Lenders’ New Right to Redeem after Nevada HOA Foreclosure Sales
Beginning October 1, 2015, lenders in Nevada will have a much-needed right to redeem properties sold at homeowners association (HOA) foreclosure sales for pennies on the dollar. Specifically, lenders and homeowners will have 60 days to redeem properties sold at HOA foreclosure sales—enabling lenders to recoup properties securing hefty deeds-of-trust. Nevada Senate Bill 306, signed into law on May 28, 2015 by Governor Brian Sandoval, clarifies Nevada Revised Statute 116 et seq. (the “HOA Lien Statute”) and limits an HOA’s ability to extinguish a lender’s interest in a property resulting from a borrower’s delinquency in HOA assessments. One key aspect of Senate Bill 306 is the right of redemption period, codified as NRS 116.31166(3)-(6).
Unlike the prior version of the HOA Lien Statute, Senate Bill 306 affords the homeowner and holders of recorded security interests on a property a 60-day right of redemption period after the property is sold at an HOA lien foreclosure sale. To redeem a property sold pursuant to the HOA Lien Statute, the redeeming lien holder must pay the purchaser the foreclosure sale purchase price, with one percent per month interest up until the lien holder’s redemption. Because the redeeming lien holder must pay the foreclosure sale purchase price, exercising the right of redemption is a much more costly alternative to paying the nine-month super-priority amount prior to an HOA foreclosure sale.
Additionally, the redeeming lien holder must pay the amount of any assessments, taxes, or payments toward liens that the purchaser paid after the purchase, and the interest on such amount. The redeeming lien holder must also pay reasonable amounts expended by the purchaser that are reasonably necessary to maintain and repair the property as provided in the HOA’s governing documents. Finally, the redeeming lien holder must pay the amount of any other lien that has priority over the redeeming lien holder’s lien, with interest, except for the HOA’s lien under which the property was sold.
In addition to satisfying the payment requirements, the redeeming lien holder must provide proper notice of the redemption to both the person who conducted the sale and the person from whom the property is redeemed. The notice of redemption must include an original or certified copy of the deed of trust securing the property or a certified copy of any other recorded security interest of the lien holder. The redeeming lien holder must also include in the notice of redemption a copy of any assignment necessary to establish the lien holder’s claim of redemption, verified by an affidavit of the lien holder, the lien holder’s agent, or a subscribing witness. Finally, the redeeming lien holder must include an affidavit executed by the redeeming lien holder or the redeeming lien holder’s agent showing the amount actually due on the lien.
At the expiration of the 60-day right of redemption period, if the redeeming lien holder redeems the property in compliance with the redemption requirements in Senate Bill 306, the person conducting the HOA lien foreclosure sale must provide a deed without warranty conveying title to the property to the redeeming lien holder. The person who conducted the HOA lien foreclosure sale must also deliver a copy of the deed to the Office of the Ombudsman for Common-Interest Communities within thirty days after the deed is delivered to the redeeming lien holder or its agent.
The new right of redemption period and the new notice requirements contained in Senate Bill 306 provide lien holders with opportunities to protect their interests in properties against HOA lien foreclosure sales. While the steps required for redemption place certain burdens on the lien holder, this newly-acquired right for lenders and other lien holders significantly improves the law in Nevada with respect to HOA lien foreclosure sales.