The Statutory Right of Redemption from Foreclosures
| Publication year | 1984 |
| Pages | 793 |
| Citation | Vol. 13 No. 5 Pg. 793 |
1984, May, Pg. 793. The Statutory Right of Redemption from Foreclosures
Several excellent articles have been published on public trustee foreclosure procedures in Colorado,(fn1) as well as the effect of the new Bankruptcy Code on foreclosures.(fn2) However, few articles have discussed in detail what happens after the foreclosure sale is held, but before issuance of a deed by the public trustee, court or other official conducting the sale.
This article deals with the statutory right of redemption, which is the right granted to redeem after the foreclosure sale actually has occurred, rather than the equitable right to redeem (or right to cure), which is the right granted to redeem before noon of the date before the sale.(fn3) Although this article generally discusses such right to redeem only in the context of a public trustee foreclosure, the same general principles apply in a judicial foreclosure, foreclosure of a mechanic's lien or an execution and levy.(fn4)
At a foreclosure sale, the public trustee or other officer conducting the sale issues a Certificate of Purchase to the highest bidder.(fn5)
For deeds of trust executed after July 1, 1965, an owner of nonagricultural real estate has seventy-five days after the date of the sale to redeem the premises sold, whether the sale is held because of the foreclosure of a mortgage, deed of trust or other lien or by virtue of an execution and levy. The property is redeemed by paying to the public trustee, sheriff or other proper officer the sum for which it was sold. The payment must include interest from the date of sale at the default rate specified in the instrument foreclosed on, or if not so specified, at the regular rate specified in the original instrument, as well as any taxes paid or other proper charges. If the owner redeems, a Certificate of Redemption is issued by the public trustee and recorded with the clerk and recorder where the premises are located, and the funds are paid to the holder of the Certificate of Purchase.(fn6)
The determination of whether property is deemed to be agricultural depends upon whether it or any parcel thereof has been platted as a subdivision. Any description which is by reference to lots, plots or blocks of any named subdivision is assumed to be nonagricultural real estate. In addition, the determination of whether property is agricultural or nonagricultural is made as of the date of execution of such mortgage or deed of trust, which is deemed to be the date recited therein, not the date of sale. In the case of a mortgage or deed of trust upon agricultural real estate, the owner has six months from the date of sale in which to redeem.(fn7) The first six-month, or seventy-five-day, redemption period granted by the statute is referred to hereafter as the "owner's redemption period."
The owner and any person liable on a deficiency may redeem at any time during the owner's redemption period.(fn8) The statute specifies no order. A deficiency is that amount bid at sale which is less than the amount of the indebtedness.
A person liable on a deficiency is permitted to redeem because such a person is usually a surety for the owner. The many individuals who sold their homes to buyers who assumed existing loans without obtaining a release from the original lender are entitled to redeem during the owner's redemption period, since they may be liable on the deficiency. Because the public trustee is required to mail a notice to the grantor of the deed of trust being foreclosed, many sureties are notified of their right to redeem.
Those grantors whose address is not given in the deed of trust or whose address is listed as the premises being foreclosed, probably would not receive
notice of their right to redeem, unless they happen to see notice of the foreclosure in the newspaper. In inflationary periods, lenders rarely seek deficiency judgments and such persons may not be damaged by their failure to receive such notice. However, in periods of less inflation and when a lender obtains a deficiency judgment, the grantor may be damaged by his lack of notice of the foreclosure and redemption period.
In addition, sureties other than the original grantees or guarantors have the right to redeem, but may not receive notice because they have nothing filed with the clerk and recorder where the property is located nor do they have an interest in the property.(fn9) Both an accommodation maker who signs or endorses a note and a guarantor might be parties who would not receive notice of the right to redeem, yet clearly would have the right to redeem, since they would be liable on the note for any deficiency.(fn10)
If an owner redeems, the Certificate of Purchase issued to the successful bidder at the foreclosure sale is a nullity, the sale is void, and the public trustee will issue and record a Certificate of Redemption. Hence, all other liens on the property, other than the lien actually foreclosed, continue or spring back into full force and effect.(fn11)
The sale is also annulled in the event redemption is made by any person because of his liability on a deficiency. However, in this case, the person so redeeming is the owner of the lien redeemed from, to its full extent, including costs and expenses. This redemption causes...
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