This website uses cookies to store information on your computer. Some of these cookies are used for visitor analysis, others are essential to making our site function properly and improve the user experience. By using this site, you consent to the placement of these cookies. Click Accept to consent and dismiss this message or Deny to leave this website. Read our Privacy Statement for more.
Home   |   Contact Us   |   Sign In   |   Register
Article Library
Blog Home All Blogs
Search all posts for:   


View all (853) posts »

Navigating Property Preservation Post-Foreclosure: Highlighting North Carolina

Posted By USFN, Tuesday, May 1, 2018
Updated: Tuesday, May 1, 2018

May 1, 2018

by Jeremy B. Wilkins,
Devin Chidester,
and Anthony Carreri
Brock & Scott, PLLC
USFN Member (North Carolina)

In North Carolina, purchasers of foreclosed homes traversing the post-foreclosure property preservation landscape are likely to encounter many legal constraints and pitfalls throughout the journey. If not anticipated and managed accordingly, certain actions may lead to delays in the eviction process, financial liability, and/or subsequent costly litigation. Therefore, it is essential to understand the applicable law so that a process that helps to ensure acting within one’s rights, while limiting exposure to liability, is followed.

What is property preservation?
Property preservation denotes a lender (or new owner if post-foreclosure sale) averting waste to the value of real property by repairing, securing, or maintaining the same, often times through third-party vendors. These steps could include (but are not limited to): changing locks, preventing squatters, winterizing to avoid damage, cutting grass to preempt a municipal lien, fixing damages such as broken windows, and other related precautionary measures.

What are the laws regarding property preservation?
During the pre-foreclosure sale period, property preservation is governed by contractual obligations in the deed of trust. Once a foreclosure is complete, determining how to proceed requires evaluation of the home for signs of occupancy, extent of any damage, and remnants of any personal property. If the property is vacant, the new owner may change the locks and start the REO process. However, if the home appears occupied or personal property is present, the scope of property preservation should follow the limitations for an eviction found under Chapters 42, 44A, and 45 of North Carolina’s General Statutes. See N.C.G.S. § 45-21.29(l). It is best practice to determine occupancy status during the pendency of the foreclosure.

Pursuant to N.C.G.S. § 45-21.29(k), an eviction post-foreclosure sale is a continuation of the foreclosure special proceeding, and possession is delivered to the new owner via a writ of possession and lockout by local authorities. N.C.G.S. § 45-21.29(k) requires that 10-day notice to vacate (including removal of personal property) be given to the parties that remain in possession of the property. If personal property remains pursuant to N.C.G.S. § 42-25.9(g), only after a 7-day waiting period from execution of the writ of possession may the purchaser dispose of the property. If the purchaser intends to sell the remaining personal property, notice (including time, date, and location) must be provided to the owner of the property. During this period, the purchaser may “move for storage purposes” but not dispose of (or sell) any items unless otherwise allowed by law. See N.C.G.S. § 42-25.9(g). Conversely, if the value of the personal property is deemed to be less than $500, the waiting period is reduced to five days from execution of the writ, at which point it is deemed abandoned. The purchaser must release any belongings upon request by the owner prior to expiration of the applicable waiting period. See N.C.G.S. § 42-25.9(h). Special note should be made that, although the federal Protecting Tenants at Foreclosure Act expired at the end of 2014, North Carolina enacted laws to protect bona fide tenants. See N.C.G.S. § 45-33A. The purchaser, and purchaser’s counsel, must be cognizant of any tenancy claims.

Oftentimes, remaining personal property is a strong indication of occupancy. If evidence of occupancy exists, best practice is to always seek a writ of possession after a foreclosure. Removal and/or storage of remaining personal effects may lead to legal consequences for the purchaser if done improperly. For instance, in the case of Heaton-Sides v. Snipes, 233 N.C. App. 1 (2014), a lender secured a foreclosed home and removed personal property not in accordance with North Carolina law. Ultimately, the appellate court found that the lender committed conversion of the prior owner’s personal property. Although purchasers have an interest to protect, they must do so in compliance with North Carolina law.

What should purchasers do while onsite to ensure that they are within the bounds of the law and limit property preservation pitfalls?
First, do not change locks unless certain that the property is vacant and no personal items remain. If there is a question as to whether someone is residing at the home, seek a writ of possession.

Second, document everything. All parties should document all communications (written or oral) with borrowers, tenants, occupants, or any party involved at any point of the post-foreclosure sale process. This alone may be the difference between whether or not property preservation was permissible in a specific set of facts. Similar to tracking communications, all work performed on the property should be recorded with specificity. From conducting a drive-by to check for occupants, to performing more in-depth preservation efforts, it is important to include date, time, and services performed. Preservation vendors should document every single piece of personal property remaining in the home. The use of photography with a date- and time-stamp juxtaposed with a log describing personal property, condition of property, etc. will help contribute to the valuation of personal property if subsequent litigation occurs.

Third, be aware of the totality of the property condition. That is, are people coming and going from the home? What is the condition of landscaping? Are there notices from a homeowners association? Is there damage to the exterior, to the interior? Are there active “cash for keys” negotiations? Do not assume a small detail is not worth documenting.

Lastly, paramount to the removal of people or property, is the general rule found in N.C.G.S. § 42-25.6: actions taken contrary to statutory guidelines are against public policy and therefore unlawful. Changing locks, preventing access to property, or the like may be a violation of public policy and North Carolina law.

With any property preservation matter, there is a risk of protracted litigation. Purchasers at foreclosure should protect their interests by seeking an experienced foreclosure and eviction law firm to guide on the pitfalls of property preservation. Simply put, knowing and following the rules are key to preservation of one’s interests.

Copyright © 2018 USFN. All rights reserved.
Spring USFN Report

Note for consideration of the USFN Award of Excellence: This article is a "Feature."


This post has not been tagged.

Share |
Permalink | Comments (0)
Membership Software Powered by YourMembership  ::  Legal