A homeowner defaulted on his mortgage and a notice of trustee’s sale (NOTS) was recorded commencing foreclosure on his residence. The sole owner of an equity purchase (EP) entity approached the owner-in-foreclosure and arranged for his entity to purchase the home. The owner-in-foreclosure signed a one-page purchase agreement, an estoppel agreement and a grant deed in favor of the EP entity — a process not compliant with the EP procedure outlined in the Home Equity Sales Contract Act (HESCA). Within two years of recording the grant deed, the owner-in-foreclosure made a demand on the entity and its owner for his money losses on the transaction, claiming the EP entity and its owner violated HESCA when purchasing the home without conforming the paperwork and procedure to HESCA since the property was the owner’s personal residence, it was in foreclosure and the entity acquiring title did not occupy the property as its personal residence. The EP entity and its owner claimed the purchase of the owner-in-foreclosure’s property was a transaction exempt from HESCA since the entity’s sole owner intended to take occupancy of the property as his personal residence and the EP entity, under which title was held, was his alter ego and should be disregarded. A California court of appeals held an owner-in-foreclosure is entitled to recover the dollar value of lost equity in his primary residence on a sale to an entity that violates HESCA since the entity, as the vested buyer, did not occupy the property as a principal residence and a sole owner’s occupancy does not qualify for the buyer-occupant exemption from HESCA. [Capon v. Monopoly Game, LLC (2011) 193 CA4th 344]
Editor’s note — first tuesday’s Equity Purchase Agreement, Form 156, complies with all statutory requirements, and properly sets forth the seller-in-foreclosure’s right to cancel.
Related first tuesday Forms: 156 – Equity purchase agreement; 156-1 — Equity purchase agreement with short-sale contingency