KEEPING UP WITH THE JONESES

     Before property is sold at a foreclosure sale, due process requires that an interested party be sent notice. The United States Supreme Court, in Jones v. Flowers, recently examined the requirements for sufficient notice. 

     The court relied on the following facts when making its decision: Mr. Jones dutifully paid his mortgage while he was married and living in the residence and continued to pay after separating from his wife and moving elsewhere in the City.  Once the mortgage was satisfied, the property taxes, which had been paid by the mortgage company through the escrow, went unpaid and the property was certified delinquent by the taxing official.  Thereafter, the tax office sent notice of the delinquency to the homeowner at the property address.  No one was present at the residence to sign for the letter, nor was it retrieved from the post office. Therefore it was returned marked “unclaimed”.  Later, another notice was sent notifying the homeowner of the impending tax sale.  That notice was also returned to the sender because no one was present to sign for the letter and no one retrieved it from the post office. A private sale was thereafter conducted pursuant to Arkansas law.  Flowers purchased the home and quickly instituted eviction proceedings.  The eviction papers were properly served.  Mr. Jones’s daughter received the papers and provided them to her father. Upon learning that the home was sold, Mr. Jones appealed the taking alleging that the Commissioner’s failure to provide adequate notice, constituted an unconstitutional taking in deprivation of his due process rights.  The Supreme Court ultimately agreed with Mr. Jones and found that there had been an unconstitutional taking of his property.

     In resolving the issues, the court stated, that notice is constitutionally sufficient if it is sent in a manner that is reasonably calculated to reach the intended recipient.  The key words here are “sent” as receipt is not required. The court further stated that the adequacy of a particular form of notice is assessed by balancing the State’s interest against the individual interest sought to be protected.   In this case, the court reasoned that when the registered letter was sent and not claimed, it could then be inferred that either Jones no longer lived at the property or was not home at the time the postman delivered the letter.  As such, due process requires additional reasonable steps be taken.  One reasonable step the court stated would be to re-send the letter notice by regular mail as well as certified mail.  Regular mail can be left until the person returns home.  Another reasonable step would include posting the notice on the front door or address a letter to “occupant”.  Either approach would increase the likelihood that the occupant would alert the owner.  The court stated that searching telephone books or income tax records is an unreasonable burden and therefore, not required. Moreover, the Court agreed that Jones’s failure to comply with the statutory obligation to keep his address updated does not cause the forfeiture of his constitutional rights. Additionally, a legal advertisement in a newspaper is insufficient alone and is only adequate where it is not reasonably possible or practical to give more adequate warning.  As such the foreclosing party should have taken additional reasonable steps to provide notice to the affected party.

     This decision increases the burden on parties handling foreclosures.  Specifically, when notice of a sale is mailed to an owner and returned undelivered, additional steps to provide notice must be taken, if time permits, before divesting an owner of his interest.  That said, the Supreme Court’s decision supports Maryland law, which provides for publication and the forwarding of notice by certified and regular mail, without requiring.  This procedure is constitutionally sufficient although practitioners receiving a notice returned before the sale, with a note of a forwarding address, should, if time permits, re-send the notice prior to sale.  Most importantly, the Supreme Court has reiterated that there is no requirement that receipt must be assured, but merely that sufficient reasonable steps are taken to provide notice to the intended party. 

Ronald S. Deustch is a Partner at the law firm of Cohn, Goldberg & Deutsch, LLC.  He specializes in foreclosures and spearheaded the creation of the Foreclosure Committee of the Real Property, Planning and Zoning Section.  He currently is a member of the Section Council and Editor of Ground Rules.