fbpx

So You Bought a Home From a Public Auction. What Are Your Next Steps?

Author: Cheryl Wilson

Guest Editor: Ashley Kaye

February 9, 2021 9:00am

If a person buys Nevada property at a mortgage or tax sale, what can the purchaser do to protect the real property from unknown claimants? The cleanest way is to bring a lawsuit to “quiet” title to the property and legally extinguish all other claims. To do so, a landowner must be sure the ownership does not implicate Nevada’s statute of limitations on seisin. “Seisin” is an old common law property term referring to the status of possessing physical and legal title to real property. Even if one has physical possession, lien claimants or title claimants may exist and be unaware of the sale of a property. Therefore, to guard against old claimants, a new Nevada landowner must establish seisin and quiet title.

NRS 11.080 Seisin within five years; when necessary in action for real property. No action for the recovery of real property, or for the recovery of the possession thereof other than mining claims shall be maintained, unless it appears plaintiff or plaintiff’s ancestor, predecessor, or grantor was seized or possessed of the premises in question within five years before the commencement thereof.

The plain language of the statute says an entity cannot sue for “recovery of real property” in Nevada “unless” plaintiff was “seized or possessed” of the subject property “within five years” before the lawsuit is filed.  Does this mean a landowner has to quiet title before he has held the land for five years, or can the landowner sue at any time after he has held the land for five years?  Does it mean a person who held land but is now dispossessed only has five years to recover it?  How does this play out in real life?

In the recent case of Berberich v. Bank of America[i], the Nevada Supreme Court concluded the limitations period in NRS 11.080 does not refer to entities which hold land undisturbed.  If ownership is interrupted, the statute begins to run, and the landowner has five years to quiet title.

Accordingly, in Berberich, a person purchased a home with a $197,359 loan secured by a deed of trust in a neighborhood governed by a Homeowners Association (“HOA”).  The homeowner defaulted on HOA assessments, and the HOA filed a default in 2010.  The bank held the loan and tendered the assessments, but the HOA rejected it and sold the property in 2011 for $4,101 to Mr. Berberich.  Six years later, Mr. Berberich filed a quiet title action against the former homeowner, the bank, and any other potential claimants to quiet title.  The bank asked the Court to dismiss the lawsuit, arguing Mr. Berberich should have filed the complaint within five years of purchase.  Berberich filed a counter motion for summary judgment because the statute does not apply to him, as he was never dispossessed of the property.  The District Court granted the bank’s motion to dismiss.

On appeal, the Nevada Supreme Court agreed with Mr. Berberich.  The plain language of the phrase, “action for the recovery” means the restoration of a right.[ii]  The past tense reinforces the perspective plaintiff no longer has the land.  Thus, “considering the statutory text as a whole, we conclude the limitations period in NRS 11.080 does not run against a plaintiff seeking to quiet title while still seized or possessed of the property.”[iii]

The Nevada Supreme Court then considered what it takes to “trigger” the statute.

Consistent with this understanding of NRS 11.080, the limitations period is triggered when plaintiff is ejected from the property or has had the validity or legality of his or her ownership or possession of the property called into question.  See, e.g., Salazar v. Thomas, 236 Cal.App.4th 467 (2015) (discussing the general rule in California, which has a statute almost identical to NRS 11.080; see also Cal. Civ. Proc. Code § 318, “whether a statute of limitations bars an action to quiet title may turn on whether the plaintiff is in undisturbed possession of the land” (quoting Mayer v. L&B Real Estate, 43 Cal.4th 1231 (2008)).  “[M]ere notice of an adverse claim is not enough to commence the owner’s statute of limitations.”  Id.; see also Crestmar Owners Ass’n v. Stapakis, 157 Cal.App.4th 1223 (2007) (“the statute of limitations for an action to quiet title does not begin to run until someone presses an adverse claim against the person holding the property”).  For example, a notice of default issued on a deed of trust has been found insufficient to dispute an owner’s possession because it does “not call into question the validity of [the owner’s] control of the property” or “indirectly question [the owner’s] control of the property by asserting [someone else] was entitled to possess the [property].” [Citations omitted].[iv]

Takeaway

Purchasing property at HOA sale can be a great bargain.  In the case of Mr. Berberich, he purchased a home for $4,101, which had previously been valued in excess of $197,000.  After enjoying six years of peaceful ownership, he filed suit to quiet title.  Although the District Court initially dismissed his lawsuit, the Nevada Supreme Court restored his claim.  The parties later settled without a public order as to resolution.  One could conclude it is more than likely the settlement included removing any formal objections to issuance of title in Mr. Berberich’s sole name.

[i] Berberich v. Bank of America, 460 P.3d 440 (2020).

[ii] Berberich, supra at 443.

[iii] Id.

[iv] Berberich, supra at 443.

Copyright © 2021 Tyson & Mendes LLP. All Rights Reserved. Website by Big Behavior.