Wisconsin Amends Foreclosure Statute

April 27, 2018

Wisconsin’s foreclosure statute (Chapter 846) recently has been amended by three separate legislative acts.  First, the process for recording sheriff’s deeds after sale has been changed.  Second, the foreclosure statute has been amended to permit counties to conduct sheriff’s sales via an Internet-based auction.  Finally, under the new law certain buyers are prohibited from bidding at sheriff’s sale or acquiring foreclosed property.

2017 Wisconsin Act 104, enacted on November 30, 2017, changes the procedure for recording sheriff’s deeds.  Prior to the enactment of Act 104, in all Wisconsin counties except Milwaukee County, the sheriff would execute the sheriff’s deed to the winning bidder and send it to the clerk of court.  Once the sale was confirmed and the winning bidder paid the purchase price and otherwise complied with the terms of the sale, the clerk of court would give the deed to the winning bidder.  It would be the winning bidder’s job to record the deed with the register of deeds.  Milwaukee County has been different since 2015.  Rather than give the sheriff’s deed to the winning bidder, the Milwaukee clerk of court provides the deed directly to the Milwaukee County register of deeds.  The rationale for treating Milwaukee County differently is that some buyers (one report claims 14% of buyers at sheriff’s sale in Milwaukee) do not record their sheriff’s deed.  Evidently, Milwaukee city landlords would buy property at sheriff’s sale to use as residential rentals but would fail to record the deed to hide their identity from Milwaukee authorities.  Act 104 extends the Milwaukee rule to the entire state.  Clerks of court for each county must now coordinate with the register of deeds for the county to establish a system to directly transmit the sheriff’s deed from the clerk of court to the register of deeds.

2017 Wisconsin Act 208, enacted April 3, 2018, permits Wisconsin counties to conduct sheriff’s sales on the Internet.  The amendment permits counties to host their own Internet-based sales or engage an authorized auctioneer to conduct the on-line auctions.  The amendment does not require counties to conduct Internet-based sales; however, if a county opts to conduct sheriff’s sales on-line, it must conduct all sheriff’s sales on-line.  Notice of the Internet sale still must be posted and published, although the content of the notice will differ from traditional notices.  Curiously, the posted notice of sale and the auction site must identify any liens or encumbrances that are senior to the mortgage being foreclosed, which is not a requirement for traditional sheriff’s sales.  The winning bidder may pay its deposit by debit or credit card or other electronic means and may be charged a fee to cover the cost of accepting electronic payment.

2017 Wisconsin Act 339, enacted April 16, 2018, prohibits certain buyers from purchasing properties at a sheriff’s sale either directly or indirectly.  Potential bidders who own property against which taxes have been levied that are over 120 days delinquent or who have an unsatisfied judgment for violations of state or local building code are prohibited from bidding.  Likewise, no one who is bidding on behalf of such an unqualified bidder or who owns, manages, or controls or is owned, managed or controlled by such an unqualified bidder may bid at a sheriff’s sale.  A winning bidder may not assign the winning bid to an unqualified bidder.  The sheriff may require the bidder to acknowledge compliance with Act 339.  At confirmation, the winning bidder will be required to submit an affidavit affirming compliance with Act 339 and to provide the address of an authorized agent to accept service of process.  The truthfulness of the affidavit may be challenged by any party or by the municipality where the foreclosed property is located.  The sale will not be confirmed until the affidavit is filed with the court and survives any challenge.  The court can penalize a bidder who submits a false affidavit.  The requirements of Act 339 do not apply to parties to the foreclosure action or their agents or an assignee of the plaintiff.

A sponsor of Act 339 and 208 said that the acts were inspired by “a small number of delinquent landlords who acquire new rental properties at sheriff’s auctions and turn a profit by manipulating loopholes in the system, while the properties linger perpetually in poor condition holding down property values and adding to neighborhood instability.”

If you have any questions about how the information in this article may affect you or your business, please contact Norm Farnam at nfarnam@stroudlaw.com or (608) 257-2281 or your Stroud attorney.

DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice.  This article is not intended to create, nor does the receipt of it constitute, an attorney-client relationship.  You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.