A Wisconsin Supreme Court decision Tuesday could speed up the sale of abandoned foreclosed properties across the state.
At issue was whether Wis. Stat 846.102, which governs the enforcement of mortgage liens on abandoned properties, requires a plaintiff in a foreclosure to sell property immediately after the redemption period expires.
According to the majority opinion written by Justice Ann Walsh Bradley, the court concluded that the statute authorizes a circuit court to order a lender to sell a property within a reasonable amount of time to be determined by that court. The context and history of the statute, according to the opinion, clearly indicates that it was “intended to help municipalities deal with abandoned properties in a timely manner.”
Patricia Gibeault, partner at Axley Brynelson LLP, said the decision is a significant one because if a bank is not taking actions to bring a property to sale, the owner could ask the court to order that property be scheduled for sale.
The justices’ ruling in Bank of New York Mellon, et. al vs. Shirley Carson, et. al stemmed from the January 2011 foreclosure of a Milwaukee home owned by Shirley Carson.
When Carson could no longer care for the home, she vacated the property by the time Bank of New York filed foreclosure, and did not dispute the filing.
The bank registered the property as abandoned and the court ordered that the property be sold. Under Milwaukee’s municipal code, lenders that initiate foreclosures must maintain the property and inspect it every 30 days.
“Historically, when a mortgage holder or a bank starts a foreclosure, it is their intent to take a property to sale,” Gibeault said. “However, facts could change.”
In this case, the facts changed when, despite written reminders from the city, the bank did not maintain the property, according to court documents.
The redemption period passed, but no sheriff’s sale was scheduled.
About 16 months after the foreclosure judgment, the property was vandalized and burglarized. At one point, according to court documents, someone started a fire in the garage. The city imposed about $1,800 in municipal fines on Carson, and she paid $25 per month toward that amount, according to the documents.
By that point, the problems with the property were significant and the bank no longer wanted to own it, said Gibeault, who read Tuesday’s decision. While it is unusual for a bank to pay for a foreclosure action and not take it to sale, she said, the practice is very common in Milwaukee.
Ryan Blay, an attorney with Lakelaw’s office in Kenosha, said the court’s decision should speed up sales of abandoned foreclosed properties, as other owners can now follow in Carson’s footsteps.
In November 2012, Carson filed a motion to amend the foreclosure judgment to include a finding that the home was abandoned and order that it be sold five weeks after the amended judgment was entered.
Circuit Court Judge Jane Carroll denied that motion, and Carson appealed.
On review, the Court of Appeals’ decided that, according to Wis. Stat. 846 102, the property must be sold immediately after the redemption period expires.
Bank of New York appealed, arguing that an unpublished 2013 Court of Appeals opinion, Deutsche Bank Nat’l Trust Co. v. James Matson, held that the state statute does not force the plaintiff to sell.
But the justices disagreed and decided Carson’s motion was valid.
The decision is not a cure-all for selling foreclosed homes, Gibeault cautioned.
“From my point of view, the next question will be what happens if no one bids,” she said, adding that just because a property goes up for sale, “doesn’t mean anyone is going to buy it.”