Foreclosure: Deposits

     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.

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.

Foreclosure: Advertisements of Sale

      The Code of Virginia provides specific guidance as to advertisements for foreclosure sales. The sale must be properly advertised or it will be void upon order of the court.

      Virginia Code §55-59.2 states that if the deed of trust provides for the number of publications of the advertisements, no other or different advertisement shall be necessary, provided that: if the advertisement is inserted on a weekly basis, it shall be published not less than once a week for two weeks, and, if such advertisement is inserted on a daily basis, it shall be published not less than once a day for three days, which may be consecutive days. If the deed of trust provides for advertising on other than a weekly or daily basis, either of these statutory provisions must be complied with in addition to the provisions of the deed of trust. If the deed of trust does not provide for the number of publications for the advertisement, the trustee shall advertise once a week for four consecutive weeks; however, if the property, or a portion of the property, lies in a city or county immediately contiguous to a city, publication of the advertisement may appear five different days, which may be consecutive. In either case, the sale cannot be held on any day which is earlier than eight days following the first advertisement or more than thirty days following the last advertisement.

     Advertisements must be placed in the section of the newspaper where legal notices appear, or, where the type of property being sold is generally advertised for sale. The trustee must comply with any additional advertisements required by the deed of trust.

Foreclosure: Notice of Sale

     The Code of Virginia provides specific guidance as to giving notice of a foreclosure sale.
     §55-59.1 requires that the written notice of sale contain the time, date and place of the proposed sale, as well as either (i) the instrument number, or, deed book and page number, of the instrument of appointment filed pursuant to §55-59-59 (appointment of substitute trustee), or, (ii) a copy of the executed and notarized appointment of substitute trustee. Personal delivery or mailing a copy of the advertisement by certified or registered mail is sufficient.
      §55-59.1 requires the trustee to send written notice of the time, date and place of the sale to (i) the present owner of the property … (ii) any subordinate lienholder … (iii) any assignee of such note … (iv) any condominium unit owner’s association that has filed a lien … (v) any property owner’s association that has filed a lien … (vi) any proprietary lessees’ association that has filed a lien.
     It is important to know that in addition to the notice required by statute, the note or the deed of trust may contain additional notice requirements. Accordingly, the trustee should examine both of these documents.
     §55-59 provides that the notice can be sent by either the trustee or the lender.

Bankruptcy: Accidental Release Forfeits Security

     Being careful when filing releases is even more evident in light of the decision rendered by the 4th U. S. Circuit Court of Appeals in In Re Kitchen Equipment Company of Virginia, Inc. In Kitchen the secured creditor, a bank, accidentally checked the "termination" box instead of the "partial release" box on a multipurpose security form. The creditor had intended to release only two items of the debtor's collateral. The two items were specified in the description block. The Court ruled, however, that by filing the release checked "termination," the creditor lost its entire security interest when the debtor filed for bankruptcy protection under Chapter 11. The bank argued that the interest should be honored under equitable principles and under the Virginia form of the Uniform Commercial Code. Nevertheless, the Court refused to allow the bank's financing statement to prevail over the bankruptcy trustee's statutory lien.