Recent Kentucky Legislation Impacts Mortgage Lenders

Kentucky lawmakers recently enacted a new statute, KRS 426.205 (http://www.lrc.ky.gov/krs/426-00/205.PDF), to provide for an expedited foreclosure sale when the subject property has been determined by the court to be vacant and abandoned.  In an effort to provide lenders a faster way to resolve vacant foreclosed properties, and to preserve the value of the property for both the lender and the community, legislators have provided the option for lenders or other lienholders to have the subject property deemed vacant and accelerate the timeline to foreclosure sale and confirmation.

The new statute sets forth the specific circumstances under which the court can determine that the property is vacant and abandoned.  Real property may be considered vacant and abandoned if there has been no legal resident for a period of 45 or more consecutive days and two or more of the following (or similar) circumstances exist, as established by the moving party's affidavit:

• Overgrown or dead vegetation
• Accumulation of flyers, mail or trash
• Disconnected utilities
• The absence of window coverings or furniture
• Uncorrected hazardous conditions or vandalism
• Statements by neighbors, delivery persons or government employees that the property is vacant

While taking action to deem a property vacant and accelerate the foreclosure process is optional, proof of vacancy and abandonment may be offered by an affidavit filed at any time during the foreclosure proceedings by the plaintiff or other lienholder.  Any lienholder, including the local taxing authority which has a vested interest in securing vacant property and maintaining property values, may provide such proof of vacancy, thus speeding up the process.  Lenders must be prepared to move quickly on a foreclosure action when it is known or reasonably believed that a property is vacant.

If the court determines that the property is vacant and abandoned, the Master Commissioner of the court is required to sell the property within seventy (70) days following the entry of a Judgment and Order of Sale.  Further, the party in whose favor the Judgment and Order of Sale were entered must apply for an Order Confirming the Sale within twenty (20) days following the date of sale, absent any objections to sale filed.  Lastly, the Master Commissioner must then convey the property on the date of confirmation, or as soon thereafter as all fees and costs are paid.  Implementation of this new statute can reduce the timeline for a Kentucky foreclosure by weeks or even months.

Upon preparation of initial pleadings, WWR's Kentucky counsel will request occupancy status from our client, and remind them to monitor occupancy status during the foreclosure process.  Should the property be determined to be vacant at any time during the foreclosure process, and if our client desires to implement this new statute and accelerate the proceedings, we will take all necessary steps to ensure that happens.