Banks Going After Homeowner’s Association (HOA) Foreclosure
Banks are Going After Homeowner’s Associations and The Agencies Conducting Foreclosure Sales
Many banks are unwilling to accept the Nevada Supreme Court ruling that Homeowners Associations’ Super-priority Liens are prior to first deeds of trust and that the foreclosure of the Associations lien extinguishes the bank’s deed of trust and all other junior liens. The banks are now filing law suits against the associations that have foreclosed on their liens, as well as the collection agencies or title companies that have conducted the foreclosure sales. The banks are even suing the purchasers of the properties, claiming that the foreclosure sales themselves are improper or otherwise unconstitutional.
NOTICE REQUIREMENTS: The banks allege that the Associations or the agents conducting the foreclosure sales failed to provide adequate notice to the banks. The banks make this claim despite the fact that the statutes, NRS 116.31162 through 116.31168 and NRS 107.090, very clearly describe who is entitled to notice of the default and notice of the foreclosure sale, which just happens to be the same notice provisions that would be required if the bank were foreclosing on its deed of trust. Under the statutes, as a junior lien holder, the banks are required to, and do, receive notice of the default and notice of the foreclosure sale.
Having received the statutory notices and being unable to argue otherwise, the banks have resorted to attacking the content of the notices, claiming that the notices do not provide sufficient information to enable a bank to determine the amount of the association’s super-priority lien and make payment to the association. Of course these arguments suggest that the bank would have actually paid the association lien prior to the Nevada Supreme Court’s decision in September 2014, which is certainly not the case. Prior to the Supreme Court’s decision, the banks insisted that their deed of trust was superior to the association’s lien and refused to pay any amount to the association. The Supreme Court ruled that the banks could have avoided the foreclosure by simply paying the amount of the lien. Now the banks argue that even though the banks are required to receive notice, the statutes require that the notices the banks receive must describe the deficiency in more detail.
Additionally, some banks are challenging the constitutionality of the statutes themselves, claiming that the statutes violate their due process rights because of what the banks describe as “opt in” provisions. The banks claim that even though the statutes in fact require the association to provide the banks with notice, some of the language of the statute can be interpreted as only requiring notice to those persons or entities that have requested notice. The banks claim that despite the fact that the statutes actually mandate notice to all junior lien holders, the purported “opt in” language of the statutes is unconstitutional because it purportedly shifts the responsibility to the banks by requiring them to request notice. Of course, these arguments ignore the fact that all junior lien holders are required to receive notice under the statutes and, since the deed of trust is junior to the association’s super-priority lien, the banks receive notice. The fact that the banks receive notice has nonetheless not discouraged the banks from attacking the language of the statutes.
SALES PRICE: The banks are also challenging the amount paid for the property at the foreclosure sale. They argue that the foreclosure sales are not being conducted in a “commercially reasonable” manner. These arguments are made despite the fact that the foreclosure statutes do not require commercial reasonableness. Further, the foreclosure sales are conducted as public auctions, with the property being sold to the highest bidder. The fact that the banks failed to attend the public auction and protect their own interest seems to have escaped the banks. So, instead they have resorted to filing law suits claiming the association should have obtained a better price than the highest bid and that the association had a duty to protect the bank’s interests, even though no duty exists.
While these arguments have been rejected by a majority of the district court judges, there have been a few judges that have agreed with the bank’s arguments. These few decisions have emboldened the banks and many associations and their agents, along with the purchasers of the properties are finding themselves defending law suits.
The Wright Law Group, P.C. is very familiar with the statutes and the issues relating to homeowner association foreclosure sales. We have litigated dozens of these cases and are uniquely qualified to assist you. If you are a homeowners association that has foreclosed on your assessment lien or if you purchased a property at an association foreclosure sale and a bank or other institution has brought suit against you we can assist you. With over 20 years of experience in litigation and as an AV rated law firm, The Wright Law Group, P.C. is well equipped to provide you with professional and knowledgeable legal help. Please call us at 702-405-0001 to schedule a consultation.