Foreclosure in Austin>Question Details

Michie79, Renter in Austin, TX

Texas Condo was purchased at a foreclosure sale set by condo association. Can original lien holder still foreclose -buyer from condo sale loses condo?

Asked by Michie79, Austin, TX Thu May 5, 2011

Condo was purchased at a foreclosure sale set up by the condo association. Can the original lien holder (the bank) send the property to foreclosure after the first foreclosure sale took place causing the buyer from the condo association foreclosure sale to lose the property to another buyer from the bank foreclosure sale? I am a tenant in the condo so I'm stuck in the middle of the old owner (the one that purchased from the Condo association foreclosure sale) trying to fight the foreclosure sale and the new owner (the one that recently purchased the property from the bank foreclosure sale). I honestly do not know what to do as far as rent, possibly changing the locks and my deposit from the original owner.

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My understanding of the Texas Property Code is that the Condo HOA can in fact foreclose on the owner's particular unit for cause (non-payment of dues, violations of CCR's, etc.) as long as formal notice has been given and received by the Owner and the HOA follows all proper foreclosure procedures (ie. public auction on the 2nd tuesday of the month at the local county courthouse). Once the HOA foreclosure has taken place then the owner still has a 6 month right to cure and pay a statutorily regulated rate of return covering all costs plus the profit to the Condo HOA that did originally foreclose.

The interesting part then becomes what happens to the original note holders. The HOA is not allowed to 'wipe out' any superior mortgage liens that were already in place (1st & 2nd liens) that were already secured against the proeperty at the time of HOA foreclosure. The Legislature changed this rule some years back. At this point, I believe the prior mortgagor is still responsible to pay the note although, if they don't have the funds to satisfy the HOA, then a event of default is probably around the corner.

From here, the question is what happens to the HOA that now owns the property subject to the lienholders that will likely invoke the 'due on sale' clause on the mortgage should a change of ownership or payments not be made. Odds are that the 1st lien holder will enter into foreclosure proceedings at this point. There are probably many different rabbit trails you could go down on who owns what from this point onward.

Your better off talking to an attorney, but this is my take on how to best answer your question.
0 votes Thank Flag Link Sun May 15, 2011
Because I am not a lawyer, I don't think I can formally answer your question. I do think, however, that the purchaser of the condo at the foreclosure auction needed to keep up the original loan, or the bank can foreclose.

I do think you might want to contact a lawyer so that you can understand your rights in this case.

Sounds like that happened.

I've linked in the Texas Uniform Condominium Act in case it has something that can help you.

Alison Shuman
(512) 585-4758
0 votes Thank Flag Link Sun May 15, 2011
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