| Minnesota HOA Liens Purchases |
| Friday, 09 January 2009 | |
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Following is an alert from the law offices of Usset, Weingarden & Liebo PLLP pertaining to "investors" purchasing HOA liens and then foreclosing out mortgage company owners without them receiving notice.
Clients: We have learned that aggressive "investors" are seeking to purchase HOA (townhome & condo Association) liens, and then foreclosing out mortgage company owners promptly after the mortgage companies become the owners of the Association properties without the mortgage companies having any notice (and then shortening redemption periods for vacant properties to 5 weeks, claiming they are abandoned). How this is done: Per MN statutes, once a (first) mortgage company forecloses its mortgage and becomes the property owner following the expiration of the redemption period, the mortgage company is immediately obligated to pay the association up to 6 months of past unpaid dues and then all dues (typically monthly) that become due and payable from the date of the mortgage co.'s ownership (i.e., date mortgagor's redemption period expired) going forward. These unpaid association dues become a senior lien on the property. In contrast, association liens have priority over junior mortgages from the start. "Investors" are contacting associations and purchasing liens for these unpaid dues promptly after the mortgage company becomes the owners, and then foreclosing the liens by advertisement without the mortgage companies getting actual notice. Thereafter, these people are bringing actions to reduce the redemption period to 5 weeks by claiming the properties are abandoned. Alternatively, the Associations can foreclose their liens themselves. The foreclosure of an association lien, similar to a mortgage, typically only requires personal service of the foreclosure notice on the actual occupants of the property. If the property is vacant, no personal service on the owner is typically required. WHAT YOU SHOULD DO TO POTENTIALLY MINIMIZE YOUR RISKS: You should immediately alert your local agents, property preservation companies, and associated departments to contact Associations and their management companies before (strongly recommended) or at least immediately after the redemption period expires and provide them with contact information in writing and ensure that all required dues are timely paid and kept current.
These agents and companies should also be sure to post conspicuous notices on the properties with contact information on your behalf. Although such a notice will not prevent foreclosures, such notices may help in the event the parties foreclosing the association liens bring an action to reduce the redemption period from 6 months to 5 weeks, since they may mail notice of such actions to the posted contact. If you receive such a notice, the party bringing the action should be immediately contacted and voluntary dismissal obtained, or you must have a proper appearance at the hearings to dispute the action, since under a new law, failure of a defendant to show after effective service is conclusive evidence of abandonment.
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