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Real Estate & Property Law

: a View from the property line

If you're going to buy Foreclosure Properties, don't forget that there's a RIGHT OF REDEMPTION

By William G. Gammon

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I'm writing this article because of a recent run-in with an ignorant prospector of real estate after she purchased a property at a local county constable's sale. This property belonged to a homeowner who had fallen several years behind on his maintenance assessments to the community association, and simply could not come up with the necessary funds to rescue his home from the clutches of foreclosure.

Now I am not decrying the business of buying and selling foreclosure properties -- this is America after all, and the foreclosure mechanism is just another animal by which wealth is redistributed to those who can afford it from those who cannot. It really makes for a rather efficient transfer of property in most cases; however, Texas Property Code section 209.001, et seq., does recognize a homeowner's absolute right to redeem such a foreclosed property within 180 days after the foreclosure sale commenced if a property owner's association lien is the instrument being foreclosed upon. It's called the Texas Residential Property Owners Protection Act and it is very much alive and well.

In fact, Section 209.011 of the Texas Property Code states that "[t]o redeem property purchased at the foreclosure sale by a person other than the property owners association, the owner must pay to the purchaser of the property:

(a) any assessments levied against the property by the association after the date of the foreclosure sale and paid by the purchaser;
(b) the purchase price paid by the purchaser at the foreclosure sale;
(c) the amount of the deed recording fee;
(d) the amount paid by the purchaser as ad valorem taxes, penalties, and interest on the property after the date of foreclosure sale; and
(e) taxable costs incurred in a proceeding brought under Subsection (a)."

Tex. Prop. Code § 209.011(e)(2). Thus, if a homeowner has the funds necessary to comply with those sums listed in the above provision, and that homeowner tenders said amounts to the purchaser of the foreclosed property, then the purchaser must allow the homeowner to redeem the property. It's that simple.

I have attended my fair share of constable's foreclosure sales in my time and I cannot tell you how many uninformed, ill-advised, uninitiated prospectors I've seen purchase property after property without having the faintest clue that the property is subject to purchase money liens, government tax liens, etc. These buyers lack the understanding of priority lien concepts, assumption of mortgages, and other pitfalls that come along with foreclosure sale prospecting. Instead, these lemmings buy the property in hopes of turning a quick buck, ignorant of the laws under which they purchase, then trample the rights of those people who would attempt to redeem when such a situation becomes tenable. Now back to the ignorant prospector.

In this case, the homeowner obtained the necessary amounts to redeem under section 209.011 of the Texas Property Code, tried to redeem his property from the purchaser, but she refused his offer. She demanded all sorts of outlandish sums for property management, attorney's fees, and "research costs" for prospecting his property! It was obvious that the prospector was conducting a money grab -- attempting to attach all manner of charges to the property -- so that she could artificially boost the profit margins on her purchase if the homeowner tried to redeem. The homeowner, distraught and not knowing where to turn to, actually asked his community association for help. Our firm stepped in, not because we had a vested interest -- our client had its judgment satisfied by the original foreclosure sale -- but rather, we entered this fray as "officers of the court" and protectors of the law. The right to redeem goes hand in hand with the foreclosure sale and is not to be ignored if such a remedy is sought. We were now fighting for the integrity and sanctity of the foreclosure process itself, and for those provisions expressly granted under the Texas Property Code.

To make matters worse, the boneheaded buyer initiated eviction proceedings against the homeowner. However, the homeowner may have the last laugh here. Texas Property Code section 209.011(f) states that ?[i]f a purchaser fails to comply with this section, the lot owner may file a cause of action against the purchaser and may recover reasonable attorney?s fees from the purchaser.? So now, the homeowner's eviction is on appeal at the county court level, he retains in possession of the propertyhe has a proper claim of wrongful eviction against the buyer, and now may recover all attorney's fees incurred in his fight to redeem the property. At the time of this writing, the case is still on appeal, but I will keep the readers informed of any updates and the eventual resolution of this case. The law is clear in this case, the homeowner can redeem if it complies with the statutory provisions of the Texas Residential Property Owners Protection Act. All the homeowner needs to do is tender those amounts listed under Section 209.011. In turn , the purchaser of the property must tender a deed back to the homeowner or suffer civil penalty.

Ultimately, I think that the Court will find in favor of the homeowner. When it does, I hope that the ignorant prospector at least learns a valuable lesson from all of this legal wrangling: the homeowner's right of redemption is absolute under the Texas Property Code when a property owner's association forecloses its lien. Don't be an ignorant prospector; instead know the law regarding foreclosure sales before you buy.

Full post as published by a View from the property line on April 27, 2008 (boomark / email).

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