Condominium Association Asserts a Literal View of Who Qualifies as a Redemptioner

Brian S. Sommer, Esq.

By Brian S. Sommer, Esq., Routh Crabtree Olsen, P.S.

Under RCW 64.34.364 of the Washington Condominium Act, a condominium association (“COA”) has a limited priority lien over a previously recorded deed of trust. The super-priority lien is for a sum equal to six months of assessments. 

The COA can attempt to foreclose the super-priority lien by filing a judicial foreclosure lawsuit against the homeowner and deed of trust beneficiary. Typically, the beneficiary will defend the lawsuit and arrange to pay the super-priority lien.  Once the beneficiary pays the super-priority lien, the beneficiary has reestablished senior lien priority.  Washington law is silent as to the deadline for the beneficiary to pay the super-priority lien. 

Practitioners and courts generally agree that the COA can foreclose the beneficiary if the beneficiary does not defend the lawsuit and/ or pay the super-priority lien prior to the COA sheriff sale.  When a beneficiary neglects to timely pay the super-priority lien, the foreclosed beneficiary attempts to triage the foreclosure by utilizing Washington’s redemption statutes, RCW 6.23 et seq.  The redemption period is eight or twelve months and will be stated in the judgment. 

Washington law defines who qualifies as a redemptioner.  Under, RCW 6.23.010(1)(b), a beneficiary qualifies as a redemptioner if the deed of trust is recorded “subsequent in time” to the foreclosed super-priority lien.  The “subsequent in time” language under RCW 6.23.010(1)(b) was enacted in 1899 when lien priority was established by the “first in time, first in right” doctrine.  With the development of Washington’s race-notice recording statute law, RCW 65.08.070, the subsequent in time language has been generally understood to mean that a subordinate foreclosed lien holder qualifies as a redemptioner.

Recently, one COA has successfully asserted a strictly literal and chronological view of who qualifies as a redemptioner under RCW 6.23.010(1)(b).  See GMAC Mortgage, LLC v. Summerhill Village Homeowners Ass’n, No. 66455-7-I (Wash. Ct. App. filed Dec. 20, 2010).  The COA argued that a recorded deed of trust arises chronologically prior in time to a COA super-priority lien; therefore, the beneficiary is not “subsequent in time” and does not qualify as a redemptioner.  Consequently, the COA now owns the condominium free and clear of the foreclosed deed of trust.

The lender has appealed the King County Superior Court’s decision.  The appellate court is expected to render the decision in the spring of 2012.  Until the right of redemption is clarified by statute or case law, it is recommended that the trustee notify the beneficiary of any COA lawsuit or lis pendens reported as a Schedule B exception on a Trustee Sale Gurantee or date down endorsement. 

Mr. Sommer is an Associate Attorney with Routh Crabtree Olsen, P.S.  His practice focuses on advising trustees and mortgage lenders in the area of Washington Condominium and Homeowner Association law.  He maintains the largest market share of litigation defense representation for mortgage lenders sued by condominium and homeowner associations seeking to foreclose assessment liens.  For additional information please contact Brian S. Sommer at bsommer@rcolegal.com or directly at 425-586-1972.