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Oregon Supreme Court Holds HOA Lien Primes First Mortgage or Deed of Trust if No Foreclosure Within 90 Days of Notice

Oregon Justice Building, home of the state's Supreme Court and Court of Appeals in SalemThe Oregon Supreme Court recently held that a lien for delinquent condominium assessments has priority over a first mortgage or deed of trust, where the mortgagee fails to initiate a foreclosure action within the 90-day notice period prescribed by ORS § 100.450(7).

A copy of the opinion in Bank of New York Mellon Trust Co. v. Sulejmanagic is available at:  Link to Opinion.

On July 25, 2013, a condominium association recorded its lien for delinquent assessments against a condominium that was subject to a first deed of trust held by a mortgagee.

Shortly thereafter, on July 30, 2013, the mortgagee filed a judicial foreclosure action against the borrower, without naming the condominium association as a party.  The mortgagee later amended the foreclosure complaint to add the association as a party.  However, on May 16, 2014, the condominium association was dismissed, without prejudice, due to the mortgagee’s failure to prosecute the action.

On Oct. 14, 2014, the condominium association sent the mortgagee written notice of the delinquent assessment, pursuant to ORS § 100.450(7).  It was undisputed the mortgagee failed to reinstate the dismissed foreclosure action or to file a new one, within the 90-day period following the notice.

On May 4, 2015, seven months after receipt of the condominium association’s statutory notice, the mortgagee obtained an order reinstating the previously dismissed judicial foreclosure action.  The condominium association filed an answer to the complaint, alleging the priority of its lien over that of the mortgagee, because either (a) the mortgagee had filed its foreclosure action before the condominium association had given notice, or (b) the mortgagee had failed to reinstate the dismissed action or file a new action within the 90-day period prescribed by ORS § 100.450(7).

The mortgagee subsequently filed a motion for summary judgment, and the trial court ruled in favor of the mortgagee sustaining its lien priority claim.  The mortgagee asserted that the statute did not require it to initiate a foreclosure action within the 90-day notice period, rather it merely required the mortgagee to initiate a foreclosure action at any time prior to the expiration of the 90-day notice period.  The condominium association appealed the ruling.

The Oregon Supreme Court, upon reviewing the statutory text, the legislative intent, and the actions of the parties, ruled in favor of the condominium association, reversing the appellate court’s ruling and the trial court judgment, and remanding the case to the trial court for further proceedings.

The Court reasoned that the purpose of the notice under ORS § 100.450(7) is to prompt a first lien holder to transfer the condominium to a new owner who could pay the condominium assessments.  In the Court’s view, a dismissed foreclosure action does not serve that purpose. 

Accordingly, the Oregon Supreme Court held that, as the mortgagee had failed to take appropriate action before the expiration of the 90-day notice period, the condominium association’s lien had priority over the mortgagee’s interest in the property.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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