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Scottsdale, AZ 85254
(602) 560-2410

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Trustee’s Sales and Their Impact on Association Liens

Phillips, Maceyko & Battock

It is important for those involved with community associations to have a general understanding of how a Trustee’s Sale can affect the Association’s interest in a property.

What is a trustee’s sale?

In a nutshell, a trustee’s sale occurs when the homeowner falls behind on his/her house payments and the lender no longer wants to let the homeowner have a free ride. The trustee, or protector of the lender’s rights, records a Notice of Trustee’s Sale with the County Recorder and the sale can take place no sooner than 90 days thereafter. The Association typically will receive notice of the trustee’s sale if it has a lien recorded against the property.

What impact does a Trustee’s Sale have upon the Association when the homeowner against whom the sale is noticed is delinquent in his/her assessment payments?

According to state statute, an association’s assessment lien is prior and superior to all other liens except the first deed of trust or mortgage and governmental tax liens. Therefore, upon receiving a Notice of Trustee’s Sale, it is important to determine if the sale concerns the first deed of trust. For example, if the Trustee’s Sale is held by the lender under a second or third deed of trust, then the Trustee’s Sale would have no impact upon the Association’s lien rights, because the purchaser at the Trustee’s Sale would take the property subject to the first deed of trust as well as the Association’s lien.

On the other hand, if the Trustee’s Sale involves the first deed of trust or mortgage, the Association’s lien rights would be wiped out as of the date of the sale. This means that the purchaser at the Trustee’s Sale takes the lot with a zero assessment balance and becomes the new owner of the property. Although the Association’s lien rights are wiped out, it may still be able to pursue the homeowner personally for breach of contract, i.e., the homeowner’s breach of the CC&R’s.

For these reasons, upon receiving a Notice of Trustee’s Sale, the Association should monitor the sale for the purpose of updating its records as to the identity of the new owner, when applicable.

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(602) 560-2410

Attorneys

Quentin Phillips
Jessica Maceyko
Kathryn Battock
Emily Mann

Recent Posts

  • 2021-2022 Statute Books Are Here!
  • Community Interest Legislative Changes 2021
  • Trustee’s Sales and Their Impact on Association Liens
  • Common Area Property Tax Valuations
  • Prevention of Damage in Condominiums

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Recent Posts

  • 2021-2022 Statute Books Are Here!
  • Community Interest Legislative Changes 2021
  • Trustee’s Sales and Their Impact on Association Liens
  • Common Area Property Tax Valuations
  • Prevention of Damage in Condominiums

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Phillips, Maceyko & Battock, PLLC
5010 East Shea Blvd. Suite 155
Scottsdale, AZ 85254

Copyright 2019 • Phillips, Maceyko & Battock, PLLC, Phoenix, Arizona

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