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August 2018

Las Vegas Team Obtains Partial Summary Judgment Victory in Federal Court on behalf of Home Owners Association Client in Superpriority Lien Case

Gordon Rees Scully Mansukhani Las Vegas partner Rob Larsen and senior counsel Brian Walters also obtained a partial summary judgment victory in federal court in favor of the firm's client Amber Hills II Homeowners Association (“Amber Hills HOA”) in a superpriority lien case.  In this case, the defendant purchaser bought a property at a homeowners’ association sale for $7,325.  At the time of the sale, Bank of New York Mellon held the mortgage which interest was purportedly extinguished by the foreclosure sale.  

Bank of New York Mellon sued Amber HIlls HOA and the purchaser alleging a variety of claims including declaratory relief/ quiet title, wrongful foreclosure and breach of NRS 116.  Bank of New York Mellon argued it was entitled to more than $150,000 in damages. On behalf of Amber Hills HOA, Gordon & Rees' attorneys filed a summary judgment motion seeking dismissal of Bank of New York Mellon’s wrongful foreclosure and breach of NRS 116 claims, which were the only bases for money damages against Amber Hills HOA.  The court granted Amber HIlls HOA’s motion, thereby eliminating the client’s exposure to a judgment for damages.

Background of Superpriority Liens in Nevada

Nevada has a unique law related to liens of homeowners associations.  The law grants priority to a portion of a homeowners association assessment lien over all other liens, including a deed of trust/mortgage which would otherwise be in first position.  This is commonly described as the superpriority lien.  Foreclosure of the superpriority lien can extinguish a mortgage.  During the recent recession, home values plummeted and many homeowners stopped paying their mortgages and homeowners association assessments.  Several thousand foreclosure sales were conducted by homeowners associations from 2012-2015.

In 2014, the Nevada Supreme Court validated the statute establishing the superpriority lien and held that a foreclosure of a homeonwers association lien which includes a superpriority lien operates to extinguish the deed of trust.  See SFR Inv. Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408, 411 (Nev. 2014).

This led to race to the courthouse by banks claiming wrongful foreclosure in an effort to protect the interest in the now extinguished mortgages. 

Gordon Rees Scully Mansukhani Las Vegas attorneys Rob Larsen, Dave Gluth, Brian Walters, Wing Wong and Lynne McChrystal have defended homeowners associations in more than 200 cases involving superpriority liens.

Robert S. Larsen
Brian K. Walters