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Wisconsin Supreme Court Interprets Statute regarding Abandoned Properties in Foreclosure

Posted By USFN, Monday, March 9, 2015
Updated: Wednesday, September 23, 2015

March 9, 2015 

 

by William (Nick) Foshag
Gray & Associates, L.L.P – USFN Member (Wisconsin)

The foreclosure process in this state, after judgment but before sale, has traditionally been driven by the foreclosing lender. The Wisconsin Supreme Court’s recent interpretation of Wis. Stat. § 846.102, however, appears to put the debtor, other parties, or a municipality in the driver’s seat as well — at least in relation to abandoned properties. [The Bank of New York Mellon v. Carson, 2015 WI 15 (Feb. 17, 2015)]. In Carson, the Supreme Court found that when a finding of abandonment is made in a foreclosure action, a circuit court may order the foreclosing lender to schedule a sheriff’s sale, and that it may determine the reasonable time after the redemption period in which the sale must be held.

In the case, the foreclosing lender had obtained a default judgment with a waiver of any deficiency. Later, the borrower filed a motion asking that the judgment be amended to indicate that the property was abandoned, and to order the lender to schedule a sheriff’s sale. The circuit court refused, and the borrower appealed.

The Court of Appeals and the Supreme Court interpreted § 846.102(2) to allow any party to the case, or a municipality, to support a request for finding the property to be abandoned; and, if abandoned, that the inclusion of the word “shall” within § 846.102(1) mandates that the lender schedule a sheriff’s sale.

Impact of the Carson Decision
 This ruling affects ALL properties in foreclosure. Foreclosing lenders should regularly inspect all properties in foreclosure (every 30 days) throughout the entire foreclosure process, and regularly communicate the results of these inspections to foreclosure counsel so that appropriate action can be taken.

• Prior to obtaining judgment, foreclosing lenders should determine whether the value and overall condition of the property is such that it is in the lender’s best interests to continue. Once a judgment has been entered, depending on the circumstances, it may be very difficult — if not impossible — to vacate the foreclosure judgment.

• After obtaining judgment, if a property that was previously occupied is found to have become abandoned, the lender should determine whether the value and overall condition of the property is such that it is in the lender’s best interests to attempt to either: amend the judgment to allow for a sheriff’s sale to be held sooner, or to attempt to vacate the judgment and/or dismiss the action.

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