Mortgage lenders got a break from a federal appeals court in a case involving a homeowners association super lien. The decision will impact many Nevada lawsuits.
Back in 2014, the
Nevada Supreme Court held that, as a matter of lien priority, the foreclosure of a super lien for HOA assessments can extinguish a first mortgage.
But the Supreme Court did not address whether the provisions of NRS Chapter 116 — which governs
notice to purported junior lienholders — were constitutional.
However, according to a bulletin issued by Ballard Spahr LLP, a decision Friday in Bourne Valley Court Trust v. Wells Fargo Bank, NA, from the Ninth Circuit Court of Appeals did address the issue.
According to the law firm,
the Ninth Circuit panel held that Chapter 116 requires a purported junior lienholder to “opt in” before receiving notice of an HOA foreclosure sale — in violation of the Due Process Clause of the 14th Amendment.
“Importantly, Bourne Valley interprets a prior version of NRS Chapter 116 that was in effect until 2015,” the bulletin stated. “At that time, the Nevada Legislature amended Chapter 116 to make notice to junior lienholders mandatory. However, the vast majority of currently pending quiet title actions involve sales which occurred before 2015 and which were governed by the pre-amendment version of the notice statutes.
“Therefore, Bourne Valley will apply to most of these cases.”
Ballard Spahr noted, however, that
the investor who bought the property in Bourne Valley can petition the Ninth Circuit for rehearing or en banc review.
But for the time being, the Ninth Circuit decision is binding on of the many lawsuits in all Nevada federal courts and will serve
s strong persuasive authority in hundreds of actions pending in Nevada state court.
