Where an association enforces an assessment lien through foreclosure and sale of an owner’s property (whether through nonjudicial or judicial foreclosure), the purchaser of the property at the foreclosure sale (whether the purchaser is the association or a third-party) takes ownership of the property subject to the foreclosed owner’s “right of redemption.” The right of redemption allows for the foreclosed owner to “redeem” (reinstate his/her ownership of) the foreclosed property by paying a certain amount to the foreclosure trustee within the applicable redemption period.
The redemption period varies depending upon whether the property is sold through nonjudicial foreclosure or through judicial foreclosure:
- Nonjudicial Foreclosure: 90 Days – When an association enforces an assessment lien through nonjudicial foreclosure (aka “trustee sale”), the applicable redemption period is ninety (90) days. (Civ. Code § 5715(b); Code Civ. Pro § 729.035.)
- Judicial Foreclosure: 3 Months or 1 Year – When an association enforces an assessment lien through judicial foreclosure, the applicable redemption period is three (3) months if the proceeds of the sale are sufficient to satisfy the association’s judgment amount, including the costs incurred in conducting the foreclosure sale. (Code Civ. Pro § 729.030(a).) If the proceeds of the sale are insufficient to cover that amount, the redemption period is one (1) year. (Code Civ. Pro. § 729.030(b).)
The price which must be paid by a foreclosed owner in order to exercise his/her right of redemption (the “redemption price”) is governed by Code of Civil Procedure Section 729.060. It generally includes the purchase price at the sale (where there are no third-party purchasers, and the property thus transfers to the association, the purchase price is typically the amount of the assessment lien plus the additional fees and costs incurred by the association in conducting the foreclosure sale).
Maintenance & Repairs During Redemption Period – In the event that the purchaser incurs expenses for maintenance and repair work on the property which were reasonably necessary for the preservation of the property, those maintenance and repair expenses may be incorporated into the redemption price. (Code Civ. Pro § 729.060(b); Barry v. OC Residential Properties (2011) 194 Cal.App.4th 861.)
Rents & Profits – During the redemption period and prior to the time when the property is redeemed, the purchaser at the foreclosure sale is entitled to receive from the person in possession of the property during the redemption period “the rents and profits from the property or the value of the use and occupation of the property.” (Code Civ. Pro. § 729.090.) Any such sums received by the purchaser must be offset against the other sums used in calculating the total redemption price. (Code Civ. Pro. § 729.060(c).)
Notice of Redemption Rights
When an assessment lien is enforced through nonjudicial foreclosure, the Notice of Sale that is recorded prior to conducting the foreclosure sale must include a statement that the owner’s property is being sold subject to the right of redemption. (Civ. Code § 5715.) Additionally, “promptly after the sale the levying officer or trustee who conducted the sale” must serve or mail a notice to the foreclosed owner of his/her right of redemption, including the applicable redemption period. (Code Civ. Pro. § 729.050.) This post-sale notice serves two (2) primary purposes:
“First, it ensures that the debtor is aware that the property may still be redeemed. Second, it informs the debtor the date on which his or her redemption rights expire. Presumably, a debtor who has not received such notice has been harmed or prejudiced by the fact that they were not informed of those rights.” (Multani v. Witkin & Neal (2013) 215 Cal.App.4th 1428, 1451.)
Where the post-sale notice is not provided, it may provide grounds for the foreclosed owner to set aside the foreclosure sale. (Multani.)
Possession During Redemption Period
The purchaser at the foreclosure sale does not technically own the property until the expiration of the redemption period. The purchaser therefore does not have a legal right to possess the property during the redemption period (i.e., to evict the owner or a tenant from the property). However, the purchaser “is entitled to enter the property during reasonable hours to repair and maintain the premises and is entitled to an order restraining waste on the property. Such order may be granted with our without notice in the discretion of the court.” (Code Civ. Pro. § 729.090(c); Barry, at 868.)
- Code of Civil Procedure Section 729.090. Rents & Profits During Redemption Period.
- Code of Civil Procedure Section 729.060. Redemption Price.
- Code of Civil Procedure Section 729.030. Right of Redemption – Judicial Foreclosure.
- Code of Civil Procedure Section 729.050. Post-Sale Notice of Right of Redemption.
- Code of Civil Procedure Section 729.035. Right of Redemption
- Civil Code Section 5715. Right of Redemption.
Related Case Law
- Barry v. OC Residential Properties
(2011) 194 Cal.App.4th 861
[Foreclosure; Redemption Price] When a property is sold through nonjudicial foreclosure of an assessment lien, the redemption price may include maintenance and repair expenses incurred by the purchaser during the redemption period that were reasonable necessary for the preservation of the property.
- Multani v. Witkin & Neal
(2013) 215 Cal.App.4th 1428
[Assessment Collection; Redemption Rights] A nonjudicial foreclosure sale may be set aside where a HOA fails to notify the foreclosed owner of his/her redemption rights after the foreclosure sale.