October 21, 2015

Court Upholds Condominium Association Foreclosure that Extinguished Bank's Lien

In late 2009, a Washington condominium association foreclosed on a first position lien for delinquent assessments and purchased the unit at a trustee's sale for $8,818.17.  Deutsche Bank, which had a junior lien on the unit for $240,000 that was extinguished by that foreclosure sale, was notified of the association's foreclosure but did not respond.  Litigation later ensued concerning the validity of the association's foreclosure.  

The Washington Court of Appeals ruled in an unpublished opinion this summer that the association was entitled to foreclose on its lien (which had a limited six-month priority over the bank's lien pursuant to the Washington Condominium Act and its Declaration) regardless of whether there were any intervening liens and for any amount.  The court noted that Deutsche Bank failed to pay the association's lien, bid at the trustee's sale, or exercise its redemption rights despite being given ample notice and opportunity to do so.

Many foreclosures by condominium associations do not end well due to bank foreclosures and owner bankruptcies, so it is always good to be reminded that they can result in successful outcomes too.  The association's attorney can help it decide whether foreclosure is advisable and likely to result in payment.