Real Estate: Foreclosing on Homeowner Association Liens to Secure an Interest in Real Estate

     In recent blogs 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. In a previous blog we reviewed the special procedures for the collection of homeowners association dues under Virginia Code §55-516. We will now review the procedures for suits to foreclose on the lien.
     Suits must be brought within thirty six months of filing, but after the perfection of the lien. The Homeowner’s Association may sell the lot at a public sale, subject to prior liens. There are detailed requirements in the code, a brief summary of which include the following:
     1. The association shall give notice to the lot owner prior to advertisement as required in the code.
     2. After expiration of the 60-day notice period, the association may appoint a trustee to conduct the sale.
     3. If the lot owner meets the conditions specified in this subdivision prior to the date of the foreclosure sale, the lot owner shall have the right to have enforcement of the perfected lien discontinued prior to the sale of the lot. Those conditions are that the lot owner: (i) satisfy 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.
     4. In addition to the advertisement requirements, the association shall give written notice of the time, date and place of any proposed sale in execution of the lien, and include certain information required in the code.
     5. The advertisement of sale by the association shall be in a newspaper having a general circulation in the city or county wherein the property to be sold, with certain information requirements as set forth in the code.
     6. Failure to comply with the requirements for advertisement contained in this section shall, upon petition, render a sale of the property voidable by the court.
     7. In the event of a sale, the code sets forth bidding and proceeds application procedures.
     8. After sale, the trustee shall deliver to the purchaser a trustee's deed conveying the lot with special warranty of title.
     9. After completion, the trustee shall file an accounting of the sale with the commissioner of accounts.
     We have experienced attorneys and staff who can examine title, file homeowner association liens, and litigate to enforce the same.

Bankruptcy: Garnished Wages - Execution of Lien - Recovery of Funds

     In the case of In Re Wilkinson, the United States Bankruptcy Court at Alexandria, Virginia denied the debtor's motion to avoid the creditor's execution lien; the debtor's wages had been garnished in execution of a judgment lien more than 90 days before the debtor filed his Chapter 7 petition. The Bankruptcy Court ruled that the debtor could not recover the garnished wages from the judgment creditor even though the order directing payment of the garnished wages to the creditor was entered within the 90-day period.

     The Bankruptcy Court stated that the issue was not whether a debtor could recover funds withheld from his wages more than 90 days before he filed his Chapter 7 petition, but whether the order of payment requiring the employer to pay those funds to the judgment creditor was entered within 90 days of the bankruptcy filing.

     The Bankruptcy Court concluded that the debtor could not succeed under the lien avoidance provisions of Bankruptcy Code §522 (f) because he no longer had an interest in the garnished funds as of the date he filed his petition. The Bankruptcy Court also concluded that the debtor could not succeed by stepping into the trustee's shoes under Bankruptcy Code §522 (h) and recovering the funds paid over to the judgment creditor as a preference because the judgment creditor's execution lien became fixed outside the 90-day preference period, and the payment within the preference period did not enable the creditor to obtain more than it would in a Chapter 7 liquidation.

     Accordingly, the Bankruptcy Court denied the debtor's motion to avoid the execution lien.