February 2, 2016
by Richard M. Rothfuss and Bill L. Purtell
Lerner, Sampson & Rothfuss – USFN Member (Kentucky, Ohio)
The Kentucky Supreme Court amended its Rules of Administrative Procedures on December 31, 2015 to alter the way in which Master Commissioners handle foreclosure sales, amongst other duties. The full text of the rules for “Part IV: Master Commissioners of the Circuit Court” can be found at: http://courts.ky.gov/courts/supreme/Rules_Procedures/201525.pdf.
The first change was to renumber all sections of the rule. A new Section 1 was inserted to reference the authority and scope of the Supreme Court to institute these rules, which then changed the number for every subsequent section (i.e., new section 4 is old section 3, etc.). The Supreme Court then carved out a new Section 5 specifically for Judicial Sales, taking prior rules from other sections and consolidating them in Section 5. Below are the relevant changes to foreclosure practice:
New Section 4: Judicial Sales; Settlements; Receiverships
- The new section now specifies the administrative form to be utilized when appointing a Master or appointing a Special Master. The fee to refer the case to the Master remains at $200.
New Section 5: General Provisions of Judicial Sales
- The Master must sell a property within 90 days of the judgment. The Master can ask for a single 30-day extension for good cause.
- Two appraisers are required to submit an appraisal before the sale, which will be filed with the Clerk’s office.
- Advertisements for sale have been reduced from three publications to only a single publication. The timing of the advertisement must be 7 to 21 days before sale. The ad cannot list the legal description, but only the street address and parcel number of the property. This was designed to reduce the advertising costs of the sale.
- Plaintiffs can credit their judgment amount against their bid at sale. This re-affirms long-standing practice in Kentucky. However, there is no mention of other creditors who may be defendants, so each court can continue to determine what other parties may be allowed to credit bid.
- Third parties who bid at sales must produce 10 percent down on the day of sale and execute a bond in order to have 30 days to complete the bid. The bond carries interest at 12 percent. At least one Master Commissioner has applied this bond requirement to lenders who bid above the amount specified in the original judgment.
- The Master must file his Report of Sale within three days after sale.
- The Master’s deed must be issued within five days of the confirmation of sale or the full payment of the bid/costs, whichever occurs later.
These rules are designed to streamline sales and make them more efficient. Kentucky has 120 separate counties, each with its own Master Commissioner, so the hope is for uniformity across the state. In practicality, the majority of Masters will operate in a similar fashion, with special procedures existing mostly in Jefferson County (Louisville).
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