LEXOLOGY-

Homeowners’ associations have a more robust tool for forcing mortgage lenders to pay delinquent assessments following a September 14 decision by the Nevada Supreme Court. Nevada HOAs have enjoyed a super-priority lien under NRS 116.3116 for nine months of unpaid assessments preceding institution of foreclosure proceedings, in addition to certain charges for maintenance and nuisance abatement. In Property Plus Investments, LLC, v. Mortgage Electronic Registration Systems, Inc., the court found that this super-priority lien is not a “one-shot offer,” but can be revived even after a previous super-priority lien has been discharged.

In Property Plus, the HOA recorded a notice of lien in 2010 for unpaid assessments on a property securing a $215,000 mortgage loan. The loan servicer for the mortgage lender attempted to pay $522 to the HOA, representing nine months’ worth of assessments, but the HOA rejected the payment. Subsequently, the property owner entered a payment plan with the HOA, and the HOA released the 2010 lien. In 2012, however, the HOA recorded a second notice of lien for unpaid assessments. That time, the property went to a foreclosure sale and sold to a new owner for $7,500. The purchaser at the sale then brought a quiet title suit, claiming that the sale foreclosed on the HOA’s super-priority lien and extinguished the first mortgage. The lender countered that its $522 payment extinguished the super-priority portion of the lien and that any foreclosure thereafter could not impact the mortgage.

[LEXOLOGY]

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