This case is about how long a bank can allow a home in an HOA to sit vacant before foreclosing. Here the owners of this property filed for Chapter 7 bankruptcies, surrendered the property, and then moved out. The property sat vacant for about eight years. As is often the case, the owners stopped paying assessments when they moved out. Finally, the Association started a foreclosure lawsuit and entered a stipulated receiver. The receiver spent over $20k repairing the vacant home and preparing it for rental. Immediately after renting the home, the bank sent a notice of default and scheduled a trustee's sale. Ultimately, the Association took the property via a deed in lieu of foreclosure and quieted title to the property from the bank's mortgage. The Court found that when the personal liability of the owners was discharged, it started a six-year statute of limitations on the entire mortgage consistent with many 9th Circuit decisions. The bank appealed, and the appellate court overturned the trial court's decision stating that a bankruptcy discharge does not accelerate a deed of trust and that the 9th Circuit got the law wrong. The Association appealed to the Washington State Supreme Court, and it accepted the issue for review.
The Association/Appellant is arguing that the banks cannot sit on properties indefinitely and that after the personal liability is discharged the bank needs to foreclose within six years. The bank/Respondent is arguing that even after a bankruptcy discharge the bank has the entire remainder of their installment payment loan to foreclose.
CAI's argument will focus on the impactt of vacant properties in a community, and how this is
not a victimless situation. The brief will discuss how the Association's dues are often unpaid,
and how a vacant home creates a risk of squatters, infestations, and unmaintained homes and
landscaping in these situations.
This issue is important because each year thousands of Associations are left with vacant homes and waiting for banks to foreclose. Now that homes from before the economic crash of 2008 are finally returning to their post-crash values, we are seeing an increase in old mortgages being foreclosed. This issue is nationwide and while each state may come up with different ways to handle this situation, it will shape the way this issue is handled across the nation.
Amicus Brief
Supreme Court of Appeal, State of Washington, Opinion
Court: Washington State Supreme Court
Topic: Chapter 7 Bankruptcy
Brief Author: Erin Maloney, Esq., CCAL, Fiore, Racobs, & Powers, Riverside, California, Anthony Rafel, Esq., CCAL, Rafel Law Group, Seattle, Washington
Filed: January 3, 2023
CAI Amicus Review Panel: Mr. Robert Diamond, Esq., CCAL, (VA) Co-Chair of Amicus Committee
Mr. Stephen Marcus, Esq., CCAL, (MA) Co-Chair of Amicus Committee
Mr. Ed Allcock, Esq., CCAL (MA)
Ms. Anthony Rafel, Esq., CCAL (WA)
Ms. Russell Robbins, Esq. (FL)