Bulletin: VA000019

Dear Associates:

The Supreme Court of Virginia recently published its opinion in the case of Wachovia Bank v. Colchester Town Condominium.  In a split decision, the Court held that, contrary to the language of the controlling statutes, the proceeds from a Condominium Association or Homeowner's Association lien foreclosure must first be used to pay off the existing first trust.  This means, then, that the sale is not made subject to any such trust; any agent insuring a Condo/HOA foreclosure must require (in addition to the usual foreclosure sale requirements) that the trust be paid with the proceeds of the sale.

Although the Court's decision focused on purchase money deeds of trust, the language was broad enough to encompass other senior deed of trust liens as well.  It will therefore be necessary to make the requirement of payoff of senior deeds of trust regardless of whether the senior trust was purchase money or not.   The decision was handed down 6 June 2003, so any closings from the auction sale of Condominium or Homeowner's Association liens after that date must comply with this procedure.