Bank of New York Mellon Trust Company, N.A. v. Arizona HOA Acceptance, LLC (3/17/2016)

March 28, 2016

Arizona Court of Appeals Division One holds that a homeowners’ association assessment lien grants its holder a right of redemption following a mortgage foreclosure sale.

A borrower obtained a mortgage on a home that was subject to assessments by a homeowners’ association.  Under A.R.S. § 33-1807, those assessments are a continuing lien upon the property.  The borrower defaulted on the mortgage.  The lender obtained a judgment and purchased the home at a sheriff’s sale for a $22,000 credit bid.  The homeowners’ association assigned its rights to enforce its $2,000 assessment lien to Arizona HOA Acceptance which recorded notice of its intent to redeem the property.  In the trial court, the lending bank argued that there was no right of redemption under A.R.S. § 12-1281 and the court agreed.  Arizona HOA Acceptance appealed, reasserting its argument that it had a right of redemption under another statute A.R.S. § 12-1283.

The Arizona Court of Appeals held that A.R.S § 12-1283 grants the holder of a homeowners’ association assessment lien the right to redeem a home following a mortgage foreclosure sale.  The Court reached this conclusion based on Western Land & Cattle Co. v. Nat’l Bank of Ariz. at Phx., 28 Ariz. 270 (1925), in which the Arizona Supreme Court had found the same right for a lienholder under a previous version of the statute.  The Court of Appeals noted that even without that case, an application of established rules of statutory construction led to the same conclusion.  It vacated and remanded for the trial court to instruct the sheriff to issue a deed to Arizona HOA Acceptance upon payment of the redemption amount.

Judge Norris authored the opinion; Presiding Judge Thompson and Judge Portley concurred.