Recent HOA foreclosure case leads to new rule in Beaufort County

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Master imposes rule based on Chief Justice Beatty’s concurring opinion

foreclosure notice

This blog recently discussed the remarkable homeowners’ association foreclosure case, Winrose Homeowners’ Association, Inc. v. Hale, South Carolina Supreme Court Opinion 27934 (December 18, 2019.) You can read the earlier blog here.

The case focused on the inadequacy of the foreclosure sales price and the business model of a third party to leverage a nominal debt to secure an exorbitant return from homeowners who fear eviction. I believe the case will require HOA foreclosure attorneys to rethink their approach going forward.

In his concurring opinion, Chief Justice Beatty said he would go a step further than the majority opinion and adopt the equity method of determining an adequate sales price for residential property in a foreclosure. The equity method compares the winning bid price to the equity in the property. The alternative debt method compares the total debt on the property to its fair market value.

The majority opinion stated that our courts have not established a bright-line rule for what percentage “shocks the conscience”, but a search of our South Carolina’s jurisprudence reveals that our courts have consistently held a price below ten percent definitely does. In this case, the debt method would have resulted in a ratio of 53.9 percent, while the equity method would have resulted in a ratio of 4.9%.

The new rule of the Beaufort County Master-in-Equity Marvin Dukes focuses on a totally separate issue in the case. The homeowners, who were in default, did not receive a notice of the date and time of the foreclosure sale. Judge Dukes’ office disseminated a message to foreclosure attorneys requiring new wording in foreclosure orders.

The new required wording entitled “Special Default Foreclosure Order and Sale Notice Service Instructions” reads as follows:

That, in addition to all notices to the property owner(s) which are required by the  SCRCP or other law, in a case involving property owner’s SCRPC 55 default, or any other case or circumstances where property owner(s) would not ordinarily receive a copy of the Order of Foreclosure and/or Notice of Sale, the party seeking foreclosure (Foreclosing Party) shall, within 5 (five) days of the execution of this Order cause this Order and Notice of Sale (if available) to be served by US Mail upon said property owner(s).

An affidavit of such service shall be filed with the Clerk of Court expeditiously.

In cases where the Notice of Sale is executed later in time than the Order, service shall be accomplished separately, and shall be sent no later than 5 (five) days from receipt by the Foreclosing Party.”

I suspect additional guidance will be coming from our courts about whether the Winrose case will have broad application in foreclosure cases or be limited to its facts. I’m confident foreclosure attorneys feel they need more information.

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