LRB-2167/1
PJK:kjf:rs
2011 - 2012 LEGISLATURE
October 17, 2011 - Introduced by Representatives Rivard, Bies, Brooks, Honadel,
A. Ott and Tiffany, cosponsored by Senators Lasee, Grothman, Holperin and
Olsen. Referred to Committee on Tourism, Recreation and State Properties.
AB328,1,2
1An Act to amend 707.37 (6); and
to create 707.28 of the statutes;
relating to:
2nonjudicial foreclosure of time-share estates and licenses.
Analysis by the Legislative Reference Bureau
Nonjudicial (or administrative) foreclosure of time shares
Under current law, a time-share estate is defined as a right to occupy a real
property unit during at least four separated periods over at least four years, together
with a property interest in the real property unit. A time-share license is defined
as a right to occupy a unit, or any of several units, under a license or lease agreement
during at least four separated periods over at least four years, without a property
interest in the real property unit. A person's interest in a time-share estate may be
foreclosed in a court proceeding (judicial foreclosure) in the same manner as an
interest in real property is foreclosed if the person defaults in payments to a creditor
that has a security interest in the time-share estate, or if the person does not pay
assessments that were imposed for time-share expenses and that have become a
lien. Current law specifies that a lien for assessments against a time-share license
may be foreclosed as provided under the Uniform Commercial Code (UCC). This bill
sets out nonjudicial (administrative) procedures for foreclosing security interests in,
and assessment liens against, time-share estates and time-share licenses. The bill
provides that a person seeking to foreclose an owner's interest in a time-share estate
or a time-share license (foreclosing entity) must use the administrative procedure,
except that the owner of a time-share estate may object to the use of the
administrative procedure, in which case the foreclosing entity must use the judicial
foreclosure procedure. In addition, the bill provides that a foreclosing entity that
uses the administrative procedure to foreclose an owner's interest in either a
time-share estate or time-share license waives the right to a deficiency if the
proceeds of the sale in the administrative procedure do not cover what is owed to the
foreclosing entity.
Procedure for time-share estates
To foreclose an owner's interest in a time-share estate, the foreclosing entity
must first send notice to the owner, informing the owner of the default, of the amount
of the default, and that he or she may, within 30 days, cure the default or object to
the use of the administrative procedure. If the owner does not timely cure the default
or object to the use of the administrative procedure, he or she has waived the right
to a judicial foreclosure, and the foreclosing entity may proceed with the
administrative foreclosure, which includes sale by public auction. The foreclosing
entity must publish notice of the foreclosure sale in a newspaper having general
circulation in the county in which the time-share estate is located. The notice must
be published once in each of three successive weeks, and the first publication must
be at least 30 days before the date of the sale. In lieu of publishing the full notice
three times in a newspaper, the foreclosing entity may post the full notice on an
Internet site for three successive weeks and publish the Internet site in a newspaper
once in each of three successive weeks. In addition to publishing notice of the sale,
the foreclosing entity must mail written notice of the date, time, and place of the sale
to the time-share estate owner and all persons having a lien of record on the
time-share estate.
The foreclosure sale must take place on the time-share estate property or at
another location in the county where the time-share estate is located and must be
conducted by a registered auctioneer or an attorney who is a member of the State Bar
of Wisconsin. The successful buyer at the foreclosure sale, which extinguishes the
former owner's right to redeem, takes the time-share estate free and clear of any
assessments owed by the former owner. The time-share estate is still subject,
however, to any outstanding taxes and to any liens or other encumbrances that were
recorded before the mortgage or assessment lien on which the administrative
foreclosure is based. The foreclosing entity must: 1) within 10 days after the
foreclosure sale, deliver to the buyer a deed or other instrument transferring title
and an affidavit attesting that all requirements under the statutes for
administrative foreclosure have been met; 2) within 30 days after delivering the deed
or other instrument and the affidavit, mail the former owner and all persons holding
liens that were junior to that of the foreclosing entity a notice that details the results
of the sale; and 3) within 30 days after the foreclosure sale, apply the sale proceeds
first to the expenses of the sale and then to the amount owed to the foreclosing entity.
If there are any surplus proceeds after that, the foreclosing entity may pay the junior
lienholders or may turn the surplus proceeds over to the court and ask the court to
determine the proper distribution. If there are no junior lienholders or if they have
all been paid, the foreclosing entity must pay any surplus to the former owner, or to
the state treasurer if the foreclosing entity is unable to locate the former owner
within one year after the sale.
Procedure for time-share licenses
Under the bill, the administrative procedure for foreclosing a security interest
in, or an assessment lien on, a time-share license is the procedure used under the
UCC when a default occurs in a secured transaction. Under this procedure, the
foreclosing entity may sell, lease, or otherwise dispose of the time-share license by
private or public proceedings. The method, manner, time, place, and other terms of
the disposal must be commercially reasonable. The bill requires that the foreclosing
entity must send at least 30 days' written notice to the time-share owner before any
proceedings may be brought. As with administrative foreclosure of an owner's
interest in a time-share estate, disposal of the time-share license by private or
public proceedings extinguishes the former owner's right to redeem and the buyer
takes the time-share license free and clear of any assessments owed by the former
owner but subject to any outstanding taxes and to any liens or other encumbrances
that were recorded before the security interest or assessment lien on which the
administrative foreclosure is based.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB328, s. 1
1Section
1. 707.28 of the statutes is created to read:
AB328,3,6
2707.28 Foreclosure of time-share estates and licenses. (1) Definition. 3In this section, "foreclosing entity" means a person that holds a mortgage or a lien
4for assessments under s. 707.37 on a time-share estate, or a person that holds a lien
5for assessments under s. 707.37 on, or a security interest in, a time-share license,
6and that seeks to foreclose the mortgage, lien, or security interest.
AB328,3,9
7(2) Exclusive procedure. A mortgage or a lien for assessments under s. 707.37
8on a time-share estate, or a security interest in, or a lien for assessments under s.
9707.37 on, a time-share license, may be foreclosed only as provided in this section.
AB328,4,2
10(3) T
ime-share estate foreclosure procedure. (a)
Notice of default;
11nonjudicial foreclosure. 1. To foreclose a mortgage or a lien for assessments under
12s. 707.37 on a time-share estate, a foreclosing entity shall first provide written notice
13to the time-share owner in default at the time-share owner's last-known address
1by certified mail, with return receipt requested, and by 1st class mail, subject to s.
2707.38 (5).
AB328,4,103
2. The notice shall inform the time-share owner of his or her default and the
4amount that he or she owes to the foreclosing entity; that he or she has the right to
5a judicial foreclosure conducted in the manner provided in ch. 846; that, within 30
6days from the date on which the notice was mailed under subd. 1., or 30 days from
7the last date the notice was mailed if the mailings were not on the same date, he or
8she may cure the default or object in writing to nonjudicial foreclosure; and that, if
9he or she does not timely cure the default or object to the nonjudicial foreclosure in
10writing, the foreclosing entity may proceed with a nonjudicial foreclosure.
AB328,4,1311
3. The notice shall include, for use by the time-share owner, a separate form
12objecting to nonjudicial foreclosure that includes the address of the foreclosing
13entity.
AB328,4,2214
4. If, within the 30-day period under subd. 2., the time-share owner returns
15the objection form or otherwise objects in writing to the use of nonjudicial foreclosure,
16the foreclosing entity must use the procedure under ch. 846 to foreclose the mortgage
17or lien. However, if the time-share owner does not, within the 30-day period under
18subd. 2., object in writing to nonjudicial foreclosure, he or she waives his or her right
19to foreclosure conducted in the manner provided under ch. 846, and, if he or she does
20not within that 30-day period cure the default, the foreclosing entity may proceed
21with a foreclosure sale of the time-share estate by public auction as provided in this
22section.
AB328,4,2423
(b)
Notice of sale; general requirements. The foreclosing entity shall provide
24notice of the foreclosure sale as follows:
AB328,5,5
11. a. Except as provided in subd. 1. b., notice of the sale as provided in par. (c)
2or (d), whichever is applicable, must be published once in each of 3 successive weeks
3in a newspaper having general circulation in the county in which the time-share
4estate is located. The first publication must be no later than 30 days before the date
5of the sale, excluding the date of that first publication and the date of the sale.
AB328,5,176
b. In lieu of publishing the notice of sale in a newspaper as provided in subd.
71. a., notice may be given by posting a copy of the notice of sale as provided in par.
8(c) or (d), whichever is applicable, for 3 successive weeks on the Internet and
9publishing, once a week for 3 successive weeks in a newspaper having general
10circulation in the county in which the time-share estate is located, a notice, in at
11least 10-point boldface type, that states at a minimum that the notice of sale for the
12foreclosure of the time-share estate is posted on the Internet, the Internet site where
13the notice is posted, and the name and street address of the property in which the
14time-share estate exists. The posting on the Internet shall begin on the same date
15as the first newspaper publication, which date must be no later than 30 days before
16the date of the sale, excluding the date of that first publication and the date of the
17sale.
AB328,5,2118
2. At least 30 days before the date of the sale, excluding the date of the sale,
19written notice of the date, time, and place of the sale, which may be a copy of the
20notice under par. (c) or (d), whichever is applicable, must be mailed to all of the
21following:
AB328,5,2422
a. Subject to s.707.38 (5), the time-share owner at the time-share owner's
23last-known address by certified mail, with return receipt requested, and by 1st class
24mail.
AB328,6,2
1b. All persons having a lien of record on the time-share estate by certified mail,
2with return receipt requested.
AB328,6,73
3. The notice provided to the time-share owner under subd. 2. a. must include
4the following language: "You are hereby notified that you have a right to petition the
5Circuit Court for _______ County (the county in which the time-share estate is
6located), with service on _________ (the foreclosing entity) and upon such bond as the
7Court may require, to enjoin the scheduled foreclosure sale."
AB328,6,118
4. If more than one time-share estate in the same time-share property will be
9sold at the foreclosure sale, all such time-share estates may be combined into one
10notice of sale, with one property description, as described in par. (c) or (d), whichever
11is applicable.
AB328,6,1512
5. The notice of sale as provided in par. (c) or (d), whichever is applicable;
13published, or posted and published, and mailed in accordance with the requirements
14under this subsection; together with such other or further notice, if any; constitutes
15sufficient notice of the sale.
AB328,6,1816
(c)
Form of notice to foreclose lien for assessments. The notice of foreclosure sale
17for foreclosing a lien for assessments under s. 707.37 on a time-share estate shall be
18in substantially the following form:
AB328,6,2019
NOTICE OF SALE OF TIME-SHARE ESTATE OR ESTATES UNDER
20CHAPTER 707 OF THE WISCONSIN STATUTES
AB328,7,221
By virtue of the (project instrument or time-share instrument, whichever is
22applicable) of the .... (name and address of the time-share property), and Chapter
23707 of the Wisconsin Statutes establishing a lien for failure to pay assessments on
24the time-share estate (or estates, if more than one) held by the time-share owner (or
1owners, if more than one) listed below, the time-share estate (or estates, if more than
2one) will be sold at public auction, commencing at ...., on ...., 20.., at ...., Wisconsin.
AB328,7,63
(For each time-share estate, list the name and address of the time-share
4owner, a general description of the time-share estate, and the recording information
5for the deed or other instrument vesting the time-share estate in the time-share
6owner.)
AB328,7,117
TERMS OF SALE: (State the deposit amount to be paid by the buyer at the time
8and place of the sale and the times for payment of the balance or the whole, as the
9case may be. The time-share estates, if more than one, must be sold in individual
10lots unless there are no individual bidders, in which case they may be sold as a
11group.)
AB328,7,1212
Other terms to be announced at the sale.
AB328,7,1414
Holder of the lien or authorized agent.
AB328,7,1715
(d)
Form of notice to foreclose mortgage lien. The notice of foreclosure sale for
16foreclosing a mortgage lien on a time-share estate shall be in substantially the
17following form:
AB328,7,1918
NOTICE OF SALE OF TIME-SHARE ESTATE OR ESTATES UNDER
19CHAPTER 707 OF THE WISCONSIN STATUTES
AB328,8,220
By virtue of Chapter 707 of the Wisconsin Statutes and the rights contained in
21a certain mortgage (or mortgages, if more than one) on the time-share estate (or
22estates, if more than one) given by the time-share owner (or owners, if more than
23one) set forth below for breach of the conditions of the mortgage (or mortgages, if
24more than one) and for the purpose of foreclosing, the time-share estate (or estates,
1if more than one) will be sold at public auction, commencing at ...., on ...., 20.., at ....,
2Wisconsin.
AB328,8,63
(For each time-share estate, list the name and address of the time-share
4owner, a general description of the time-share estate, the recording information for
5the deed or other instrument vesting the time-share estate in the time-share owner,
6and the recording information for the mortgage.)
AB328,8,117
TERMS OF SALE: (State the deposit amount to be paid by the buyer at the time
8and place of the sale and the times for payment of the balance or the whole, as the
9case may be. The time-share estates, if more than one, must be sold in individual
10lots unless there are no individual bidders, in which case they may be sold as a
11group.)
AB328,8,1212
Other terms to be announced at the sale.
AB328,8,1414
Holder of the mortgage or authorized agent.
AB328,8,2315
(e)
Sale procedure. 1. The foreclosure sale must take place on the time-share
16property in which the time-share estate exists or at another location in the same
17county in which that time-share property is located. The sale must be by public
18auction, conducted by an auctioneer registered under ch. 480 or by an attorney who
19is a member of the State Bar of Wisconsin. At his or her discretion, the auctioneer
20or attorney may dispense with the reading of the names of the time-share owners
21if there is more than one time-share owner, of the descriptions of the time-share
22estates if there is more than one time-share estate, and of the recording information
23if there is more than one instrument.
AB328,9,1024
2. Upon the sale of the time-share estate, the time-share owner's right to
25redeem the time-share estate is extinguished. Unless the successful buyer is the
1time-share owner, the successful buyer at the foreclosure sale takes title to the
2time-share estate free and clear of any outstanding assessments owed by the
3previous time-share owner to the managing entity or other person specified in the
4project instrument or time-share instrument, but subject to municipal or other taxes
5and to any liens and encumbrances that were recorded prior to the recording of the
6mortgage or the assessment lien. A buyer at a foreclosure sale is not required to
7complete the purchase if the time-share estate is subject to outstanding liens and
8encumbrances, other than those included in the notice of sale, that are not stated at
9the sale. The buyer shall have a period of 5 days from the foreclosure sale date to
10determine if the time-share estate is subject to any such liens or encumbrances.
AB328,9,1811
3. No later than 10 days after the foreclosure sale date, the foreclosing entity
12shall deliver to the successful bidder a foreclosure deed or other appropriate
13instrument transferring title to the time-share estate and an affidavit in recordable
14form attesting that all requirements described in this section have been met. Within
1530 days after the delivery of the foreclosure deed or other instrument of transfer and
16affidavit, the buyer shall record the foreclosure deed or other instrument of transfer
17and affidavit with the register of deeds of the county in which the time-share estate
18is located.
AB328,9,2319
4. Subject to s. 707.38 (5), within 30 days after delivering the foreclosure deed
20or other instrument of transfer and affidavit to the buyer, the foreclosing entity shall
21mail by 1st class mail to the last-known address of the former time-share owner and
22to each party that held a lien or security interest junior to that of the foreclosing
23entity a notice detailing the results of the foreclosure sale.
AB328,9,2524
(f)
Application of sale proceeds. 1. No later than 30 days after the foreclosure
25sale, the foreclosing entity shall apply the proceeds of the sale first to the expenses
1of the sale and then to the amount owed to the foreclosing entity, as set forth in the
2notice to the former time-share owner under par. (a).
AB328,10,43
2. Any surplus after the payments under subd. 1. are made shall be applied as
4follows:
AB328,10,115
a. If there are any parties that held a lien or security interest junior to that of
6the foreclosing entity, the foreclosing entity may make an equitable and proper
7distribution of the surplus to those parties, or may bring an action of interpleader,
8turn the surplus over to the court, name the parties with the junior liens or security
9interests, and ask the court to determine the proper distribution of the surplus. The
10foreclosing entity shall recover reasonable attorney fees in any interpleader action
11under this subd. 2. a.
AB328,10,1712
b. If no party held a lien or security interest junior to that of the foreclosing
13entity, or if all parties holding junior liens or security interests have been paid, any
14surplus shall be paid to the former time-share owner. If the foreclosing entity is
15unable to locate the former time-share owner within one year after the foreclosure
16sale, the foreclosing entity shall deliver the surplus to the state treasurer as provided
17under ch. 177.
AB328,11,4
18(4) Time-share license foreclosure procedure. (a)
Procedure. If the owner
19of a time-share license fails to pay assessments when due or breaches the terms of
20an instrument granting a security interest in the time-share license, a foreclosing
21entity may foreclose the security interest in, or lien for assessments under s. 707.37
22on, the time-share license in accordance with s. 409.610, except that "secured party"
23as used in s. 409.610 means "foreclosing entity" for purposes of this subsection, and
24"collateral" as used in s. 409.610 means "time-share license" for purposes of this
25subsection. No proceedings may be brought to foreclose the security interest or lien
1for assessments unless the foreclosing entity provides at least 30 days' prior written
2notice by registered mail with return receipt requested to the last-known address
3of the time-share owner as shown on the books or other records of the managing
4entity or other person specified in the project instrument.
AB328,11,105
(b)
Consequences of sale. Upon the sale of the time-share license, the
6time-share owner's right to redeem the time-share license is extinguished. Unless
7the successful buyer is the time-share owner, the successful buyer takes title to the
8time-share license free and clear of any outstanding assessments owed by the
9previous time-share owner to the managing entity or other person specified in the
10project instrument or time-share instrument.
AB328,11,14
11(5) Waiver
of deficiency. Any foreclosing entity that forecloses a mortgage,
12lien, or security interest under this section waives the right to bring an action for any
13deficiency that may remain due to the foreclosing entity after the sale of the
14time-share estate or license.