Can a Living Trust Help Avoid Probate in Washington?

Thinking about what will happen to your family after you die is unpleasant. For that reason, many people don’t take the time to evaluate the estate planning tools available to them or plan effectively for the distribution of their assets . Unless you have taken steps to avoid it, your assets will go into probate at the time of your death. The probate court will gather all of your probate assets and distribute them according to the terms of your will. If no will was drafted, the assets will be distributed according to Washington State law.1. The process of probating your estate is time-consuming, intrusive, and expensive. It can, however, be avoided with some planning. An attorney can provide you with information on a variety of estate planning tools and help you develop a comprehensive plan for all of your assets. A living trust is one common estate planning tool that can protect assets from the probate process.

Benefits of a Living Trust

There are two general kinds of assets that you hold at the time of your death: probate and non-probate property. Probate property consists of any assets held in your name alone or in which you have an interest . All probate property is distributed by the probate process overseen by the court, on the other hand, a non-probate property does not pass through the courts. Common examples include jointly

-owned bank accounts or titles with a “transfer on death” or TOD provision. Assets held in a living trust are non­ probate property and will be distributed according to the terms of the trust and without court involvement. This process is generally faster, easier and less expensive than probate.

A living trust and the distribution of its contents are controlled by the creator of the trust. A living trust can hold almost any type of assets or property and any assets placed in the living trust become exempt from the probate process. You may serve as the trustee of the living trust during your lifetime – meaning you will still have full control over the assets it holds. You may also name a co-trustee,such as a spouse, or multiple co-trustees who would also have authority over the assets. The living trust will need to specify who the successor trustee will be when the initial trustee dies. The successor trustee, not the court,will be bound by the instructions in the trust on how to distribute the assets.

By taking the time now to explore the possibility of a living trust,you could be saving your family considerable amounts of time, stress, and money down the road.

Is Probate Necessary in Washington State?

A common term that you might hear after someone passes away is “probate”. Probate is the process of administering an estate by collecting assets, settling debts, and making distributions to family members. This process is often overseen by a judge who can ensure that the estate is properly administered and can resolve any disputes. If your loved one dies, you may wonder whether probate is necessary for your situation.

In Washington State, some estates must go through the probate process and some do not. Sometimes it is a benefit to file for probate, even if you do not need to. It is also important to note that Washington State Law does require you to file any existing wills with the court, regardless of whether you chose to file for probate. You must do this within 40 days of the death, so you should not delay in locating and filing a will if you believe your loved one has drafted one.

If you file for probate, it is likely because you need assistance with complex issues that may arise. You should always file for probate if the deceased left personal property worth more than $100,000, or if they individually own any real property that cannot be transferred by other means. Some additional reasons you will choose to file for probate include:

• The estate was insolvent and you want the court to settle the debts with creditors;
• You want to dispute the will or other matter regarding the estate;
• There are questions regarding who is an heir or beneficiary;
• The nature of certain property is in question;
• You want to challenge certain creditor claims against the estate;
• You need the court to grant you access to the deceased person’s safety deposit box;
• There were pending legal actions involving the deceased.

If the above or any other complex issues may exist in the administration of the estate, it is often best to have the courts there to oversee the process. This can provide guidance throughout the administration and can help to avoid liability on your part as the personal representative of the estate.

It can be a difficult decision whether or not you need to file for probate if a loved one dies. If you have questions or concerns, it is generally best to consult with an experienced legal professional who can evaluate your situation.

How Contractor’s Registration affects Construction Liens on Real Property Development

Construction liens are an important part of Seattle real estate law and other high-growth areas of Western Washington. The lien, also called a “mechanic’s lien,” represents a pre-judicial claim against title, and the owner of the land on whom the lien is recorded cannot sell the property or obtain a loan thereon until the lien is satisfied, removed, or otherwise accommodated.

The Effect of a Construction Lien. Under RCW 60.04.021, “any person furnishing labor, professional services, materials, or equipment for the improvement of real property shall have a lien upon the improvement for the contract price of labor, professional services, materials, or equipment furnished at the instance of the owner, or the agent or construction agent of the owner.” Effectively, a lien is a written notice recorded on the targeted property in the county auditor’s or recorder’s office and represents an encumbrance on title even though no lawsuit is filed.

Seattle real estate attorneys confront a regular occurrence of construction liens because of the tremendous growth in Seattle and Bellevue. Most are likely legitimate, but a great number are not. Construction companies may record them to leverage an unjustified payment out of a pending closing or to temper an angered developer seeking to sue the contractor for substandard work. Before, however, a contractor or construction company is eligible to record a construction lien or mechanic’s lien, it must be a registered contractor with the state. Under RCW 60.04.011(11), a “potential lien claimant” must be “registered or licensed if required to be licensed or registered by the provisions of the laws of the State of Washington.”

Mandatory Contractor’s Registration. Under RCW 18.27.020(1), registration is mandatory through the Department of Labor and Industries, requiring the posting of a surety bond and procuring insurance. The purpose of contractors’ registration is to protect consumers from irresponsiblecontractors, “to prevent the victimizing of a ‘defenseless’ public.” Northwest Cascade Construction Co. v. Custom Component Structures, Inc., 83 Wn.2d453, 459-60, 519 P. 2d 1 (1974). See also B.A. Van de Grift, Inc. v. Skagit County, 59 Wn. App. 545, 800 P.2d 375 (1990).

A suit for unjust enrichment will not suffice for a lack of registration. The court in Vedder v. Spellman, 78 Wn.2d 834, 480 P.2d 207 (1971) denied non-registered contractor’s damages notwithstanding the plaintiff’s masterful job and a great investment of time. There is no relief for a contractor who unwittingly performs without valid registration regardless of great loss to him or her and unjust enrichment to the customer. Stewart v. Hammond, 78 Wn.2d 216, 471 P.2d 90 (1971).

Penalties for Lack of Registration. There are severe penalties for companies performing work without registration. For example, it is a gross misdemeanor for any contractor to “advertise, offer to do work, submit a bid, or perform any work as a contractor without being registered as required by this chapter.” RCW 18.27.020(1)(2)(a). This applies even if acontractor’s previous registration is suspended or revoked; or if a licensed contractor hires an unregistered subcontractor or allows another entity to falsely use its registration. RCW 18.27.020(2)(d) and (e). It gets worse:

A person is guilty of a separate gross misdemeanor for each day worked if, after the person receives a citation from the department, the person works while unregistered, or while his or her registration is suspended or revoked, or works under a registration issued to another contractor. A person is guilty of a separate gross misdemeanor for each worksite on which he or she violates subsection (2) of this section. RCW 18.27.020(5).

Labor and Industries is serious; it mandates a two-year audit and monitoring program for offending parties after reinstatement with notices to the Departments of Revenue and Employment Security to assist in scrutinizing whether “any taxes or registration, license, or other fees or penalties are owed the state.” RCW 18.27.020(6).

Consumer Protection Violation. Making matters even more critical for the contractor is a violation of the Washington Consumer Protection Act for lack of registration. Under RCW 18.27.350, noncompliance with the Contractor’s Registration Statute may violate the Unfair Business Practices-Consumer Protection Act.

“The fact that a contractor is found to have committed a misdemeanor or infraction under this chapter shall be deemed to affect the public interest and shall constitute a violation of chapter 19.86 RCW,” enabling the plaintiff to “recover the actual damages sustained by him or her, or both, together with the costs of the suit, including a reasonable attorney’s fee.” The court at its discretion can treble the plaintiff’s damages up to a limit of $25,000. RCW 19.86.090.

Importance to Landowners and Developers. Aside from the obvious reasons, i.e., unregistered persons are likely less competent contractors or business people, it is critically important for landowners, developers, and real estate professionals to verify registration because without it, no contractor may record a lien. That means even with a dispute, no lien gets in the way of a sale of property, obtaining title insurance or obtaining a loan secured by the land. When, thus, any lien is threatened or recorded, the effective property owner or developer looks first to verify the contractor’s registration.

Where to Verify a Contractor’s Registration. Washington’s Department of Labor & Industries provides a verification service for the public to investigate the registration status of a contractor or business.

A page is displayed showing the contractor’s full name, principals (sole proprietor, corporation or limited liability company), governing persons, UBI number, whether it is registered, expiration date of the license, name of the bonding company (for use in filing suit against the contractor), name of insurance company and policy number, Labor & Industries tax debts, if any, license violations during the six years previous, existing lawsuits against the bond, and more. If the contractor is not registered, no construction lien may be recorded, RCW 60.04.011(11), and the owner or developer may sue for removal of the wrongful lien.

Surplus Funds from Deeds of Trust Foreclosures

In a highly-charged real estate market, people losing their homes to deeds of trust foreclosure may be surprised to learn they are entitled to cash after the trustee’s sale. Despite the unpleasant fact a foreclosure is taking place, often the equity gained by the fated property substantially exceeds the amount owed to the foreclosing party. By law, these funds ultimately belong to the grantor, i.e., the debtor to the deed of trust. Debtors in these situations must check their elation, however, because the surplus funds must run a gauntlet of potential creditors before reaching the grantor.

Foreclosure Procedure

The Deed of Trust foreclosure procedure is governed by RCW 61.24 et. seq. Under RCW 61.24.080, if there is a surplus of funds after a trustee’s sale, they shall be deposited with the clerk of the superior court in the county of the sale. With the filing, the trustee shall provide a notice on the amount of the surplus, a copy of the notice of trustee’s sale, and an affidavit of mailing to potential post-sale creditors and interested parties.

The notice of surplus and the two accompanying documents shall be sent by both first-class and either certified or registered mail, return receipt requested, to the same persons required to receive notice of the trustee’s sale under RCW 61.24.040(1), just a portion of whom are:

• The beneficiary of any deed of trust or any person who has a lien or claim of lien against the property recorded subsequent to the recordation of the deed of trust being foreclosed and before the recordation of the notice of sale. RCW 61.24.040(1)(b)(ii).• “The holder of any conveyances of any interest or estate in any portion or all of the property described in such notice” if the interest “was recorded after the recordation of the deed of trust being foreclosed and before the recordation of the notice of sale.” RCW 61.24.040(1)(b)(iii). 
• “The last holder of record of any other lien” on the property subordinate to the deed of trust being foreclosed “that was recorded before the recordation of the notice of sale.” RCW 61.24.040(1)(b)(iv). 
• The last holder of record of any judgment subordinate to the deed of trust under foreclosure. RCW 61.24.040(1)(b)(v). 
• To any plaintiff in a pending court action to foreclose on a lien or encumbrance on the subject property and a lis pendens is recorded thereon. RCW 61.24.040(1)(c). 

Upon filing, the clerk of the court indexes the surplus funds in the grantor’s name, and the trustee is discharged from all further responsibilities for the surplus. However, “interests in, or liens or claims of liens against the property eliminated by sale under this section shall attach to the surplus in the order of priority that it had attached to the property, as determined by the court.” RCW 61.24.080(3).

The party seeking disbursement, generally the grantor, files a motion in the superior court for release of the surplus funds. As above, notice of the motion to disperse shall be “personally served upon or emailed in the manner specified in RCW 61.24.040(1)(b), to all parties to whom the trustee mailed notice of the surplus funds.” All of these notice procedures must take place “not less than twenty days prior to the hearing of the motion.” Creditors and interested parties may defend their liens or judgments at that motion, where the court will decide validity and priority. The clerk will not disperse the funds except on order from the court. RCW 61.24.080(3).

Real Property and “Grandfather Rights” aka Nonconforming Use

We often hear the expression, “grandfather rights,” when someone’s property is not affected by a land use change while nearly everyone else’s is. In legal parlance, land use attorneys know the term is “Nonconforming Use,” defined as a use “existing lawfully before the rezone of the surrounding area and continues or is ‘grandfathered’ after the rezone, provided the use is not thereafter interrupted for longer than a prescribed period, generally a year.” Land Use and Environmental Law, Ch. 24, Part Two, Washington Lawyer’s Practice Manual. Nonconforming use is not limited solely to zoning issues, but to changes in a large spectrum of administrative regulations.

“The right to continue a nonconforming use despite a zoning ordinance which prohibits such a use in the area is sometimes referred to as a ‘protected’ or ‘vested’ right. This right, however, only refers to the right not to have the use immediately terminated in the face of a zoning ordinance that prohibits the use.” Rhod-A-Zalea & 35th, Inc. v. Snohomish County, 136 Wn.2d 1, 6, 959 P.2d 1024 (1998).

Establishing nonconforming use requires: (1) the use existed on the date specified in the zoning or administrative code, (2) it was lawful, and (3) after the change took effect, it was not abandoned or discontinued for one year or more. State ex rel. Lige & Wm. B. Dickson Co. v. Pierce County, 65 Wn. App. 614, 623-24, 829 P.2d 217 (1992). Nonconforming uses are also disfavored in the law, and slowly but surely the courts in Washington State are restraining their existence. The prevailing public policy is to severely limit if not abolish them.

Washington State, however, is one of the jurisdictions where nonconforming use is hanging on because there is some emphasis on protecting due process rights. Bartz v. Board of Adjustment, 80 Wn.2d 209, 217, 492 P.2d 1374 (1972). “Due process prevents the abrupt termination of what one had been doing lawfully.” Meridian Minerals Co. v. King County, 61 Wn. App. 195, 212, 810 P.2d 31, rev. denied, 117 Wn.2d 1017 (1991). The message for the property-owning public is nonconforming use is still available in Washington, at least for the foreseeable future.

There are conditions where nonconforming us is in effect a vested right and is therefore permanent. But there are limits. Immediate abolishment of a nonconfirming use regardless of due process is allowed where the use is substantially detrimental to the public health, safety, morals or welfare. State v. Thomasson, 61 Wn.2d 425, 428, 378 P.2d 441 (1963). A local government may legislate an “amortization period,” where a nonconfirming use is phased out because sufficient time is given the property owner to endure the change. University Place v. McGuire, 102 Wn. App. 658, 9 P.3d 918 (2000). A city or county may require a permit for nonconfirming use, but impose so many conditions that the use is effectively eliminated.

From the beginning of nonconforming use, laws existed limiting the character of the use from any expansion. In Greer v. Washougal Motocross LLC, 137 Wn. App. 1046 (2007), while the nonconfirming use is allowed, a property owner cannot significantly change, alter, extend, or enlarge it. So, for example, a retail store in an area downzoned to residential cannot expand its building or business from what was in place with the change took place.

There are time considerations. Almost all jurisdictions have a time limit in which a nonconforming use lapses. It is generally a year, Miller v. City of Bainbridge Island, 111 Wn. App. 152, 43 P.3d 1250 (2002), but for some local governments it is less. The lapse can come from a predecessor. A former owner discontinued the use of his land as church for over a year. He then sold the property to group planning to use the location as a church. However, because of the significant lapse in time with the first owner, the nonconforming use expired, and the court prohibited the new owner’s plans to use the property as a church once again. Open Door Baptist Church v. Clark County, 140 Wn.2d 143, 150-51, 995 P.2d 33 (2000).

What does this mean for a property owner believing he or she has a nonconforming use after a land use or administrative change? First, never assume the property loses its nonconforming use no matter what you are told. Because it is against their interests, the forces promoting the change will not in any way accept your use as nonconforming. Second, as early as possible seek out professionals to gather the evidence confirming the existence of a nonconforming use. Third, take no chances on the time limit; examine the local jurisdiction’s code on when the time period is up, and take steps many, many months before the deadline. If selling the property or installing a tenant preserves the nonconforming use, do so early on.

Deciphering the “Lis Pendens“

Seattle real estate attorneys, real estate brokers, and escrow companies deal with the “lis pendens” from time to time, and many people are not sure what it means. The Latin definition is simply: notice of a pending lawsuit.

The Revised Code of Washington defines “lis pendens” as an “instrument having the effect of clouding the title to real property, however, named, including consensual commercial lien, common-law lien, commercial contractual lien, or demand for performance of a public office lien.” RCW 4.28.328 (1)(a). Is recording a lis pendens, thus, a violation of the owner’s procedural due process, i.e., the right to notice and an opportunity to be heard?

Not according to Cranwell v. Mesec, 77 Wn. App. 90, 890 P.2d 491 (1995), where the court determined that unlike a lien, a lis pendens is not a significant property interest, and though “substantial economic effects” may result from it, the effects do not “constitute a significant enough deprivation by the state so as to require that the landowner be given an opportunity to be heard in advance of filing.” The court reasoned that owners, even though subject to a lis pendens, can still sell the property, provided “the landowner can find a willing buyer.”

A lis pendens is not a lien. A lawsuit, for example, must be commenced before a lis pendens may be filed whereas a lien, whether construction, landowners’ associations, or taxing agencies, is recorded before a lawsuit is started, and the holder may thereafter bring an action to foreclose on the lien, but does not have to. Pre-litigation liens areprocedurally tricky and may have contingent deadlines before a suit is allowed to be filed. A construction lien for example, also known as a mechanic’s lien, must be recorded on the title of the property to which a registered contractor is performing improvements within 90 days (residential) or 60 days (commercial) of the date the contractor last performed work on the job. A lawsuit must then be brought to foreclose on the lien within eight months of the date it was recorded.

A lis pendens, on the other hand, is tied to an existing lawsuit and expires when the litigation is over. It does not have to be recorded at the instant the lawsuit commences, but any time up to 60 days thereafter, though early is best for the reasons explained below. Incidentally, after a lawsuit is commenced, say on a construction lien, a lis pendens maythen be recorded on the same property subject to the lawsuit.

The real strength in the lis pendens is defined by statute:

From the time of the filing (of the lis pendens) only shall the pendency of the action be constructive notice to a purchaser or encumbrancer of the property affected thereby, and every person whose conveyance or encumbrance is subsequently executed or subsequently recorded shall be deemed a subsequent purchaser or encumbrancer, and shall be bound by all proceedings taken. RCW 4.28.320.

In assuming priority over purchasers or lienors, the lis pendensfunctions like a pre-litigation lien. When it is recorded, the law treats it as notice to everybody, whether they see the actual recording or not. This is called “Constructive Notice,” where every person is warned their conveyance or encumbrance recorded after the lis pendens is second to it, and subject to the outcome of the lawsuit. In other words, as in the Cranwell case, where the owner of the property could have readily obtained a loan by a lender who would have recorded a deed of trust on the property, the lender hesitates because its encumbrance could be vitiated by the outcome of the lawsuit.

It cannot be stressed enough that grounds for a lis pendens must affect title to the property. For example, recovering a money judgment is notan action on the title. Bramall v. Wales, 29 Wn. App. 390, 395, 628 P.2d 511 (1981). Nor is the enforcement of a restrictive covenant, Foster v. Nehls, 15 Wn. App. 749, 753, 551 P.2d 768, 772 (1976). An action involving a short plat was not enough where the plaintiffs “believed” property would revert to them, and damages were awarded to the plaintiff for the wrongful recording of a lis pendens. Richau v. Rayner, 98 Wn. App. 190, 198, 988 P.2d 1052 (1999). An action on an easement, however, does affect title, and the plaintiff may record a lis pendens. Schwab v. City of Seattle, 64 Wn. App. 742, 826 P.2d 1089 (1992).

To be procedurally sufficient, lis pendens must contain the names of the plaintiff and defendant, a description of the causes of action, and identification of the real property affected by the litigation. A form for a lis pendens looks like this (thanks to 1A WAPRAC § 53.35 Notice of LisPendens):

[CAPTION ] NOTICE OF LIS PENDENS

NOTICE IS HEREBY GIVEN that an action has been commenced in the above-entitled Court upon the complaint of plaintiffs above-named against the above-named defendants. The object of that action is to foreclose a lien claimed by plaintiffs, which lien claim was filed in the office of the Auditor for _____ County, Washington, on_____, 20__, by plaintiff and against defendant.

This action and the lien above described affects title to the following described real property situated in _____ County, Washington, to wit:

[Legal Description]

All persons dealing with the above-described real property situated in ______ County, Washington, subsequent to the filing of this notice, will take subject to the rights of plaintiffs as established in that action.

DATED this______day of______, 20__.

_________________________

Attorney for Plaintiff

Judicial Foreclosure and Nonjudicial Foreclosure: the Differences

Used together, a promissory note and a deed of trust embody the most common type of mortgage. The deed of trust is recorded on the borrower’s title securing the note and prioritizing the loan’s position on title. There are only two ways to foreclose on this mortgage: judicially and nonjudicially.

Judicial Foreclosure and Redemption

A judicial foreclosure is processed through the courts by filing a complaint for a judgment on the note which accelerates the unpaid balance, and orders the sheriff to sell the property at auction. Because the lender obtains a judgment, the remedies can be any type of collection, foreclosure being one of them. When the sale occurs, interest from default until the date of the auction, costs, legal fees, and other statutory expenses will be part of the sheriff’s opening bid. If, after the sheriff’s sale, the bank takes back the title because no third-party bid, there is an eight-month redemption period from the sale date wherein the loan owed to the bank may be paid off, and the borrower takes full title to the property once again. RCW 6.23.020(1). During the redemption phase the borrower may remain in the foreclosed premises with no rental obligation to the bank or exposure to eviction.

If a third-party places the highest bid at the sheriff’s auction, the redemption period is still in force but if the borrower redeems, he or she must pay the third-party the amount it paid to purchase the property at the sheriff’s sale plus the below costs. As part of either redemption scheme, all post-auction fees and costs incurred by the judgment creditor must be paid, including assessments or taxes, interest from the time of the sale until redemption, prior liens on the property paid by the purchaser provided they were necessary to protect the interests of the judgment debtor or a redemptioner, etc. RCW 6.23.020(2).

Deficiency Judgment

If a third-party bids but offers less than the full judgment amount, the bank is entitled to a deficiency judgment which is the difference between the judgment amount and the final bid. RCW 61.12.070. For example, if the original judgment is $200,000, and property sells for only $125,000, the bank retains a deficiency judgment against the borrower for $75,000. It is collected as a personal judgment, where the plaintiff employs wage garnishment, levies on bank accounts or tangible personal property, and/or foreclosure on other real property owned by the debtor.

Upset Price

To keep deficiency judgments under control, Washington foreclosure law allows an “upset price” as part of the judgment. For example, the law prevents a foreclosing plaintiff to accept a bid unreasonably lower than the property’s fair market value because it would leave the debtor with an exceptionally high deficiency judgment. Thus, the court, “in ordering the sale, may in its discretion, take judicial notice of economic conditions, and after a proper hearing, fix a minimum or upset price to which the mortgaged premises must be bid or sold before confirmation of the sale.” RCW 61.12.060. Effectively, then, the property’s fair market value is added to the judgment offsetting the deficiency judgment. If the value is high enough, it may eliminate the deficiency altogether.

Nonjudicial Foreclosure on the Deed of Trust

The closest a nonjudicial foreclosure gets to a court of law is the courthouse steps, but not inside. Where the judicial method requires filing with the superior court, nonjudicial foreclosure is conducted by the beneficiary on the deed of trust (the lender) against the grantor (borrower) independently of any court proceedings. Instead of focusing on a judgment against the promissory note, the nonjudicial procedure exercises rights in the deed of trust allowing the lender to foreclose directly against the borrower’s title. Usually an attorney for the lender assumes the position of trustee of the deed of trust, and serves a Notice of Default on the borrower, followed thirty days later by a Notice of Trustee’s Sale. RCW 61.24.031 and RCW 61.24.040.

Unlike the default notice, the trustee’s sale notice is recorded, and provides a date for the trustee to sell the property on the courthouse steps, always on a Friday, always at 10:00 a.m. RCW 61.24.040(f). The auction date is no sooner than 90 days from recording the Notice of Trustee’s Sale, making service of the notices of default and of trustee’s sale a 120-day event. Like a sheriff’s sale, the trustee commences the auction with a starting bid from the lender representing the borrower’s default, then entertains third-party bidders at the auction.

No Deficiency or Redemption under Deed of Trust Foreclosure

If a third-party bids less than the bank’s opening bid but the banks accepts it notwithstanding, there is no deficiency against the borrower. Put a better way, there is never a deficiency in nonjudicial foreclosure. RCW 61.24.100(1). Nor does a redemption right exist under the Deed of Trust Act, “after a trustee’s sale, no person shall have any right, by statute or otherwise, to redeem the property sold at the trustee’s sale.” RCW 61.24.050(1). Because there is no redemption, the buyer has an immediate right to possession, although the trustee has up to fifteen days to record the trustee’s deed (which in practice is about three to four weeks). RCW 61.24.100(1).

Creditor’s Election on Type of Foreclosure. Nothing in Washington law forces foreclosure attorneys to use one or the other method to foreclose. Creditors can effectively choose, though nonjudicial is the most common because the court system is avoided. However, for various reasons judicial foreclosure is also used. For example, banks are increasingly frustrated at Foreclosure Fairness Acts imposed by the state to assist debtors in challenging or at least slowing the four or five-month pace of a deed of trust foreclosure.

Under RCW 61.24.160 and 163, a good faith duty is imposed on lenders to attempt resolution of the delinquent mortgage with the debtor, including mediation. This process, identified in the Notice of Trustee’s sale, interrupts or can postpone indefinitely the four or five-month stride of the nonjudicial foreclosure. Because it is faster and less complicated, some lenders side-step the mediation programs by entering the court system, and bringing a summary judgment in foreclosure as described above. They may even waive the deficiency if they believe the property’s equity will cover the judgment at the sheriff’s sale.

Under either foreclosure process, when continued default is inevitable, the debtor and his or her attorney are well-advised to start early in making the best out of a bad situation. In summary, there are five primary differences between the two foreclosures. The judicial version starts in the courts, but carries with it the debtor’s right of redemption and availability of an upset price. A deficiency judgment is available to the lender, and it may elect what type of collection procedure it desires, including foreclosure. The nonjudicial course stays out of the courts completely, and bears no redemption right or deficiency. Its end result is foreclosure alone.

By Thomas L. Dickson, Esq.
Dickson Frohlich PS