By Blair Gisi, Esq.

SouthLaw,PC*

USFN Member (IA, KS, MO, NE)

With the housing shortage continuing, some companies in Kansas are getting creative with how they are replenishing their inventory. It is becoming more and more common for title work ordered in anticipation of a foreclosure to include a recent conveyance from the borrowers to a business entity. The parties intend to convey redemption rights to that entity by virtue of a deed, given that K.S.A. §60-2414(a) provides very clearly that a “defendant owner may redeem real property” following the Sheriff’s Sale. 

            K.S.A §60-2414(a) also provides that:

            . . . . Except for mortgages covering agricultural lands or for mortgages covering single or two-family dwellings owned by or held in trust for natural persons owning or holding such dwelling as their residence, the mortgagor may agree in the mortgage instrument to a shorter period of redemption than 12 months or may wholly waive the period of redemption.

            In other words, where a single-family residence is no longer owned by a natural person and the subject mortgage includes a redemption-waiver clause, a lender may be entitled to wholly waive any redemption period.

            Now, if a defendant owner can show the trial court that the property is being held as their primary residence, redemption waiver may not be appropriate. However, with a vacant property, or in a situation where the defendant owners are renting the property or generally no longer using the property as their primary residence, there should be no issue with successfully arguing the redemption period was waived; and with the redemption period waived, the lender [KSJ1]is entitled to a Sheriff’s Deed immediately following the Sheriff’s Sale.

            The case law is light on this pursuit in this context, so best practices likely warrant a discussion between the law firm and the lender/investor before alleging the redemption is waived. However, under the right circumstances, this statute could prove useful as a powerful REO tool.

Copyright @2022

Fall 2022 USFN Report