JDSUPRA BUSINESS ADVISOR: Nevada District Judge Voids HOA Foreclosure Following Evidence that HOA Hindered Efforts to Preserve its Mortgage

By G. Benjamin Milam – Bradley Arant Boult Cummings LLP

May 11, 2016

Nevada Eighth Judicial District Judge Elizabeth Gonzales has voided a 2014 homeowners association (HOA) foreclosure sale and ruled that a first mortgage held by Bank of America, N.A. was unaffected by the sale. The April 20, 2016 ruling inNevada New Builds, LLC v. Bank of America, followed a trial in which Bank of America presented evidence that it had paid any HOA dues that could potentially have priority over the first mortgage. The ruling reaffirmed an HOA’s responsibility to communicate with lenders concerning the payment amount required to preserve the first mortgage. The ruling will likely buoy lenders seeking to overturn HOA foreclosures where the association fails to cooperate with the lender’s good faith effort to safeguard its lien.In Nevada, an HOA’s foreclosure of its lien can sometimes extinguish a first-priority mortgage, thanks to the state legislature’s grant of super-priority status to the 9 months of assessments preceding an HOA foreclosure (codified at NRS 116.3116, et. seq.). Lenders have argued that the mortgage should be preserved, however, where the lender has attempted to pay those 9 months of assessments to the HOA. Read more: