Opinion ID: 3160075
Heading Depth: 2
Heading Rank: 2

Heading: Right of Redemption

Text: Following foreclosure of the super-priority lien, a first mortgagee has another opportunity to preserve its security interest. Section 34-36.1-3.21 of the act governs the foreclosure of a condominium lien. In 2008, the act was amended to include a right of redemption in favor of the holder of the first mortgage. It states as follows: “Any foreclosure sale held by the association pursuant to [this section], shall be subject to a thirty (30) day right of redemption running in favor of the holder of the first mortgage or deed of trust of record. The right of redemption shall be exercised by tendering payment to the association in full of all assessments due on the unit together with all attorney’s fees and costs incurred by the association in connection with the collection and foreclosure process within thirty (30) days of the date of the post-foreclosure sale notice sent by the association   . Otherwise, the right of redemption shall terminate thirty (30) days from the date of the post-foreclosure sale notice   .” 8 The defendant also asserts that extinguishing its mortgage contradicts the express language in plaintiff’s deed to the property, which states that it is “subject to mortgages of record, if any    which may survive the [foreclosure] sale.” (Emphasis added.) But, as stated above, there were no mortgages of record (including defendant’s) that survived the foreclosure sale. -12- The fact that the statutory scheme was amended in 2008 to include a right of redemption is indicative of the Legislature’s intent that foreclosure of a super-priority lien extinguishes a first mortgage, for it is true that one cannot redeem what it has not lost. 9 It is undisputed that defendant did not redeem the association’s lien within the statutory period. While defendant is correct in arguing that it was not required to redeem the association’s lien, nevertheless, by failing to do so, it forfeited its final opportunity to preserve its security interest in the property. At best, the right of redemption creates a conditional foreclosure: foreclosure of the super-priority lien extinguishes the first mortgage (and any other junior liens on the unit) unless the first mortgagee redeems within the statutory period. Here, defendant did not redeem and, as such, relinquished its last chance to save its security interest in the property. Notably, there is no right of redemption in the UCA, and its absence further supports our interpretation of the statute. By amending the act in 2008 to include this right (as well as the notice provisions, discussed supra note 9), the Legislature took an affirmative step to offer more protection to lenders in recognition of the harsh reality that foreclosure on a condominium assessment super-priority lien could wipe out their security interests. 10 9 In addition to the right of redemption, several notice requirements were added to the act in 2008. First, the notice provision found in § 34-36.1-3.16(b)(4) requires the association to send a notice of delinquency, including the amount that is delinquent, to the unit owner as well as to the first mortgagee. Additionally, two notice provisions were added to § 34-36.1-3.21 (the foreclosure section) – subsection (a)(2) requires the association to mail notice to the unit owner and the first mortgagee of the time and place of the foreclosure sale at least twenty days prior to publishing notice of the sale, and subsection (a)(4) requires the association to send notice to the first mortgagee within seven days of the foreclosure sale. The addition of these provisions further indicates that it was the Legislature’s intent that foreclosure on a super-priority lien would operate to extinguish a first mortgage because it provides the first mortgagee with notice of the lien and an opportunity on the front end to satisfy the lien in order to avoid foreclosure (and, thus avoid losing its security interest), as well as after the foreclosure sale (to redeem). The defendant does not contest the sufficiency of any notice provided by the association in this case. 10 As an aside, we note that the association’s foreclosure sale extinguished only defendant’s security interest in the property, not the obligation stemming from the underlying note. See 7912 -13- IV