Real Estate: Homeowners’ Association Wins Damages on Owner Violations

There has been much litigation over HOA violations in the last few years. Circuit Courts have been scrutinizing HOA violation claims very carefully. Enforcement and damages for violations can be won. The December 2011 Loudon County Circuit Court case of Lee’s Crossing Homeowners’ Association v. Zinone is a good example of such enforcement. In Lee’s Crossing, the court found that in building her home, the homeowner committed multiple violations of the plan approved by the Architectural Review Board.  Ultimately, the court assessed damages in favor of the homeowners’ association on the basis of “one overriding violation,” the failure to comply with the ARB-approved application.

Bankruptcy: Bankruptcy Exemption - Sale of Tenants by the Entirety Property

In the case of In Re Zella the United States Bankruptcy Court at Alexandria, Virginia ruled that a deed that conveyed the Virginia martial home to the debtor and his wife "as joint tenants with the full common law right of survivorship" created a tenancy by the entirety and proceeds from the sale of the property is exempt from claims on non-joint creditors in Bankruptcy Court.

In Zella a creditor challenged a claim of exemption. The Bankruptcy Court determined that the key issue of the case was whether, in Virginia, a deed to parties described in the deed as husband and wife, and who are in fact husband and wife, as "joint tenants with the full common law right of survivorship," creates a tenancy by the entirety in accordance with Virginia Code §55-20, and thus makes the property exempt from the claims of non-joint creditors under Bankruptcy Code §522(b)(2)(B). The Bankruptcy Court concluded that the deed in question did create a tenancy by the entireties, notwithstanding the lack of language using those specific words, as the deed specifically contained the language "with the full common law right of survivorship". The Bankruptcy Court cited two Virginia Supreme Court cases which support such a finding: Allen v. Parkey and Burroughs v. Gorman. The Bankruptcy Court ruled that the language in the deed explicitly evidenced the intent to preserve the common-law right of survivorship.

Collections: The Importance of Docketing Judgments

If the creditor has obtained a judgment in the General District Court, the creditor should ensure that an abstract is recorded in the Circuit Court where the debtor's real property is located. Docketing perfects a lien against the debtor's real estate in that jurisdiction. Docketing also provides creditors with the right to force the sale of the real property to satisfy the debt. Judgments obtained in the Circuit Court, however, are automatically docketed, but only in that locality, pursuant to Virginia Code §8.01-446. If the debtor owns realty in another jurisdiction, the creditor should have the abstract of the judgment docketed in the Circuit Court of that jurisdiction in order to perfect a lien. 

Foreclosure: Sale Price and Delays in Sale

The trustee is under a duty to “use all reasonable diligence to obtain the best price.” 

If the trustee determines that in order to fulfill his fiduciary duty to realize the highest price for the property, a recess is necessary, he or she should recess the sale. Arguably, the recess is within the scope of the discretion afforded trustees in the conduct of the foreclosure sale. For example, if a bidder who previously advised the trustee of his interest in bidding on the property is delayed, the trustee, in his discretion, may recess the sale to a later hour on the same day to allow the bidder to attend the sale. If the trustee fails to accommodate the bidder and the property is sold for a price less than the bidder was willing to pay, the trustee may have breached his duty to “use all reasonable diligence to obtain the best price.” A decision by the trustee to recess the sale, however, should not impair the sale by making it impossible or impracticable for the bidders to appear and bid at the recessed sale.

The postponement of a foreclosure sale to a different day is not a recess and is governed by statute. Virginia Code §55.1-321 provides that the trustee, in his discretion, may postpone the sale to a different day, and no new or additional “notice” must be given. Presumably, the “notice” referred to in this section is notice of the postponement. The trustee needs only to announce at the sale that it has been postponed. §55.1-321 provides that if the sale is postponed, the trustee must advertise the “new” sale in the same manner as the original advertisement. Read in conjunction, these sections require the trustee who postpones the foreclosure to re-advertise the sale in the same manner as the original sale was advertised. Although the secured obligation will not need to be accelerated again, all other aspects of the foreclosure must be completed. Effectively, a postponed sale is a new sale in which the trustee must complete all acts that he or she completed in the first sale.

Real Estate: Using Homeowner Association Liens to Secure an Interest in Real Estate

In recent editions of Creditor News we have been discussing the benefits of using real estate to improve creditors’ positions. As I have emphasized, properly securing debts through real estate could make the difference between collecting the funds and incurring a loss. In this edition, we will review the benefits of using homeowner association liens to aid in the collection of your debt.

Virginia Code §55.1-1833 provides for special procedures for the collection of homeowners association dues. This code section allows associations to place a lien on the land for unpaid assessments, as well as give associations a priority over certain other debts. To perfect the lien, however, it must be filed before the expiration of 120 months from the time the first such assessment became due and payable. This filing must be by a memorandum filed in the circuit court of the county or city where the development is located. The memorandum must contain the information specified in the statute. Before filing the lien, written notice must be sent to the property owner by certified mail giving at least ten days prior notice that a lien will be filed. 

Suit to foreclose on the lien must be brought within thirty six months of filing in very limited, specific situations. For example, suit to foreclose cannot be done on primary residences. We will review foreclosure suit procedures in the next issue. 

We have experienced attorneys and staff who can examine title, file homeowner association liens, and litigate to enforce the same.