Published on: January 26, 2016

On December 4, 2015, the Rhode Island Supreme Court issued its opinion today in the much anticipated case of Twenty Eleven, LLC vs. Botelho. The question before the Court was whether 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.

Edmund A. Allcock submitted an Amicus Brief on behalf of the New England Chapter of the Community Association Institute in support of the Plaintiff’s position that the foreclosure of the condominium’s lien extinguished the first mortgage.  Twenty Eleven LLC, purchased the condominium unit at the association’s foreclosure sale. After foreclosure, the mortgagee also failed to redeem the unit after sale and the condominium association gave a foreclosure deed to Plaintiff.

After the foreclosure sale, the mortgagee attempted to foreclose on the unit. The bidder at foreclosure 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 timely exercise its statutory right of redemption. 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.

Marking a huge victory for condominium associations in Rhode Island, the opinion 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, which the Rhode Island Supreme Court recognized and followed which cases have also held that the association’s lien is a true priority lien that is capable of extinguishing a first mortgage by foreclosure.

For a copy of the decision [click here].

If you have any questions, please contact Ed Allcock at eallcock@meeb.com or Janet Aronson at jaronson@meeb.com.