SB241: Bill Text

LRB-2090/1

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2011 - 2012 LEGISLATURE

2011 Senate BILL 241

October 18, 2011 - Introduced by Senators Lasee, Holperin, Grothman and Olsen, cosponsored by Representatives Rivard, Bies, Tiffany, A. Ott and Brooks. Referred to Committee on Workforce Development, Small Business, and Tourism.

SB241,1,2 An Act to amend 707.37 (6); and to create 707.28 of the statutes; relating to: nonjudicial 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:

SB241, s. 1 Section 1. 707.28 of the statutes is created to read:

SB241,3,6 707.28 Foreclosure of time-share estates and licenses. (1) Definition. In this section, "foreclosing entity" means a person that holds a mortgage or a lien for assessments under s. 707.37 on a time-share estate, or a person that holds a lien for assessments under s. 707.37 on, or a security interest in, a time-share license, and that seeks to foreclose the mortgage, lien, or security interest.

SB241,3,9 (2) Exclusive procedure. A mortgage or a lien for assessments under s. 707.37 on a time-share estate, or a security interest in, or a lien for assessments under s. 707.37 on, a time-share license, may be foreclosed only as provided in this section.

SB241,4,2 (3) Time-share estate foreclosure procedure. (a) Notice of default; nonjudicial foreclosure. 1. To foreclose a mortgage or a lien for assessments under s. 707.37 on a time-share estate, a foreclosing entity shall first provide written notice to the time-share owner in default at the time-share owner's last-known address by certified mail, with return receipt requested, and by 1st class mail, subject to s. 707.38 (5).

SB241,4,10 2. The notice shall inform the time-share owner of his or her default and the amount that he or she owes to the foreclosing entity; that he or she has the right to a judicial foreclosure conducted in the manner provided in ch. 846; that, within 30 days from the date on which the notice was mailed under subd. 1., or 30 days from the last date the notice was mailed if the mailings were not on the same date, he or she may cure the default or object in writing to nonjudicial foreclosure; and that, if he or she does not timely cure the default or object to the nonjudicial foreclosure in writing, the foreclosing entity may proceed with a nonjudicial foreclosure.

SB241,4,13 3. The notice shall include, for use by the time-share owner, a separate form objecting to nonjudicial foreclosure that includes the address of the foreclosing entity.

SB241,4,22 4. If, within the 30-day period under subd. 2., the time-share owner returns the objection form or otherwise objects in writing to the use of nonjudicial foreclosure, the foreclosing entity must use the procedure under ch. 846 to foreclose the mortgage or lien. However, if the time-share owner does not, within the 30-day period under subd. 2., object in writing to nonjudicial foreclosure, he or she waives his or her right to foreclosure conducted in the manner provided under ch. 846, and, if he or she does not within that 30-day period cure the default, the foreclosing entity may proceed with a foreclosure sale of the time-share estate by public auction as provided in this section.

SB241,4,24 (b) Notice of sale; general requirements. The foreclosing entity shall provide notice of the foreclosure sale as follows:

SB241,5,5 1. a. Except as provided in subd. 1. b., notice of the sale as provided in par. (c) or (d), whichever is applicable, must be published once in each of 3 successive weeks in a newspaper having general circulation in the county in which the time-share estate is located. The first publication must be no later than 30 days before the date of the sale, excluding the date of that first publication and the date of the sale.

SB241,5,17 b. In lieu of publishing the notice of sale in a newspaper as provided in subd. 1. a., notice may be given by posting a copy of the notice of sale as provided in par. (c) or (d), whichever is applicable, for 3 successive weeks on the Internet and publishing, once a week for 3 successive weeks in a newspaper having general circulation in the county in which the time-share estate is located, a notice, in at least 10-point boldface type, that states at a minimum that the notice of sale for the foreclosure of the time-share estate is posted on the Internet, the Internet site where the notice is posted, and the name and street address of the property in which the time-share estate exists. The posting on the Internet shall begin on the same date as the first newspaper publication, which date must be no later than 30 days before the date of the sale, excluding the date of that first publication and the date of the sale.

SB241,5,21 2. At least 30 days before the date of the sale, excluding the date of the sale, written notice of the date, time, and place of the sale, which may be a copy of the notice under par. (c) or (d), whichever is applicable, must be mailed to all of the following:

SB241,5,24 a. Subject to s.707.38 (5), the time-share owner at the time-share owner's last-known address by certified mail, with return receipt requested, and by 1st class mail.

SB241,6,2 b. All persons having a lien of record on the time-share estate by certified mail, with return receipt requested.

SB241,6,7 3. The notice provided to the time-share owner under subd. 2. a. must include the following language: "You are hereby notified that you have a right to petition the Circuit Court for _______ County (the county in which the time-share estate is located), with service on _________ (the foreclosing entity) and upon such bond as the Court may require, to enjoin the scheduled foreclosure sale."

SB241,6,11 4. If more than one time-share estate in the same time-share property will be sold at the foreclosure sale, all such time-share estates may be combined into one notice of sale, with one property description, as described in par. (c) or (d), whichever is applicable.

SB241,6,15 5. The notice of sale as provided in par. (c) or (d), whichever is applicable; published, or posted and published, and mailed in accordance with the requirements under this subsection; together with such other or further notice, if any; constitutes sufficient notice of the sale.

SB241,6,18 (c) Form of notice to foreclose lien for assessments. The notice of foreclosure sale for foreclosing a lien for assessments under s. 707.37 on a time-share estate shall be in substantially the following form:

SB241,6,20 NOTICE OF SALE OF TIME-SHARE ESTATE OR ESTATES UNDER CHAPTER 707 OF THE WISCONSIN STATUTES

SB241,7,2 By virtue of the (project instrument or time-share instrument, whichever is applicable) of the .... (name and address of the time-share property), and Chapter 707 of the Wisconsin Statutes establishing a lien for failure to pay assessments on the time-share estate (or estates, if more than one) held by the time-share owner (or owners, if more than one) listed below, the time-share estate (or estates, if more than one) will be sold at public auction, commencing at ...., on ...., 20.., at ...., Wisconsin.

SB241,7,6 (For each time-share estate, list the name and address of the time-share owner, a general description of the time-share estate, and the recording information for the deed or other instrument vesting the time-share estate in the time-share owner.)

SB241,7,11 TERMS OF SALE: (State the deposit amount to be paid by the buyer at the time and place of the sale and the times for payment of the balance or the whole, as the case may be. The time-share estates, if more than one, must be sold in individual lots unless there are no individual bidders, in which case they may be sold as a group.)

SB241,7,12 Other terms to be announced at the sale.

SB241,7,13 Signed ....

SB241,7,14 Holder of the lien or authorized agent.

SB241,7,17 (d) Form of notice to foreclose mortgage lien. The notice of foreclosure sale for foreclosing a mortgage lien on a time-share estate shall be in substantially the following form:

SB241,7,19 NOTICE OF SALE OF TIME-SHARE ESTATE OR ESTATES UNDER CHAPTER 707 OF THE WISCONSIN STATUTES

SB241,8,2 By virtue of Chapter 707 of the Wisconsin Statutes and the rights contained in a certain mortgage (or mortgages, if more than one) on the time-share estate (or estates, if more than one) given by the time-share owner (or owners, if more than one) set forth below for breach of the conditions of the mortgage (or mortgages, if more than one) and for the purpose of foreclosing, the time-share estate (or estates, if more than one) will be sold at public auction, commencing at ...., on ...., 20.., at ...., Wisconsin.

SB241,8,6 (For each time-share estate, list the name and address of the time-share owner, a general description of the time-share estate, the recording information for the deed or other instrument vesting the time-share estate in the time-share owner, and the recording information for the mortgage.)

SB241,8,11 TERMS OF SALE: (State the deposit amount to be paid by the buyer at the time and place of the sale and the times for payment of the balance or the whole, as the case may be. The time-share estates, if more than one, must be sold in individual lots unless there are no individual bidders, in which case they may be sold as a group.)

SB241,8,12 Other terms to be announced at the sale.

SB241,8,13 Signed ....

SB241,8,14 Holder of the mortgage or authorized agent.