Super priority lien
What does this mean? In short, taxes, sewer, trash and homeowners associations have a priority status over other liens. The Supreme Court just ruled this extended to mortgages. We have our attorney groups looking at this issue and expect to have a video out on its impact
next week but here is the implications in a nutshell.
Investors have been buying properties that homeowners associations are foreclosing on at the courthouse steps for a fraction of what they are worth. Generally the sales price is the amount owed to the homeowners association. They have then been filing actions to quiet title in the District Court. When the banks did not respond, they were awarded the property despite large mortgages still being owed on them.
What the court has ruled is that this is proper. The HOA does take priority over the mortgage and that all that was required to stop this from happening was for the mortgage holder to pay up to 9 months back HOA dues as that is all that can be recovered.
Expect quite a bit of fallout for this as it was unexpected. Lenders could require impound accounts for HOA dues or make some other changes to their lending practices. We’ve not found the banks to be responsible so their could be a knee jerk reaction as well. Its just very hard to tell. At minimum, this will have repercussions until a solution is found and it could easily be legislation, as a prominent long time attorney told me this morning.
We’ll update you on this, but look for our video next week.
Written by David Radcliffe