GSL Decision Alert!

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GSL Decision ALERT!

GSL Protects the Association’s Super Priority Lien in Rhode Island

The Rhode Island Supreme Court released its opinion today in the much anticipated case of Twenty Eleven, LLC vs. Botelho. The question before the Court was whether or not a condominium lien foreclosure sale on the association’s super priority lien, conducted pursuant to the Rhode Island Condominium Act, Section 36.1 et seq., extinguished a first mortgage on the unit, when the mortgagee failed to exercise the statutory right of redemption.

Goodman, Shapiro, & Lombardi, LLC represented the Plaintiff, Twenty Eleven LLC, who purchased the condominium unit at the association’s foreclosure sale of its super priority lien, which the mortgagee had failed to pay prior to foreclosure. After foreclosure, the mortgagee also failed to redeem the unit after sale and the condominium association gave a foreclosure deed to Plaintiff. In so doing, Goodman, Shapiro & Lombardi, LLC was hoping to protect the “Super Lien” enjoyed by Associations. We were successful!

The facts of the case are briefly stated as follows. After the foreclosure sale, the mortgagee attempted to foreclose on the unit. GSL filed a complaint to quiet title in Superior Court, arguing that the mortgage was extinguished by virtue of the foreclosure of the association’s super priority lien, and that the mortgagee had failed to redeem the unit. The Superior Court dismissed the complaint and held that the super priority lien was not a true priority lien capable of extinguishing a first mortgage, and that the Plaintiff did not hold title free and clear of the mortgage. GSL Attorneys Frank A. Lombardi and Mary-Joy Howes appealed the case to the Rhode Island Supreme Court.

Marking a huge victory for condominium associations in Rhode Island, the opinion, released today, reversed the Superior Court decision. The Rhode Island Supreme Court held, “[A]t best, the right of redemption creates a conditional foreclosure: foreclosure of the super-priority lien extinguishes the first mortgage (and any other junior liens on the unit) unless the first mortgage redeems within the statutory period. Here, defendant did not redeem and, as such, relinquished its last chance to save its security interest in the property.”

This victory follows the recent decisions in Nevada and the District of Columbia, (in which members of Goodman, Shapiro & Lombardi, LLC also filed successful Amicus Curiae (friend of the Court) briefs which have also held that the association’s lien is a true priority lien that is capable of extinguishing a first mortgage by foreclosure.

If you have questions please direct them to Frank Lombardi at lombardi@goshlaw.com, Ellen Shapiro at shapiro@goshlaw.com, Henry Goodman at goodman@goshlaw.com or Mary-Joy Howes at howes@goshlaw.com.