By William R. Dziedzic

Bendett & McHugh, PC*

USFN Member (CT, ME, MA, NH, RI, VT)

In the case of [T]he Vermont House Condominium v. Salese et al, a Vermont Superior Court Judge issued a decision effectively refusing to expand the condominium association’s super-priority lien over a first mortgage beyond the statutorily mandated six-month priority.

In this action, the Plaintiff (“association”) submitted a proposed judgment decree that sought to extend its statutory “super-priority” lien to all common expense assessments that became due from the defaulting unit owner and not just the six months that accrued before it filed its action. The mortgagee objected.

An association’s six-month super-priority lien derives from the Vermont Common Interest Ownership Act (VCIOA.) However, while VCIOA allows common expense assessments that became due from the defaulting unit owner, absent acceleration, during the six months prior to the condominium association filing its action, in the past decade there have been a number of superior court decisions expanding the lien beyond six months, often including common assessments that become due during the pendency of the action, as a matter of fairness. The courts looked to factors such as the increase in loss mitigation efforts by lenders, the implementation of a state mortgage foreclosure mediation program, and other factors that have led to longer foreclosure timelines and their impact on the six-month priority lien. As such, the priority lien was expanded in certain counties beyond the six months.

The association argued that under the “fairness” doctrine the statute in this matter should be interpreted to include the entire amount of common assessments that became due as, it alleged, lenders and servicers often “abuse” VCIOA “by dragging their heels in condominium foreclosure proceedings…because the Association is forced to serve as their property manager for free for years at a time.” The court declined to expand the reading of the priority statute beyond the six months prior to the action under a plain reading of the language of the statute, a review of the history of the statute demonstrating legislative intent, rules of construction, and settled common law principles.

The decision is important because, although it is only a trial court decision, it is persuasive on the judges in Vermont. This decision will be a much-needed tool in the toolbox when loan servicers request and negotiate priority lien payoffs throughout this county, and hopefully a trend other trial court judges will adopt statewide.

It should be noted that until the Vermont Supreme Court addresses the split of interpretations of the priority statute, it will continue to be a county by county, judge by judge, interpretation. As always, it is important to contact local counsel when requesting association lien payoffs. 

Copyright @2022

USFN August e-Update

By Peter Mehler, Esq.

Reimer Law Co.*

USFN Member (KY, OH, WV)

On May 10, 2022, Louis Blessing, III, a Republican member of the Ohio Senate from the Cincinnati area, introduced Ohio Senate Bill 334. The legislation intends to give local residents and tenants of properties going through the foreclosure process a leg up on out-of-town, deeper pocketed investors. State Senator Blessing argues that out-of-town investors are buying substantial numbers of properties throughout the state and then either flipping the homes or renting them out to local residents.

Often, local residents get outbid by the investors, which, State Senator Blessing argues, has a deleterious impact on the local community by decreasing local ownership, decreasing home values, and generally raising rents in marginalized communities.  As a result, Senator Blessing is attempting to level the playing field by expanding the opportunities for local owner/occupants to purchase property at auction.

The proposed law would require the county sheriff or private selling officer to post notice on the property at least three weeks prior to all sales advising “eligible-tenant buyer(s)” or “eligible bidder(s)” that they have the right to purchase the property by matching or exceeding the highest bid placed at sale. “Eligible-tenant buyer(s)” are defined as a party either living in the property or intending to live in the property within 60 days of purchase for a period of at least one year.   An “eligible bidder” is defined as an owner occupant or locally based nonprofit organization whose primary purpose is to provide affordable housing.

Moreover, SB 334 would give additional time after the date of sale for the “eligible-tenant buyer” or “eligible bidder” to arrange financing to close the transaction.  There are several additional administerial steps involved with the proposed law, but in essence, the local tenant/buyers would be given an additional 45 days to deposit funds with the sheriff or private selling officer.

While the goal of the law is laudable, it is unlikely to have the intended impact.  Most tenants will be unable to secure financing, even with additional time after the sale, and “eligible bidders” will be few and far between.  The more likely impact of the law, as introduced, will be to delay the foreclosure process and decrease the number of bidders at foreclosure auctions.  It might have the tangential effect of limiting the bulk buying of properties by out-of-town investors, but chances are low this will decrease rents or increase homeownership in marginalized communities. Thus, Senator Blessing’s proposed law is misplaced at best.

In fact, recent statistics show an overwhelming majority (84%) of buyers at foreclosure sales[1] purchased only one home over the last calendar year, which indicates that the number of properties being purchased in bulk by out-of-town investors is grossly exaggerated.

A better approach would be to make it easier to buy properties at auction, not harder.  County sheriffs throughout the state were supposed to have a centralized online auction platform in place two years ago, wherein buyers could view all properties being auctioned throughout the state in an easy-to-use format, but the roll-out has been piece meal and remains behind schedule. Furthermore, additional funding to assist those in marginalized communities to purchase homes is what is needed, not additional time within which to do so.