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1997 SESSION

971989745
SENATE BILL NO. 1135
Offered January 20, 1997
A BILL to amend and reenact §§ 55-79.84 and 55-516 of the Code of Virginia, relating to the condominium and property owners' associations; liens for assessments.
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Patrons-- Ticer, Howell and Whipple; Delegates: Darner, Mims, Moran, Puller and Van Landingham
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Referred to the Committee on General Laws
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Be it enacted by the General Assembly of Virginia:

1. That §§ 55-79.84 and 55-516 of the Code of Virginia are amended and reenacted as follows:

§ 55-79.84. Lien for assessments.

A. The unit owners' association shall have a lien on every condominium unit for unpaid assessments levied against that condominium unit in accordance with the provisions of this chapter and all lawful provisions of the condominium instruments.

1. The said lien, once perfected, shall be prior to all other liens and encumbrances except (i) real estate tax liens on that condominium unit, (ii) liens and encumbrances recorded prior to the recordation of the declaration, and (iii) sums unpaid on any first mortgages or first deeds of trust recorded prior to the perfection of said lien for assessments and securing institutional lenders.

2. The lien shall also be prior to a mortgage or deed of trust described in clause (iii) of subdivision 1, to the extent of the common expense assessments based on the periodic budget adopted by the unit owners' association which would have become due in the absence of acceleration during the six months immediately preceding perfection of the lien.

3. The provisions of this subsection shall not affect the priority of mechanics' and materialmen's liens.

B. Notwithstanding any other provision of this section, or any other provision of law requiring documents to be recorded in the miscellaneous lien books or the deed books in the clerk's office of any court, on or after July 1, 1974, all memoranda of liens arising under this section shall, in the discretion of the clerk, be recorded in the miscellaneous lien books or the deed books in such clerk's office. Any such memorandum shall be indexed in the general index to deeds, and such general index shall identify the lien as a lien for condominium assessments.

C. The unit owners' association, in order to perfect the lien given by this section, shall file before the expiration of ninety days from the time such assessment became due and payable in the clerk's office in the county or city in which such condominium is situated, a memorandum, verified by the oath of the principal officer of the unit owners' association, or such other officer or officers as the condominium instruments may specify, which contains the following:

1. A description of the condominium unit in accordance with the provisions of § 55-79.47.

2. The name or names of the persons constituting the unit owners of that condominium unit.

3. The amount of unpaid assessments currently due or past due together with the date when each fell due.

4. The date of issuance of the memorandum.

It shall be the duty of the clerk in whose office such memorandum shall be filed as hereinabove provided to record and index the same as provided in subsection B, in the names of the persons identified therein as well as in the name of the unit owners' association. The cost of recording such memorandum shall be taxed against the person found liable in any judgment or decree enforcing such lien.

D. No suit to enforce any lien perfected under subsection C shall be brought after twenty-four months from the time when the memorandum of lien was recorded; provided, however, that the filing of a petition to enforce any such lien in any suit wherein such petition may be properly filed shall be regarded as the institution of a suit under this section; and provided further that nothing herein shall extend the time within which any such lien may be perfected.

E. The judgment or decree in an action brought pursuant to this section shall include, without limitation, reimbursement for costs and attorneys' fees, together with interest at the maximum lawful rate for the sums secured by the lien from the time each such sum became due and payable.

F. When payment or satisfaction is made of a debt secured by the lien perfected by subsection C, said lien shall be released in accordance with the provisions of § 55-66.3. For the purposes of that section, the principal officer of the unit owners' association, or such other officer or officers as the condominium instruments may specify, shall be deemed the duly authorized agent of the lien creditor.

G. Nothing in this section shall be construed to prohibit actions at law to recover sums for which subsection A creates a lien, maintainable pursuant to § 55-79.53.

H. Any unit owner or purchaser of a condominium unit, having executed a contract for the disposition of the same, shall be entitled upon request to a recordable statement setting forth the amount of unpaid assessments currently levied against that unit. Such request shall be in writing, directed to the principal officer of the unit owners' association or to such other officer as the condominium instruments may specify. Failure to furnish or make available such a statement within ten days of the receipt of such request shall extinguish the lien created by subsection A as to the condominium unit involved. Such statement shall be binding on the unit owners' association, the executive organ, and every unit owner. Payment of a fee not exceeding ten dollars may be required as a prerequisite to the issuance of such a statement if the condominium instruments so provide.

I. The unit owners' association, upon nonpayment of assessments and compliance with this subsection, may sell the condominium unit. The sale may be at a public sale or by private negotiation and at any time and place, but every aspect of the sale, including the method, advertising, time, place, and terms, shall be reasonable. The unit owners' association shall give to the unit owner reasonable written notice of the time and place of any public sale or, if a private sale is intended, of the intention of entering into a contract to sell, and of the time after which a private disposition may be made. Such notice shall be sent to the unit owner at his address as his name and address appears on the records of the unit owners association. The same notice shall also be sent to any other person who has a recorded interest in the condominium unit which would be cut off by the sale, at the address recorded with such interest, but only if the interest was on record eight weeks before the date specified in the notice as the date (i) of any public sale or (ii) after which a private sale may be made. The sale shall not be held until six weeks after notice is sent. The association may buy at any public sale and, if the sale is conducted by a fiduciary or other person not related to the association, at a private sale.

J. The proceeds of a sale under subsection I shall be applied in the following order:

1. The reasonable expenses of the sale;

2. The reasonable expenses of securing possession before sale; holding, maintaining and preparing the condominium unit for sale, including payment of taxes and other governmental charges, premiums on hazard and liability insurance, and reasonable attorney's fees and other legal expenses incurred by the association;

3. Satisfaction in the order of priority of any prior claims of record;

4. Satisfaction of the association's lien;

5. Satisfaction in the order of priority of any subordinate claim of record; and

6. Remittance of any excess to the unit owner. Unless otherwise agreed, the unit owner is liable for any deficiency.

K. If a condominium unit is sold pursuant to subsection I, a good faith purchaser for value shall acquire the unit owner's interest in the condominium unit free of the unit owner's association debts which gave rise to the lien under which the sale occurred and any subordinate interest, even though the unit owners' association or other person conducting the sale failed to comply with the requirements of this section. The person conducting the sale under subsection I shall execute a conveyance to the purchaser sufficient to convey the condominium unit which states that the conveyance is executed by him, after a foreclosure by power of sale of the association's lien, and that he has power to make the sale. Signature and title or authority of the person signing the conveyance as grantor and a recital of the facts of nonpayment of the assessment and of the giving of the notices required by subsection I shall be sufficient proof of the facts recited and of his authority to sign. Further proof of authority shall not be required even though the unit owners' association is named as grantee in the conveyance.

L. At any time before the unit owners' association has disposed of the unit or entered into a contract for its disposition under the power of sale, the unit owner, or the holder of any subordinate security interest, may cure the unit owner's default and prevent sale or other disposition by tendering the performance due, including any amounts due because of exercise of a right to accelerate, plus the reasonable expenses of collecting the amounts due and proceeding to foreclosure incurred to the tender, including the reasonable attorney's fees of the creditor.

M. At any time after perfecting the lien given by this section, the unit owners' association may sell the unit at public sale conducted in compliance with this section. Except to the extent expressly modified by this section, such sale shall be conducted in accordance with the law governing the conduct of nonjudicial real estate foreclosure sales in accordance with the provisions of §§ 55-59.1 and 55-59.2. The sale shall not occur earlier than fourteen days after the date on which the unit owners association sends notice of the date, time and place of the sale, which place may be either on the grounds of the condominium or at the courthouse of the county or city in which the condominium is located, via registered or certified mail together with a copy of the notice of lien described in subsection C to the unit owner at his address as his name and address appears on the records of the unit owners association. The same notice shall also be sent to any subordinate or senior lienholder which is the beneficiary of a deed of trust against the condominium unit or the assignee of the beneficiary of such deed of trust, provided that the address of such beneficiary or assignee is recorded among the land records of the county or city wherein the condominium, or any part thereof lies.

In addition to giving notice as required by this section, an advertisement of the date, time and place of the sale shall be published in a newspaper of general circulation in the county or city where the condominium is located not less than once in each of two different weeks. The advertisement shall (i) identify the condominium unit by both unit number and street address and (ii) set forth the name, address and telephone number of some person designated by the unit owners' association to respond to inquiries concerning the sale. The sale may be conducted by any elected officer or member of the executive organ or an attorney representing the executive organ. Such person may bid on behalf of the unit owners' association and, beyond compliance with the provisions of this section, shall have no obligation to the unit owner or any other creditor. Any defect in the notice or advertisement required by this section shall not void a sale of the unit for value to a party without knowledge of such defect.

§ 55-516. Lien for assessments.

A. Once perfected, the association shall have a lien on every lot for unpaid assessments levied against that lot in accordance with the provisions of this chapter and all lawful provisions of the declaration.

1. The lien, once perfected, shall be prior to all other subsequent liens and encumbrances except (i) real estate tax liens on that lot, (ii) liens and encumbrances recorded prior to the recordation of the declaration, and (iii) sums unpaid on and owing under any mortgage or deed of trust recorded prior to the perfection of said lien.

2. The lien shall also be prior to a mortgage or deed of trust described in clause (iii) of subdivision 1, to the extent of the common expense assessments based on the periodic budget adopted by the property owners' association which would have become due in the absence of acceleration during the six months immediately preceding perfection of the lien.

3. The provisions of this subsection shall not affect the priority of mechanics' and materialmen's liens.

4. Notice of a memorandum of lien to a holder of a credit line deed of trust under § 55-58.2 shall be given in the same fashion as if the association's lien were a judgment.

B. The association, in order to perfect the lien given by this section, shall file before the expiration of twelve months from the time such assessment became due and payable in the clerk's office in the county or city in which such development is situated, a memorandum, verified by the oath of the principal officer of the association, or such other officer or officers as the declaration may specify, which contains the following:

1. The name of the development;

2. A description of the lot;

3. The name or names of the persons constituting the owners of that lot;

4. The amount of unpaid assessments currently due or past due relative to such lot together with the date when each fell due;

5. The date of issuance of the memorandum;

6. The name of the association and the name and current address of the person to contact to arrange for payment or release of the lien; and

7. A statement that the association is obtaining a lien in accordance with the provisions of the Virginia Property Owners' Association Act as set forth in Chapter 26 (§ 55-508 et seq.) of Title 55.

It shall be the duty of the clerk in whose office such memorandum shall be filed as hereinafter provided to record and index the same as provided in subsection D, in the names of the persons identified therein as well as in the name of the association. The cost of recording and releasing the memorandum shall be taxed against the person found liable in any judgment or decree enforcing such lien.

C. Prior to filing a memorandum of lien, a written notice shall be sent to the property owner by certified mail, at the property owner's last known address, informing the property owner that a memorandum of lien will be filed in the circuit court clerk's office of the applicable city or county. The notice shall be sent at least ten days before the actual filing date of the memorandum of lien.

D. Notwithstanding any other provision of this section, or any other provision of law requiring documents to be recorded in the miscellaneous lien books or the deed books in the clerk's office of any court, on or after July 1, 1989, all memoranda of liens arising under this section shall be recorded in the deed books in the clerk's office. Any memorandum shall be indexed in the general index to deeds, and the general index shall identify the lien as a lien for lot assessments.

E. No suit to enforce any lien perfected under subsection B shall be brought after twenty-four months from the time when the memorandum of lien was recorded; however, the filing of a petition to enforce any such lien in any suit wherein the petition may be properly filed shall be regarded as the institution of a suit under this section. Nothing herein shall extend the time within which any such lien may be perfected.

F. The judgment or decree in an action brought pursuant to this section shall include, without limitation, reimbursement for costs and reasonable attorney's fees, together with interest at the maximum lawful rate for the sums secured by the lien from the time each such sum became due and payable.

G. When payment or satisfaction is made of a debt secured by the lien perfected by subsection B hereof, the lien shall be released in accordance with the provisions of § 55-66.3. For the purposes of § 55-66.3 the principal officer of the association, or any other officer or officers as the declaration may specify, shall be deemed the duly authorized agent of the lien creditor.

H. Nothing in this section shall be construed to prohibit actions at law to recover sums for which subsection A hereof creates a lien, maintainable pursuant to § 55-515.

I. The association, upon nonpayment of assessments and compliance with this subsection, may sell the lot. The sale may be at a public sale or by private negotiation and at any time and place, but every aspect of the sale, including the method, advertising, time, place and terms, must be reasonable. The association shall give to the owner reasonable written notice of the time and place of any public sale or, if a private sale is intended, of the intention of entering into a contract to sell, and of the time after which a private disposition may be made. Such notice shall be sent to the lot owner at his address as his name and address appear on the records of the association. The same notice shall also be sent to any other person who has a recorded interest in the lot which would be cut off by the sale, at the address recorded with such interest, but only if the interest was on record eight weeks before the date specified in the notice as the date (i) of any public sale or (ii) after which a private sale may be made. The sale shall not be held until six weeks after the sending of notice. The association may buy at any public sale, and, if the sale is conducted by a fiduciary or other person not related to the association, at a private sale.

J. The proceeds of a sale under subsection I shall be applied in the following order:

1. The reasonable expenses of the sale;

2. The reasonable expenses of securing possession before the sale; holding, maintaining and preparing the lot for sale, including payment of taxes and other governmental charges, premiums on hazard and liability insurance, and reasonable attorney's fees and other legal expenses incurred by the association;

3. Satisfaction in the order of priority of any prior claims of record;

4. Satisfaction of the association's lien;

5. Satisfaction in the order of priority of any subordinate claim of record; and

6. Remittance of any excess to the lot owner. Unless otherwise agreed, the owner is liable for any deficiency.

K. If a lot is sold under subsection I, a good faith purchaser for value acquires the lot owner's interest in the lot free of the association's debt which gave rise to the lien under which the sale occurred and any subordinate interest, even though the association or other person conducting the sale failed to comply with the requirements of this section. The person conducting the sale under subsection I shall execute a conveyance to the purchaser sufficient to convey the lot which states that the conveyance is executed by him, after a foreclosure by power of sale of the association's lien, and that he has power to make the sale. Signature and title or authority of the person signing the conveyance as grantor and a recital of the facts of nonpayment of the assessment and of the giving of the notices required by subsection I shall be sufficient proof of the facts recited and of his authority to sign. Further proof of authority shall not be required even though the association is named a grantee in the conveyance.

L. At any time before the association has disposed of the lot or entered into a contract for its disposition under the power of sale, the owner or the holder of any subordinate security interest may cure the owner's default and prevent sale or other disposition by tendering the performance due, including any amounts due because of exercise of a right to accelerate, plus the reasonable expenses of collecting the amounts due and proceeding to foreclosure incurred to the time of tender, including the reasonable attorney's fees of the creditor.

M. At any time after perfecting the lien given by this section, the association may sell the lot at public sale conducted in compliance with this section. Except to the extent expressly modified by this section, such sale shall be conducted in accordance with the statutes and law governing the conduct of nonjudicial real estate foreclosure sales in accordance with the provisions of §§ 55-59.1 and 55-59.2. The sale shall not occur earlier than fourteen days after the date on which the association sends notice of the date, time and place of the sale, which place may be either on the grounds of the association or at the courthouse of the county or city in which the lot is located, via registered or certified mail together with a copy of the notice of lien described in subsection C to the owner at his address as it appears on the records of the association. The same notice shall also be sent to any subordinate or senior lienholder which is the beneficiary of a deed of trust against the lot or the assignee of the beneficiary of such deed of trust, provided that the address of such beneficiary or assignee is recorded among the land records of the county or city wherein the lot or any part thereof lies.

In addition to giving notice as required by this section, an advertisement of the date, time and place of the sale shall be published in a newspaper of general circulation in the county or city where the association is located not less than once in each of two different weeks. The advertisement shall (i) identify the lot by both lot number and street address and (ii) set forth the name, address and telephone number of some person designated by the association to respond to inquiries concerning the sale. The sale may be conducted by any elected officer or member of the association or an attorney representing the association. Such person may bid on behalf of the association and, beyond compliance with the provisions of this section, shall have no obligation to the lot owner or any other creditor. Any defect in the notice or advertisement required by this section shall not void a sale of the lot for value to a party without knowledge of such defect.