MTGLQ Investors, L.P. v. Association of Apartment Owners of Elima Lani Condominiums
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After recording a notice of default and intention to foreclose for unpaid assessments and costs, AOAO, a homeowners’ association, acquired the property by quitclaim deed in July 2015 after a non-judicial foreclosure sale. In September 2017, MTGLQ filed a complaint for foreclosure of the property and moved for summary judgment and an interlocutory decree of foreclosure, asking that a commissioner be appointed to take possession of the property, rent it out, and sell it. AOAO objected to MTGLQ’s request for possession and rents, arguing that Hawai͑i Revised Statutes 514B-146(n) referenced “any excess rental income received by the association” after a bank foreclosure, which meant the statute “clearly contemplated” that the association would continue in possession and collect rents. The court granted MTGLQ’s requests. In a January 2020 report, the Commissioner stated that he had conducted a public auction of the property and had collected $3,275.00 in rent for three months in 2019. The court confirmed the sale and awarded the rent to MTGLQ.
The Supreme Court of Hawaii vacated the allocation of rent. Although AOAO’s right to rent and possession was terminated by the foreclosure judgment, section 514B-146(n) entitles it to the subsequent income to the extent that it has not already recouped its losses through rent previously collected.
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