An appeals court in the Grand Canyon State has ruled that home owners associations can redeem a residential property even though it has already been through a foreclosure sale.
The case
involves a loan made in 2005 on a property located in Maricopa County, Arizona, that was subject to a previously recorded declaration of covenants, conditions and restrictions.
Following the borrower’s default on the note and deed of trust, the trustee, The Bank of New York Mellon Trust Co., N.A., filed a foreclosure lawsuit, according to the appeals decision.
In addition, Bank of New York sued the HOA alleging that any interest it claimed in the property was subordinate and inferior to the deed of trust lien.
A default judgment obtained by Bank of New York against the borrower for $199,643
declared the bank’s deed of trust lien valid and superior to all other liens.
Bank of New York purchased the property for $22,000 at a sheriff’s sale.
A month later, the HOA assigned all rights it had to enforce a $2,000 assessment lien on the property to Arizona HOA.
On the same day, Arizona HOA recorded a notice of intent to redeem for the $22,000 plus other costs needed for redemption.
The bank moved to stay the attempted redemption and requested that the superior court order a deed to the property issued to it. Bank of New York claimed that the HOA was not entitled to redemption because A.R.S. § 12-1281 restricts redemption rights to a limited class of creditors that have a lien by judgment or mortgage on the property sold.
But the HOA argued that
a different statute, A.R.S. § 12-1283, entitled it to redeem.
After the superior court granted Bank of New York relief, the HOA filed an appeal with the Arizona Court of Appeals.
The appeals court sided with the HOA.
“As it did in the superior court, Arizona HOA argues A.R.S. § 12-1283(B) identifies who may redeem property from a mortgage foreclosure sale — ‘creditors having liens’ on the property sold ‘subsequent to the lien so foreclosed’ — and asserts that because the statute does not restrict ‘creditors’ and ‘liens’ in any way, its assessment lien entitled it to redeem the property,” the decision stated. “Based on a decision by the Arizona Supreme Court that allowed a creditor holding a non-judgment lien to redeem under the predecessor version of A.R.S. § 12-1283(B) and the evolution of Arizona’s redemption statutes, we agree with Arizona HOA.”
An opinion was filed Thursday vacating the superior court’s order, and the case was remanded with instructions to
enter an order directing the sheriff to issue Arizona HOA a sheriff’s deed to the property upon payment of the redemption amount.
