Foreclosure: Obtaining Possession after Foreclosure

     Upon purchasing property at a foreclosure sale, it is not uncommon to have a “holdover tenant”. If this occurs, you can obtain possession of the property by filing a Summons for Unlawful Detainer in the appropriate General District Court. The applicable statute requires that the plaintiff prove “a right to the possession of the premises at the time of the commencement of the suit.” The only evidence that is usually required is (a) a copy of the recorded trustee’s deed, since the facts recited therein are prima facie evidence of their truth, and (b) a copy of the notice to vacate sent to the occupant(s).
     On the date of the initial return, if the defendant fails to appear, possession will be granted. If the matter is contested, most courts set a new date for trial. In contested cases, issues are usually related to notice and service, so the trustee should be prepared to present evidence that the foreclosure sale was properly advertised, noticed and conducted.
     The judgment for possession is not final until 10 days after it is entered, and most courts will not issue a writ of possession during that 10-day pendency. If an appeal is noted within the 10-day period, the defendant must perfect the appeal by posting an appeal bond and paying within 30 days of the date of the judgment the applicable writ and service fees for the circuit court. Most judges are sympathetic to require significant appeal bonds equating with the former mortgage payments.  

     Eviction is accomplished using a “Request for Writ of Possession.” A writ of possession may be issued on an unlawful detainer for up to one year from the date of judgment. When requesting the writ of possession, provide contact information for both the Sheriff and the person who will supervise the eviction of the new owner; the Sheriff will coordinate a date and time to serve the writ of possession and maintain the peace while the owner physically evicts the personal property of the occupant(s) and secures the property.

Real Estate: Common Area Parking Spaces Must be Assigned Equally

     The Court of Appeals of Virginia recently issued an opinion affirming a Circuit Court decision holding that common area parking spaces must be assigned equally. The case involved a suit by a homeowner, Patrick Batt, against Manchester Oaks subdivision in Fairfax County. The subdivision contained 57 townhouses, 30 of which were constructed with a garage and driveway (garaged lots) and 27 of which were constructed with an additional bedroom and bathroom in lieu of a garage (ungaraged lots). The subdivision included a common area with 72 parking spaces.
      The subdivision was subject to a declaration, administered by the homeowners association that gave the association the right to designate a maximum of two parking spaces for the exclusive use of each lot owner. However, the association was not required to ensure that parking spaces were available to any particular owner or to oversee use of the parking spaces. Batt had purchased a garaged lot in 1990, before the subdivision was complete. At that time, residents parked wherever they chose. In 1993 or 1994, the developer began assigning two parking spaces to each ungaraged lot. The remaining 18 parking spaces were designated as “visitor” parking, available to all lot owners on a first-come, first-served basis.
     In 2009, the association issued one visitor parking permit to each lot owner and posted a parking policy on its website. Any vehicle not displaying a permit while parked in the visitor parking spaces would be towed. In December 2009, the association amended the declaration to provide that the association had the right to designate two parking spaces exclusively to each of the ungaraged lot owners on a non-uniform and preferential basis. In June 2010, Batt sued the association, claiming that the unequal treatment of owners over parking space assignments violated the declaration. The association argued that Batt’s suit was barred by the December 2009 amendment to the declaration.

     The circuit court ruled in Batt’s favor, finding that the amendment was invalid for six reasons. The association appealed. The Court of Appeals ruled, in summary, that equality is inherent in the definition of “common area.” A “common area” is defined as, “[a]n area owned and used in common by residents of a condominium, subdivision, or planned-unit development.” Black’s Law Dictionary defines “in common” to mean “[s]hared equally with others, undivided into separately owned parts.” Accordingly, the court held that the association must assign common area parking spaces to all lot owners equally, if at all, unless the declaration expressly provided otherwise. In this case, the court did not find that unequal assignment was authorized.

Bankruptcy: Poor Debtor's Exemption - Objection in a Chapter 13 Plan

     In the case of In re Bonner, Judge Tice of the United States Bankruptcy Court, Eastern District of Virginia, Richmond Division, ruled that a credit union, which did not perfect its lien on a car the debtor purchased with a credit union loan, could not prevent confirmation of the debtor's Chapter 13 plan. The Court did, however, sustain the credit union's objection to the debtor's claim of a $2,000 "poor debtor's exemption" in the car under Virginia Code §34-5.

     In Bonner the credit union maintained that its purchase money security interest, though not perfected as to third parties, could be enforced in a Chapter 13 case notwithstanding Bankruptcy Code §544(a). The Court ruled, though, that the avoidance powers under §544 extend to trustees in Chapter 13. The Court cited the case of In re Freeman, where another court had held that a Chapter 13 debtor shares the trustee's status as a hypothetical lien creditor under §544. Accordingly, the Court ruled that since either the debtor or trustee is deemed to have exercised the hypothetical lien creditor's rights at the time of filing, the transfer of the security interest by the debtor to the credit union had been nullified. The claim filed by the credit union was therefore unsecured, and the debtor had properly provided for it under the plan.
     Nevertheless, the Court ruled that pursuant to Virginia Code §34-5, the poor debtor's exemption could not be claimed against a debt for the purchase of such property or any part thereof. Unlike the exception included in Virginia Code §34-26(8), which provides only a valid purchase money security interest with priority over the exemption, the restriction in §34-5 is not conditioned on the creditor possessing an enforceable lien. Therefore, the Court reasoned that the credit union's failure to perfect its security interest simply had no bearing. Accordingly, the Court sustained the credit union's objection to the poor debtor's exemption.

Collection: Mechanics Lien voided by Old Work

     Mechanic’s liens are strictly governed by statutory law. This fact is well illustrated in the case of Johnson v. Tadlock. In Johnson the Fairfax County Circuit Court ruled that a mechanic's lien that included work performed before the 150-day statutory window was invalid in its entirety. Under the mechanic's lien statute, a memorandum of lien should not include any sums due for labor and materials furnished more than 150 days prior to the last day of work. However, the Court's decision in Johnson appears to be the first in which a Circuit Court has struck an entire lien based on the inclusion of stale work.

     In Johnson, the Court found as fact that a workman filed a mechanic's lien for $15,500 for various work, including lot clearance, removal of trees and installation of a storm drainage system and caissons. The property owner sought to have the lien released based on its inclusion of stale work. A portion of the lien (amounting to at least $1,500) was for work clearly performed within the 150-day statutory period. The property owner asserted that all or a part of the remainder of the work was performed more than 150 days prior to the workman's last day on the job.
     The Court ruled that the inclusion of a stale claim tainted the entire lien. The Court cited language in the mechanic's lien statute "no memorandum... shall include ....," to support his position. The Court pointed out that mechanic's liens are "creatures of statute" and therefore need to conform strictly to their statutory requirements. Accordingly, the court refused to remove the improper portions of the claim and rule on the proper portion of the claim - it survived or perished in its totality.
     The lesson of Johnson, as the lesson is in so many cases, obtain competent legal advise and representation in pursuing mechanic's lien claims.

Foreclosure: Foreclosure Sale Deficiency Actions

     Frequently there will be a deficiency balance after the sale is completed and the accounting is done. The account of sale will set forth the distribution of the sale proceeds and also establish any amounts remaining due on the indebtedness following application of the net proceeds from the foreclosure sale. This deficiency amount is usually recovered by a personal judgment against the maker of the promissory note or other obligors on the indebtedness that was secured by the deed of trust. An action to recover the deficiency balance remaining after a foreclosure sale need not be brought on the chancery side of the court, and may properly be brought as an action at law. A plaintiff’s action to recover on an assumed promissory note may be maintained as an action at law even though the plaintiff is not named in the deed of trust.