recorded in 2006, it was not
"subsequent in time" to the super priority lien that arose in 2008.  Thus,
the Court denied the lender the right to redeem the property and ruled that
its interest had been extinguished at the Sheriff's sale. The court stated
that "[w]e will not rewrite the redemption statute because a lienholder's
lack of diligence had unexpected consequences."

The lesson in this case is that the first position lien holder can lose its
rights to a foreclosing HOA for lack of diligence-failing to pay the mere
six months of past HOA assessments.

  _____  

James R. Doran

Attorney at Law

100 E. Pine Street - Suite 205

Bellingham, WA 98225

(360)393-9506

 <mailto:jim at doranlegal.com> jim at doranlegal.com

www.doranlegal.com

From: wsbarp-bounces at lists.wsbarppt.com
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Kathryn R. McKinley
Sent: Tuesday, February 24, 2015 2:54 PM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] Condo HOA Lien Foreclosure

Actually, if the condominium was formed under the Washington Condominium
Act, the COA may have a super priority lien over CitiMortgage for
assessments in the 6 months preceding foreclosure. See Summerhill Village
Homeowners Association v. Roughly. I believe it is a 2012 case. 

Kathryn R. McKinley

Of Counsel

717 W. Sprague Ave. Suite 1200
Spokane, WA 99201
(509) 455-6000

 <mailto:kathryn.mckinley at painehamblen.com>
kathryn.mckinley at painehamblen.com

This message is private or privileged. If you are not the person for whom
this message is intended, please delete it and notify me immediately, and
please do not copy or send this message to anyone else. 

From: wsbarp-bounces at lists.wsbarppt.com
<mailto:wsbarp-bounces at lists.wsbarppt.com>
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Rich Holland
Sent: Tuesday, February 24, 2015 2:32 PM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] Condo HOA Lien Foreclosure

That is awesome, but I doubt it.  Look at the governing documents of the
Condo.  They almost ALWAYS subordinate COA liens to the first mortgage.

From: wsbarp-bounces at lists.wsbarppt.com
<mailto:wsbarp-bounces at lists.wsbarppt.com>
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Jim Doran
Sent: Tuesday, February 24, 2015 1:46 PM
To: 'WSBA Real Property Listserv'
Subject: [WSBARP] Condo HOA Lien Foreclosure

I do not do much condo work so here is a question for you all.

The condo owner did not pay his HOA dues and a sheriff's sale was done.  The
purchaser at the sheriff's sale has brought in a quote from somewhere saying
that "in some states" the HOA liens are considered "super priority liens".
The quote further says that if the HOA forecloses the super line, such as in
this case, it may eliminate the first mortgage.  In this case CitiMortgage
has a $60,000 mortgage.  

Does the foreclosure and Sheriff's Sale brought by the HOA for dues
eliminate the CitiMortgage underlying DOT and Note?

Thanks.

(My instincts say "No, it does not".)

James R. Doran

Attorney at Law

100 E. Pine Street - Suite 205

Bellingham, WA 98225

(360)393-9506

jim at doranlegal.com <mailto:jim at doranlegal.com> 

www.doranlegal.com <http://www.doranlegal.com> 

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