HOUSE BILL REPORT

HB 1297

BYRepresentatives Rayburn, Nealey, Kremen and McLean

Establishing procedures to foreclose on properties with delinquent payments of assessments.

House Committe on Agriculture & Rural Development

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (12)

      Signed by Representatives Rayburn, Chair; Kremen, Vice Chair; Baugher, Brooks, Chandler, Doty, Holm, R. King, McLean, Moyer, Nealey and Rasmussen.

House Staff:Tim Burke (786-7103)

AS REPORTED BY COMMITTEE ON AGRICULTURE & RURAL DEVELOPMENT

JANUARY 21, 1988

BACKGROUND:

The current statutory procedure for foreclosing on delinquent assessments owed to an irrigation district is prescribed under obsolete statute law originally enacted in 1890.  In Wenatchee Reclamation District v. Mustell, 102 Wn.2d 721 (1984), our state supreme court invalidated this procedure on the ground that it violated "due process" requirements, particularly requirements pertaining to notification of parties with financial interests in the property to be foreclosed.  As a result of this decision, irrigation districts are effectively precluded from using foreclosure as a remedy for collecting delinquent irrigation assessments and costs and interests resulting from delinquency.

SUMMARY:

SUBSTITUTE BILL:  The irrigation district foreclosure law is repealed and a new more modern foreclosure procedure, designed to satisfy "due process" requirements, is established.  This procedure, similar to the property tax foreclosure procedure, contains the following key requirements:

(1) After irrigation district assessments are delinquent for three years, the district will prepare a certificate of delinquency containing, among other things, the lien amount of the assessments, costs, and interest due.

(2) It will then institute foreclosure proceedings and serve a "notice and summons" on each "party in interest." ("Party in interest" is defined to include an occupant of the property, the owner of record, mortgage holder, or other person having a financial interest of record in the property.)  The notice and summons must include, among other things, the lien amount due, a description of the property, a direction that the party should appear and defend the foreclosure action or pay the lien amount due, and a notice that failure to appear or pay the amount due will result in a foreclosure sale of the property at a specified date, time and place.

(3) If the court finds for the district and renders a judgment of foreclosure, then, at least ten days before the foreclosure sale, the district will have to publish a notice of sale specifying, among other things, the property to be sold, the lien amount due, the place, date and time of the sale and providing notice that the sale will not take place if the amount due is paid at least one day before the date of the sale.

(4) At the foreclosure sale, the property will be sold to the "highest and best bidder", so long as the bid is for a minimum amount specified by the court in its foreclosure judgment. Amounts in excess of the lien amount due will be remitted to the owner of the property, if requested by the owner.  The purchaser will be granted a treasurer's deed conveying the property clear of all incumbrances, except for the following taxes and assessments not due at the time of the foreclosure sale:  property taxes, certain drainage or diking assessments, and irrigation assessments.  In addition, before receiving title, the purchaser will have to pay any of the above taxes or assessments that are due at the time of sale. If the property is not sold, then title to the property will vest automatically in the irrigation district.

Irrigation districts and county treasurers are authorized to use the interlocal cooperation act as a means of providing for the combined foreclosure of delinquent property taxes and irrigation district assessments.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The substitute makes numerous substantive and technical changes.  The major substantive changes include the following:  While the original bill may not have included title search costs within the lien amount due (as well as other costs occurring after preparation of the certificate of delinquency), the substitute makes it clear that all costs are included in the lien amount due.  Both the original and substitute bills provide that, after a judgment of foreclosure has been rendered, the owner or other party in interest has until the day before the sale to make payment and thereby cancel the sale.  However, the original seems to provide that payment must be for the lien amount for which the judgment has been rendered, plus the amount of any new assessments, costs, and interests.  The substitute makes it clear that payment is for only the lien amount for which the judgment has been rendered.  Under the original bill, the notice of foreclosure sale does not include any language advising the owner or other party in interest that the sale will not occur if payment of the amount due is made at least one day before the sale date.  The notice required under the substitute contains such language.

Fiscal Note:      Requested January 22, 1988.

House Committee ‑ Testified For:    Jim Trull, Sunnyside Valley Irrigation District; Fred Saeger, Washington Association of County Officials; and Jeanne Dickman, Washington Water Resources Association.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The bill permits foreclosures but provides the due process protections that are needed.  It is patterned after the statutes used by counties for foreclosing for delinquent taxes.  The original bill was developed by representatives of the irrigation districts working with county treasurers.

House Committee - Testimony Against:      None Presented.