The foreclosure crisis led to a record number of non-judicial foreclosure auctions and, for some, this meant excellent deals on real estate. Hawaii is no exception. If you purchased property during the crisis rather than lost property, you may wonder whether a former homeowner can come back and make you leave if the foreclosure was done incorrectly.
In most cases, the answer in Hawaii appears to be “no”, as long as:
- You were a “bona fide purchaser” at the foreclosure sale;
- There was no lis pendens recorded at the time you bought the property;
- You were not aware of any foreclosure or title dispute at the time you bought the property, and
- The Affidavit of Foreclosure was recorded prior to your receiving any notice of title defects.
See FairHorizon LLC v. Agard, Hawaii Intermediate Court of Appeals Case No. CAAP-12-0000437 (opinion dated January 26, 2015) as an example. While a separate case apparently concluded that the seller, Deutsche Bank National Trust did not improperly foreclose, the court ruled that even if it could be proven that Deutsche’s foreclosure and title to the note and mortgage were faulty it would not affect the bona fide purchaser’s title, citing Lee v. HSBC Bank USA, 121 Hawai’i 287, 291, 218 P.3d 775, 779 (2009) (noting that”[n]onjudicial foreclosure sales] are final between the parties and conclusive as to bona fide purchasers”).
So how does it affect those of you still hoping to save your homes, even after foreclosure? The key to this ruling is the Lis Pendens, also known as a “Notice of Pendency of Action”. If you are or were facing a foreclosure that you believe wrongful, get that Lis Pendens filed as soon as possible to preserve your rights! A lis pendens can only be filed when there is a lawsuit pending, so it makes sense not to sit on your claims, but to see a qualified attorney who can file your case and record a lis pendens right away to preserve any rights to the property you may have against future “bona fide purchasers”.
For buyers, and Hawaii property owners generally, this ruling is good news. As long as you run a title report on your prospective purchase and it comes out clean, you should be able to rely on that title. This ruling enhances the finality of real estate transactions in Hawaii generally. Prior case law in Hawaii was not so clear on this issue in prior rulings, giving foreclosed homeowners hope that perhaps eventually they can undo the foreclosure and get their title back. This ruling changes the legal landscape in the Hawaii real estate market, and may help in the recovery of property values in Hawaii.
Facing a possible foreclosure or one completed incorrectly in HIlo, HI? Contact our office today to schedule a consultation.