[WSBARP] DOT and Non-monetary Defaults

Thu Feb 4 12:51:56 PST 2016

Eric, as you pointed out, my DOT has the provisions that you have quoted.
The problem arises with the practical question of what comes next.  The
debtor has the right to cure the default, but that can be a subjective test.
For example the roof leaks, will the debtor be able to climb on the roof and
slather black tar around and call it good?  Can the creditor dictate that
the debtor stall a new roof (twenty year shingles?).  If the debtor
challenges the foreclosure and asserts that the debtor cured the default,
would a judge really be willing to cut the debtor out of the residence
because the debtor didn't do enough?  I doubt it.  

And Rick raises additional problems.  The debtor needs a redemption cost but
that should be based on the repair/cure costs.  AND, the debtor has the
right to reside in the residence during the redemption period.  So, how does
the creditor make the repairs while the debtor has possession?  

What a mess.

From: wsbarp-bounces at lists.wsbarppt.com
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Eric Nelsen
Sent: Thursday, February 4, 2016 10:48 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] DOT and Non-monetary Defaults

Dwight, as usual, strikes accurately on a difficulty. But I think Rick is
also right--nonjudicial foreclosure was supposed to work for non-monetary
defaults as well. But the statutory language is certainly not well-suited
for dealing with one, and the case law that strictly construes the
requirements makes it difficult to find a creative solution that involves
simple cure of the non-monetary default.

Maybe the non-monetary default can be converted to a monetary default by
acceleration.

In the standard deed of trust LPB 22-05 rev. 4/2014, paragraph 4 of the
mutual covenants section, it says, "upon default by the grantor in the
payment of any indebtedness secured hereby or in the performance of any
agreement contained herein, all sums secured hereby shall immediately become
due and payable at the option of the beneficiary."

Paragraph one of the grantor covenants on the previous page is that grantor
covenants and agrees "to keep property in good condition and repair; to
permit no waste of thereof;."

So notice of default on keeping the property in good condition, followed by
an acceleration upon failure to cure, creates a monetary default. Maybe that
would work? 

Sincerely,

Eric

Eric C. Nelsen

SAYRE LAW OFFICES, PLLC

1320 University St

Seattle WA 98101-2837

phone 206-625-0092

fax 206-625-9040

From: wsbarp-bounces at lists.wsbarppt.com
<mailto:wsbarp-bounces at lists.wsbarppt.com>
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Rick Hoss
Sent: Wednesday, February 03, 2016 4:32 PM
To: 'WSBA Real Property Listserv'
Subject: Re: [WSBARP] DOT and Non-monetary Defaults

The non-judicial trustee may drag her or his feet before proceeding with
foreclosure for non-monetary default, but rcw 61.24.090(3) addresses cure
necessary for a default occasioned by other than a failure to make payments
so this was contemplated when adopting rcw 61.24. The trustee should make it
very clear about what constitutes cure and come up with an objective
performance standard. With so much recent focus on trustee behaviors the
trustee should be more flexible in extending cure times than with payment
defaults.

A more cautious approach  is often for a judicial foreclosure with or
without a request for appointment of a receiver. But thinking backward, how
will the foreclosed party exercise his redemption rights unless the cost of
the nonmonetary default is specified in the fof, col and/or judgment? What
if there is a judgment for the cost to cure but the work isn't done?

It takes me just about the same amount of time to draft a judicial
foreclosure and summary judgment pleadings as the non-judicial foreclosure
notices, and there are not nearly as many recent decisions critical of
judicial foreclosure processes. But there is a redemption right that needs
to be planned for with the judicial foreclosure.

From: wsbarp-bounces at lists.wsbarppt.com
<mailto:wsbarp-bounces at lists.wsbarppt.com>
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Paul Neumiller
Sent: Wednesday, February 03, 2016 1:53 PM
To: wsbarp at lists.wsbarppt.com <mailto:wsbarp at lists.wsbarppt.com> 
Subject: [WSBARP] DOT and Non-monetary Defaults

Listmates: I have been pondering this problem for a long time.  Client is a
seller-carryback holder of a deed of trust and note.  Debtor is not in
default of note installments but is allowing the real property secured by
the lien of the DOT to deteriorate.  Waaaay too much deferred maintenance
(i.e. leaking roof in residence, dilapidated barns, etc.).  The note doesn't
mature for another 20 years.  Parties used the standard WA residential DOT
requiring that debtor "keep the property in good condition and repair"  and
an acceleration of debt if the debtor fails to perform a duty agreed to in
the DOT.  

So how does this work?  Has anyone just tried a non-judicial foreclosure and
"damn the torpedoes"?  Maybe, have the creditor go in and fix everything
(not sure the creditor has the right to cure non-monetary defaults) and then
bring a non-judicial foreclosure based on the repair costs, OR bring a
judicial foreclosure and have lots of pictures and evidence of deferred
maintenance?  That sure seems like a can of worms and litigator's dream.
Any ideas?

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