[WSBARP] Judicial foreclosures and HOAs

Mon Feb 1 12:50:40 PST 2016

Richard, that's interesting, and disappointing.  One aspect of this is that
with default judgments, with respect to the right to take a default on any
issues that are not amounts certain, we are all supposed to prove the right
to what we want. For example, in a default, if it is abandoned and improved,
we have to always provide a declaration (often with copies of County
permitting documents) and a memorandum about what that means factually and
what that means to the judgment. We also always do this with priority issues
- if the client is prior, then we show the language in the governing
documents that makes it prior. Then the court makes its findings and
conclusions and can enter the judgment. All of this is under CR 55(b).

But judges are busy and often don't require such proof, and if they do, they
only see one side of things. So it is often up to the lawyers to stick to
the straight and narrow in defaults. 

Rob 

Robert D. Wilson-Hoss 
Hoss & Wilson-Hoss, LLP 
236 West Birch Street 
Shelton, WA 98584 
360 426-2999

www.hossandwilson-hoss.com
rob at hctc.com

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From: wsbarp-bounces at lists.wsbarppt.com
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Richard Holland
Sent: Monday, February 01, 2016 12:03 PM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] Judicial foreclosures and HOAs

I’d love to see the topic fleshed out as I represent many lenders post
foreclosure with REOs and we run into a similar issue with HOA/COA
foreclosures from the other side where they either don’t name the bank or do
and then insert what I contend is rather sneaky language into the default
which a judge rarely reads stating that the HOA/COA lien has super priority
over everything except taxes even if there was subordination language in the
governing documents.  They then foreclose and demand the bank pay the full
amount to redeem.  Creates a huge mess when realistically the attorney had
no good faith basis for requesting that relief over the bank.

From: wsbarp-bounces at lists.wsbarppt.com
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Rob Wilson-Hoss
Sent: Monday, February 01, 2016 11:22 AM
To: 'WSBA Real Property Listserv' <wsbarp at lists.wsbarppt.com>
Subject: [WSBARP] Judicial foreclosures and HOAs

          I just want to introduce this topic and see if anyone else cares.
I represent many HOAs and some condos and coops. This means many
interactions with lenders around nonpayment of both loans and association
fees. These days, lenders are filing more judicial foreclosures to address
dead borrowers and other difficult issues. That is their choice. But they
almost always name the association as a defendant, and claim, and seek
relief about, extinguishing all rights of defendants.

          This is absurd, as a bank judicial foreclosure of a deed of trust
in a covenanted community cannot (usually) extinguish the application of the
covenants to the property. Certainly one issue is priority, bank loan to
association delinquency, and that is a complicated issue involving the form
of the association (condo or HOA/coop); if a HOA/coop, the language of the
governing documents; and so on. Putting priority and payment issues aside,
there are very likely a whole lot of other very important rights that
associations and members of associations have in property that is being
foreclosed, including the rights to the property condition and behavioral
covenants, for example.

          For a lender to file a complaint and serve it on an association
that seeks to extinguish those rights is, well, not something they teach in
law school. Of course, my release date from law school was 1978, so things
may have changed.  

          So, who cares? First, there is a difference between associations
with lawyers who call the banks on these complaints, and insist on a
dismissal and judgment language that excepts covenant rights; and smaller
(usually) associations that just ignore these lawsuits. But if the
association is sued and is defaulted, then the judgment is going to say that
all of its rights are extinguished.  Never mind the mess that needs to get
unwound around unknown persons claiming rights being served by publication -
I doubt that this can reach the individual members who usually have
individual rights to enforce covenants, because they are known, and without
service the judgment is void against them for want of jurisdiction.  

          I guess I care because these things mess up the record for the
lots foreclosed and sold.

          I will say that the bank lawyers I have dealt with about these
issues typically agree, agree to a dismissal, and usually include language
in the judgment that excepts the association, although not always. Twice I
have had to make them go back and change the judgment to except the
association from the general language extinguishing all other liens or
encumbrances. 

          Second, if an association is not prior, such as a condo or HOA
without priority language, why should the association have to pay for an
hour or two of its lawyer messing around with this to get the lender to do
what it should have done in the beginning? And then following it to the end
to make sure the judgment is what it is supposed to be? I suppose I could
send out a CR 11 warning right away and let them take care of it directly,
but that sounds like it would be more work in the long run, in most cases;
and very unfriendly as well. 

          Anyone else care? Anyone? Buehler?

Rob 

Robert D. Wilson-Hoss 
Hoss & Wilson-Hoss, LLP 
236 West Birch Street 
Shelton, WA 98584 
360 426-2999

www.hossandwilson-hoss.com
rob at hctc.com

This message is intended solely for the use of the addressee and may contain
information that is privileged, confidential, and exempt from disclosure
under applicable law.  If you are not the addressee, you are hereby notified
that any use, distribution, or copying of this message is strictly
prohibited.  If you received this message in error, please notify us by
reply e-mail or by telephone (call us collect at the number listed above)
and immediately delete this message and any and all of its attachments.
Thank you.

This office does debt collection and this e-mail may be an attempt to
collect a debt, Any information obtained will be used for that purpose.  To
the extent the Federal Fair Debt Collection Practices Act (15 U.S.C. § 1692)
applies this firm is acting as a debt collector for the
condominium/homeowners' association named above to collect a debt owed to
it. Any information obtained will be used for collection purposes. You have
the right to seek advice of legal counsel.

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