The Nevada Legislature recently passed a bill intended, in part, to address issues resulting from the Nevada Supreme Court’s decision that a homeowners association lien is a true super-priority lien that, if foreclosed, extinguishes a first deed of trust. We wrote about the SFR Investments Pool I, LLC v. U.S. Bank, 130 Nev. Adv. Op. 75, 334 P.3d 408 (2014) decision in the October 9, 2014, edition of the Mortgage Banking Update.
Senate Bill 306, approved by Nevada Governor Brian Sandoval on May 27, 2015, makes several significant changes to NRS 116.3116 et seq. affecting unit-owner associations’ super-priority liens and the procedures for foreclosing such liens. Some of the changes include:
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Authorizing the inclusion of certain costs associated with enforcing an association’s lien as part of the super-priority lien;
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Providing that if the holder of a subordinate lien on the unit pays an amount included in the association’s lien, the payment becomes a debt due from the unit’s owner to the holder of that lien;
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Requiring an association that records a notice of default and election to sell (NODES) to send a copy of the NODES to holders of recorded security interests by certified mail no later than 10 days after it is recorded;
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Requiring an association that records a notice of foreclosure sale of the unit (NOS) to send a copy of the NOS to holders of recorded security interests by certified mail no later than 10 days after it is recorded;
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Provided that the holder of a first security interest pays the amount of the super-priority lien no later than five days before the date of sale, then the foreclosure of the association’s lien will not extinguish the first security interest; and;
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Granting a unit’s owner or a holder of a security interest a right to redeem the unit and be restored to ownership subject to any security interest existing at the time of the sale (in the case of a unit owner) or become the owner of the unit (in the case of a holder of a security interest) by paying certain amounts to the purchaser within 60 days of the foreclosure sale.
The provisions of Senate Bill 306 take effect on October 1, 2015. We recommend that those involved in the mortgage industry in Nevada review Senate Bill 306 carefully.
