New HOA foreclosure laws
On October 1, 2015, new revisions took effect in Nevada’s law concerning foreclosures by homeowner’s associations (HOA’s). HOA foreclosures garnered much attention last year when the Nevada Supreme Court held in SFR Investments Pool 1, LLC v. U.S. Bank (139 Nev. Adv. Op. 75, 334 P.3d 408 ) that NRS 116.3116 created what is commonly referred to as a “super-priority lien” with certain HOA assessments, where an HOA foreclosure could extinguish a first lienholder’s secured interest in the property. Thus, an HOA foreclosure on a super-priority lien could wipe out a mortgage holder’s interest secured by a first deed of trust.
Senate Bill 306 modified NRS Chapter 116.3116 with the addition or modification of various provisions, such as the following:
Required Notices to Lienholders Before Sale
The law now states no later than 10 days after recording a notice of default and election to sell, the HOA must mail by certified mail, a copy of the notice to each holder of a security interest recorded prior to the notice. The notice of default and election to sell must specify the amount due under a super-priority lien. The HOA must then send by certified mail, a copy of a notice of sale no later than 10 days after recording said notice to each holder of a security interest recorded prior to the notice. The HOA must record an affidavit asserting they sent said notices. The law previously did not impose these requirements.
Costs to Enforce Super Priority Lien
The law now imposes the following maximum limits on costs the HOA can attach to the super-priority lien associated with its enforcement:
- A demand or intent to lien letter: $150
- A notice of delinquent assessment: $325
- An intent to record a notice of default letter: $90
- A notice of default: $400
- A trustee’s sale guaranty: $400
The HOA cannot include attorney’s fees as part of the lien.
Satisfaction of Super-Priority Lien
The law now provides that if the first lienholder satisfies the super-priority lien amount no later than 5 days before the date of sale, then the foreclosure sale will not extinguish the first lienholder’s security interest. The HOA must record a notice of satisfaction no later than 2 days before the sale for the sale to proceed. The person conducting the sale has to announce at the sale whether the super-priority lien has been satisfied. Any payment by the first lienholder will become a debt due from the property owner to the lienholder.
Foreclosure Mediation Program
Although an HOA cannot foreclose on a property subject to the Foreclosure Mediation Program, the law now states the HOA can foreclose if the owner failed to pay assessments that became due pending the mediation. Regardless, the HOA can proceed to foreclose once the trustee of the first deed of trust has recorded the certificate from the Mediation Administrator indicating the mediation has concluded or is not required. The trustee is to notify the HOA that the property is subject to the Foreclosure Mediation Program and when the trustee has received the certificate of completion.
Right of Redemption
The law now creates a right of redemption, where either the owner of the property or a holder of security interest has 60 days from the date of sale to redeem the property to either restore ownership or gain ownership, respectively. After the 60-day redemption period, then any flaw in the foreclosure procedure will not affect the rights of a bona fide purchaser or encumbrancer for value, meaning anyone who subsequently buys or encumbers the property can assume the foreclosure was properly conducted.