[WSBARP] Judicial Foreclosures & HOAs

[Richard Holland]

While admittedly I have personally seen this come up more in Oregon (because of how the statute is worded), I have had it come up in Washington and am just passing this along for those HOA advisors.  For sake of brevity, here is the Oregon Statue that, in various forms of language, appears in many CC&Rs:

Oregon Statute 94.723 Common expenses; liability of first mortgagee, once a lot in a planned community is foreclosed upon the mortgagee and subsequent purchaser shall not be liable for any of the common expenses chargeable to the lot which became due before the mortgagee or purchaser acquired title to the lot.  The unpaid expenses shall become a common expense of all lot owners including the mortgagee or purchaser.

The problem is when is "Title" acquired after a judicial foreclosure?  One argument is that it is the date of sale but that isn't accurate because you do not get a Deed (which is the instrument that conveys TITLE) until after the redemption period.  The other obvious one is that it is the date of the deed - though I have also heard the date of recording of the deed argued.  If you represent the lender, you want it to be the date the lender actually got title.  If you represent the HOA, the obvious issue is that the debtor is no longer responsible for payment after the date of sale - they have been foreclosed out - so who is responsible for paying the dues during the redemption period?  (And remember, if the US Gov't is on the title that can be 18 months in some situations).

When I have had the opportunity to advise HOAs, I suggest that they either specify this as "the date of sale" or as "the date the mortgagee obtained the right of possession" or I suppose you could say "the date the purchaser acquired title or the right to possession, whichever is earlier" but being a verbose sort why not go all out and say "The purchaser shall not be liable for any of the common expenses chargeable to the lot which became due before the earlier of:  1) The date of sale; 2) the date the purchaser acquired title; or 3) the date the purchaser obtained the right to possession".    And yes, a right of possession in the general sense could be in a rental agreement but not in the context of where the provision is in the CC&Rs.  Anyway, it's a random thing to post but it came up for me again today so it was fresh on my mind and I thought I would pass it along.

Sincerely,

Richard L. Holland

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