Thursday, October 16, 2014

SFR Investments v. US Bank

The Nevada Supreme court has ruled that:

"NRS 116.3116 gives a homeowners' association (HOA) a 
superpriority lien on an individual homeowner's property for up to nine 
months of unpaid HOA dues. With limited exceptions, this lien is "prior to 
all other liens and encumbrances" on the homeowner's property, even a 
first deed of trust recorded before the dues became delinquent. NRS 
116.3116(2). We must decide whether this is a true priority lien such that 
its foreclosure extinguishes a first deed of trust on the property and, if so, 
whether it can be foreclosed nonjudicially. We answer both questions in 
the affirmative and therefore reverse."

The result is that an investment company bought a house for peanuts at an HOA foreclosure sale, and the sale wiped out the first mortgage on a house worth hundreds of thousands of dollars.  Wow.  I have placed the full opinion on for anybody to download.


IC_deLight said...

Although the case is terrible for mortgage companies (yeah, I know - pillars of the community like HOAs, title loan companies, and used car sales companies), I hope it is moving towards larger changes such as elimination of financing for HOA burdened property. Instead what will probably happen is a legislative fix to prohibit this result in the future.

Evan McKenzie said...

Toward the end of the opinion the court seems to be saying to the banks, "hey, if you don't want the HOA to sell the place for peanuts to an investor so they can recover their unpaid assessment, get busy and foreclose yourself." If banks did that, then they wouldn't have a problem. So to me the court is protecting HOAs from an obnoxious banking industry practice.