Monday, September 26, 2016

Real Estate: The Virginia Property Owners' Association Act - Foreclosing on Memorandums of Lien

       In a previous blog, I discussed the provisions related to filing a memorandum of lien under the Virginia Property Owners’ Association Act.
     The Act provides: “At any time after perfecting the lien pursuant to this section, the property owners' association may sell the lot at public sale, subject to prior liens.” In order to conduct a nonjudicial foreclosure, the association must comply with the statutory requirements.
     The association must give notice to the lot owner prior to advertising the sale. The notice must include notice of: “(i) the debt secured by the perfected lien; (ii) the action required to satisfy the debt secured by the perfected lien; (iii) the date, not less than 60 days from the date the notice is given to the lot owner, by which the debt secured by the lien must be satisfied; and (iv) that failure to satisfy the debt secured by the lien on or before the date specified in the notice may result in the sale of the lot.” The notice must also inform the lot owner of the right to bring a court action in the circuit court of the county or city where the lot is located to assert the nonexistence of a debt or any other defense of the lot owner to the sale.
     If the lot owner (i) satisfies the debt secured by lien that is the subject of the nonjudicial foreclosure sale and (ii) pays all expenses and costs incurred in perfecting and enforcing the lien, including but not limited to advertising costs and reasonable attorneys' fees, then the sale is discontinued. However, if after 60 days and the lot owner has not made those payments, the association may appoint a trustee for the sale and advertise the sale. In addition to advertising the sale, the association must give written notice of the time, date and place of any proposed sale in execution of the lien, and including the name, address and telephone number of the trustee. That notice must be at least given to the owner, lienholders and their assigns by certified or registered mail 14 days prior to the sale.
     The association must advertise the sale in a newspaper in the city or county where the property will be sold. The advertisement must be in a section with legal notices or where the property being sold is generally advertised for sale. The advertisement must describe the property by address and general location and have information for the representative or an attorney who can respond to inquiries about the property with their name, address, and telephone number. The advertisement must be in the newspaper for four successive weeks, but if the lot is located in a city or county immediately contiguous to a city, publication of the advertisement for five different days is sufficient. The sale then must be held on any day after the last advertisement but not earlier than 8 days after the first advertisement and not more than 30 days after the last advertisement.
     Failure to comply with these and other requirements in the statute will render the sale of the property voidable by the court. The law firm of Lafayette, Ayers & Whitlock, PLC, represents homeowner’s associations and can handle memorandums of lien and foreclosure procedures. 

Monday, September 19, 2016

Bankruptcy: Homestead & Poor Debtor Exemptions, Rental Property

          In the case of In re: Latham, the United States Bankruptcy Court at Roanoke, Virginia ruled that Virginia debtors who had a North Carolina beach house could not claim their beach house furniture in North Carolina exempt under the "household furnishings" provision of the Virginia poor debtor's exemption in Virginia Code §34-26.
     The Bankruptcy Trustee had filed an objection to the debtor's exemption claim that the furniture had a value of $9,200.00. The Bankruptcy Trustee took the position that the miscellaneous beach furniture was not household furniture because it was not located in the debtors' household and constituted personal property located on a property used by the debtors to generate income.
     The Bankruptcy Court in Latham found that the miscellaneous beach furniture did not fall within the statutory phrase "household furnishings" found in Virginia Code §34-26 (4a). The Bankruptcy Court noted that there were no published decisions that defined the term "household furnishings" from Virginia Code §34-26 (4a). The Bankruptcy Court stated that the meaning could be determined by the examination both of the statute itself and the definition of household furnishings in Black's Law Dictionary. In regard to the statute, the Bankruptcy Court noted that the statute gives examples of household furnishings which the legislature intended to set aside for the benefit of the debtors and their families. The examples cited by the legislature in the statute point toward items that debtors can retain and use in order to facilitate their fresh start. The common definitions indicate a necessity that the furnishings be in the household and used by the householder or his family. The Bankruptcy Court noted that the purpose of the pertinent statute is to protect debtors and their families from being destitute by the creditor process. Accordingly, the Bankruptcy Court found that the term "household furniture" in Virginia Code §34-26 (4a) meant "those items of furniture which are typically found in or around the home of debtors and are used by debtors and their dependents to support and facilitate day-to-day living within the home, including maintenance and upkeep of the home itself." With this being the case, the Bankruptcy Court found that the debtors in Latham intended to use their beach house as a place to go on vacation only when it was not rented. In order to finance construction, the debtors built the house with the primary intent to rent it out during peak season. The Bankruptcy Court found that the beach house was not the type of "home of the debtors" contemplated by the definition. Accordingly, the Bankruptcy Court sustained the Bankruptcy Trustee's objection to this claimed exemption.
     The Bankruptcy Trustee also objected to the debtor's claim for $3,000.00 in rental income on the property. As to this property, the Bankruptcy Trustee took the position that the debtors were required to file their homestead deed in North Carolina at the situs of the real property in order to perfect their claimed exemption in the rental income. The Bankruptcy Trustee was unable to cite authority in support of his position, however. Accordingly, the Bankruptcy Court ruled that the income was properly claimed and the exemption was properly perfected by the recordation of the homestead deed in Washington County, Virginia, and the Bankruptcy Trustee's objection to the claimed exemption was denied.

Monday, September 12, 2016

Collection: Child Support Exemption for Garnishment

     In the case of General Electric Capital Auto Lease, Inc. v. Turner, the City of Richmond Circuit Court denied a debtor's exemption to garnishment claim.
     In Turner the debtor claimed an exemption based on the amount of monthly child support the debtor owed. The Court noted that the specific exemption claimed by the debtor on the garnishment form was the exemption created by Virginia Code §55-165. The judgment creditor argued that this code section only applied to assignments of wages executed and approved by a judge under the procedure specifically set out in Virginia Code §55-161 through 167. That procedure included notice to and consent of the debtor's creditors, the appointment of a trustee, and so on. The Court found as fact that none of those things were done in this case. Therefore, the Court ruled that an exemption under Virginia Code §55-165 did not apply. The Court also considered all the other exemptions from garnishment listed in Virginia Code §8.01-512.4, and none of those exemptions applied either. Accordingly, the debtor's claim of exemption was denied.

Monday, September 5, 2016

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 §55-59.1(D) 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. §55-59.2(D) 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.