9th Circuit Holds Nevada Superior Lien Statute Is Constitutional and Not Preempted by FHA Mortgage Insurance Program
JDSUPRA.COM: 9th Circuit Holds Nevada Superior Lien Statute Is Constitutional and Not Preempted by FHA Mortgage Insurance Program
Written by: Weiner Brodsky Kider PC
May 1, 2019
The U.S. Court of Appeals for the Ninth Circuit recently held that Nevada’s homeowner’s association (HOA) super lien statute is constitutional, overruling its previous decision given new Nevada Supreme Court precedent rejecting the Ninth Circuit’s interpretation of the statute. Further, the Ninth Circuit held that this statue was not preempted by FHA Mortgage Insurance Program.
The Nevada statute provides a homeowners association a lien with superpriority status on property governed by the association for the last nine months of unpaid HOA dues and any unpaid maintenance and nuisance-abatement charges. With a few exceptions, the superpriorty portion of the lien is superior to all other liens on the property, including the first deed of trust held by the mortgage lender.
In this case, the relevant home was in a neighborhood governed by the defendant HOA. The original owners of the home purchased the property using a mortgage insured by FHA. The deed of trust securing the loan was later assigned to the plaintiff, a national bank. The owners fell behind on their monthly HOA dues and the HOA initiated foreclosure proceedings and recorded a notice of delinquent assessment lien and a notice of default and election to sell. The bank received the notice of default and asked the HOA to identify the superpriorty portion of the lien so that it could pay the amount and protect its lien fist deed of trust. The HOA provided the bank with a ledger showing the total amount due to the HOA, but this ledger did not specify the superpriority amount. After reviewing the ledger, the bank determined the superpriority amount and tendered it to the HOA. However, the HOA rejected the payment as insufficient and went forward with the foreclosure sale. The bank sued the HOA asserting claims, among others, for quiet title and declaratory judgment and wrongful foreclosure. Read more: