In a recent ruling, the Wisconsin Supreme Court delivered a decisive victory to the owners of zombie properties, to homeowners going through the foreclosure process, and to municipalities and neighborhoods where zombie properties are located.
To best understand the Court’s decision and its implications, it’s useful to understand the two-step foreclosure process in Wisconsin and what constitutes a zombie property. To foreclose on a house, the lender bank must first obtain a judgment of foreclosure against the property owner. Second, after a redemption period during which the owner can refinance or sell the property, the lending bank must sell the property at a Sheriff sale, which must be confirmed by the court.
Zombie properties, also known as walkaway properties, are created when the lender bank completes the first step of the foreclosure process, but stops short of completing the second step. If the owner has already walked away from the house, the property may end up staying vacant and abandoned for years, and often falls into disrepair. This creates not only a blight to the neighborhood, but also causes the owners to suffer, as they typically remain responsible for property taxes and maintenance costs until the sale is confirmed by the court, even if they can’t access the property or don’t even realize they still own it.
In Bank of New York Mellon v. Carson, 2015 WI 15, ___ Wis. 2d ___, 859 N.W.2d 422, decided on February 17, 2015, the Wisconsin Supreme Court gave the owners of foreclosed properties a powerful tool to fight back against lender banks who obtain judgments of foreclosure but delay in completing the foreclosure process. In Carson, a property owner who had defaulted on her $52,000 mortgage filed a motion 16 months after the judgment of foreclosure was entered, asking the court to order the bank to sell the vacant house. The case eventually made its way to the Wisconsin Supreme Court, who ruled that under Wis. Stat. § 846.102, a circuit court has authority to order abandoned properties “to be brought to sale within a reasonable time after the redemption period.” 2015 WI 15, ¶ 3. The Supreme Court further instructed circuit courts to independently determine what constitutes a reasonable time based on each case’s circumstances.
The Carson decision provides a powerful tool to the owners of zombie properties, any homeowners going through foreclosure, and the cities and towns where zombie properties are located. The owners of zombie properties, or the municipality where the property is located, can ask the court to order the lender bank to bring the property to sale by a set date in the near future. In addition, any homeowners going through the foreclosure process can request the court to set a reasonable date after the end of the redemption period by which the lender bank must sell the property at a sheriff’s auction. Requiring the prompt sale of foreclosed properties will allow property owners to move beyond foreclosure actions and neighborhoods to fight back against decay and blight.
For more information about how the Wisconsin Supreme Court’s Decision in Bank of New York Mellon v. Carson may affect your rights as a property owner, please contact a real estate attorney at Halling & Cayo, S.C. The Carson decision is available online through the Wisconsin Courts website.