The Oregon Supreme Court recently held that a condo association’s lien for unpaid assessments took priority over a bank’s lien because the bank failed to initiate foreclosure proceedings within 90 days of the condo association’s notice concerning a condo owner’s default.
An owner purchased a condo unit in 2003 and gave a note to the bank’s predecessor-in-interest, which was secured by a properly recorded deed of trust. In 2011, the owner failed to make loan payments. In 2013, the owner also failed to pay condo association assessments. The condo association filed its lien for unpaid assessments on July 25, 2013. Five days later, on July 30, 2013, the bank initiated foreclosure proceedings, but did not name the condo association in the action. On December 11, 2013, the bank and the owner entered into a stipulated limited judgment of foreclosure. In January 2014, the bank filed its first amended complaint for judicial foreclosure naming the condo association as a party. In May 2014, the court entered a general judgment of dismissal without prejudice as to the condo association for failure to prosecute.
On or about October 1, 2014, the condo association sent notice to the bank of the owner’s default on assessments. On May 4, 2015, the bank moved the trial court to reinstate the foreclosure action, which the court granted. The condo association answered the complaint, and asserted priority over the bank pursuant to ORS 100.450(7). The condo association then moved for summary judgment arguing it had priority because the bank failed to initiate foreclosure proceedings within 90 days of notice. The bank argued it was not required to initiate proceedings when it had already initiated one. The trial court granted summary judgment for the bank, and the court of appeals affirmed the judgment.
The Supreme Court for Oregon reversed the judgment, finding that the bank had failed to initiate proceedings after its earlier proceeding had been dismissed by general judgment. Generally, a first mortgage takes priority over a condo association’s lien for unpaid assessments. However, such a lien can take priority, if after the condo association gives notice to a lender of a condo owner’s default, the lender fails to initiate foreclosure proceedings within 90 days of the notice. While the bank was not required to initiate proceedings within 90 days of notice if it had a proceeding that was pending, the bank’s earlier proceeding was not pending because it had been dismissed. Therefore, it was required to initiate a proceeding within 90 days of notice to maintain its priority.