Virginia Code §55-59.4(A)(2) permits the trustee to require of any bidder at any sale a deposit of as much as ten percent of the sales price, unless the deed of trust specifies a higher or lower amount. However, because the statute is not mandatory, the trustee is given the right to waive the deposit if he deems it appropriate, unless the deed of trust requires a specific deposit. The trustee should also consider using a fixed amount as the deposit rather than a percentage of the sales price. Using a percentage of the sales price as the method of determining the required deposit often results in confusion, and the successful bidder has either too much or too little money to deposit. A fixed deposit avoids the confusion and allows all potential buyers to know exactly how much money to bring to the sale to deposit. The fixed deposit should not be excessive but should be of a sufficient amount to ensure that the successful bidder completes the closing of the sale.
Monday, October 14, 2024
Monday, October 7, 2024
Real Estate: Making Owners and General Contractors Personally Liable to Subcontractor, Laborer or Materialman
Virginia Code §43-11 provides a way for owners or general contractors to be made personally liable to subcontractor, laborer or materialman if notice is appropriately given, and if the payer makes payment to the owing party without paying the notifying creditor. Specifically, §43-11 (2) states that:
“…if such subcontractor, or person furnishing labor or material shall at any time after the work is done or material furnished by him and before the expiration of thirty days from the time such building or structure is completed or the work thereon otherwise terminated furnish the owner thereof or his agent and also the general contractor, or the general contractor alone in case he is the only one notified, with a second notice stating a correct account, verified by affidavit, of his actual claim against the general contractor or subcontractor, for work done or materials furnished and of the amount due, then the owner, or the general contractor, if he alone was notified, shall be personally liable to the claimant for the actual amount due to the subcontractor or persons furnishing labor or material by the general contractor or subcontractor, provided the same does not exceed the sum in which the owner is indebted to the general contractor at the time the second notice is given or may thereafter become indebted by virtue of his contract with the general contractor, or in case the general contractor alone is notified the sum in which he is indebted to the subcontractor at the time the second notice is given or may thereafter become indebted by virtue of his contract with the general contractor. But the amount which a person supplying labor or material to a subcontractor can claim shall not exceed the amount for which such subcontractor could file his claim.”
The notices referred to in this code section are commonly referred to in the industry as “42-11 letters”. We have experienced attorneys and staff who can examine title, file mechanic’s liens, and litigate to enforce the same. If you have a need, please call us.
Monday, September 30, 2024
Bankruptcy: Homeowners’ Association Assessments and the Chapter 13 Automatic Stay
The United States Bankruptcy Court in Alexandria, Virginia, in the case of Montclair Property Owner’s Association, Inc. v. Reynard, ruled that a homeowner’s association may collect post-petition assessments from a Chapter 13 debtor’s property that is not property of the bankruptcy estate.
In making its decision, the bankruptcy court noted that courts have taken different approaches with respect to the extent of the bankruptcy estate after confirmation of a Chapter 13 plan and, indeed, whether there is an estate after confirmation. The bankruptcy court ruled, however, that Bankruptcy Code §1306(a) includes in the Chapter 13 estate all property acquired by the debtor after confirmation, including future earnings. If the Chapter 13 estate did not have these assets, it could not pay pursuant to the plan.
In this case, no relief from the automatic stay was necessary, as there was no judgment yet obtained to execute upon. However, the court did rule that no relief from the automatic stay is necessary to collect post-petition homeowner’s assessments from property that is not property of the estate. Collection activities may only be directed to property of the debtors, not property of the estate. All post-confirmation earnings are property of the estate.
Monday, September 23, 2024
Collections: Secured Transaction Proceeds
In the case of Orix Credit Alliance Inc. v. Sovran Bank, N.A., the United States District Court at Baltimore, Maryland, reviewed a case where Sovran Bank, which had provided the debtor with a line of credit and several bank accounts, one of which was a depository "cash collateral" account routinely applied against draws on the line of credit, signed an agreement with Orix, a finance company, to subordinate the bank's security interest in a crane (purchased by the debtor with funds from the finance company) to the finance company's interest in the crane. The Court ruled, however, that the bank was entitled to use the proceeds from the sale of the crane to reduce the debtor's obligation under the line of credit. The Court's decision was based upon a finding that the bank's transfer of the proceeds occurred in the debtor's ordinary course of business under Virginia Code §8.9-306, comment 2(c), which extinguished the finance company's interest in the proceeds from the sale of the crane.
This case serves as another example as to why competent legal advice should be sought before relying upon a recorded security interest.