Legal Question in Real Estate Law in California

Are there any laws that can protect a Sheriff's Deed awarded to the highest bidder at a judicial (HOA's) foreclosure auction sale against beneficiary and trustee of a Deed of Trust on a property who did nothing after payments defaulted more than a decade ago? Borrower filed bankruptcy 3 yrs ago but HOA petitioned for automatic stay to be lifted and judge ordered for property to be sold with no redemption. Valid preforeclosure notices were sent, Sheriff recorded and conveyed Title to the winning bidder after a month. Bank trustees did not claim interests before the Sheriff auction (1/2020) but assigned the Deed of Trust to another Trustee in 7/2020. Title holder filed a case to quiet title but District court granted motion to dismiss with prejudice (9/2021). Borrower filed for bankruptcy in 2018, got discharged in 8/2020 but home loan was not discharged. Immediately after quiet title case closed last month, certified letters from a law firm addressed to the borrower started coming but nothing for Title holder who has been occupying and rehabbing the property since title was conveyed (3/2020) If those letters are preforeclosure notices, Title occupant is not receiving any certified letter from the trustees at all. Buyer's rights were not properly defended at the District Court despite a year of legal fees expended on top of purchase amount and repairs. Can Title holder pursue other options to redeem such as Senate Bill 1079 (enacted 1/2021) - CA law requiring a post-auction sale opportunity for qualifying bidders :such as prospective owner-occupants, current tenant, or certain non-profits. If the winning bidder is not a prospective owner-occupant, they have to wait 15 days t see if an eligible bidder will submit an intent to bid. However, If an owner-occupant is the winning bidder at the Trustee foreclosure sale, sale will finalize immediately.


Asked on 10/03/21, 2:07 am

1 Answer from Attorneys

Though it is not entirely clear from your narrative, it sounds like you have a lien priority problem. Bankruptcy does not wipe out a voluntary lien, such as a deed of trust (otherwise known as a mortgage). A HOA lien necessarily attaches after the purchase money deed of trust, so it is junior to the deed of trust and the deed of trust survives a foreclosure on the HOA lien. SB1079 just means the bank will bid the full amount of the debt at the trustee's foreclosure sale, eliminating any deficiency charges to the original borrower. So title holder would have to bid more than that at the foreclosure, or if they are a prospective owner occupant, during the SB 1079 period. In short, Title holder has to come up with some way to pay off the bank, because the bank's lien survived the Sheriff's sale due to priority.

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Answered on 10/05/21, 9:04 am


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