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SFR Investments Pool 1, LLC v. U.S. Bank, N.A. (2014)

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SFR Investments Pool 1, LLC v. U.S. Bank, N.A. (2014)

Citation: 130 Nev. 742 (2014); 334 P.3d 408; 130 Nev. Adv. Op. 75 · Court: Supreme Court of Nevada (en banc), No. 63078 · Decided: September 18, 2014

Nevada’s landmark HOA super-priority decision. The court held that NRS 116.3116(2) gives a homeowners’ association a true superpriority lien — for up to nine months of unpaid assessments — that is prior to a first deed of trust, and that the non-judicial foreclosure of that super-priority lien extinguishes the first deed of trust. The ruling reorders who holds equity and captures any surplus after a common-interest-community foreclosure sale. See nevada, hoa-super-priority, lien-survival.

Facts

A residence in a Nevada common-interest community was encumbered by a note and first deed of trust in favor of U.S. Bank. The homeowners fell delinquent on both their HOA assessments and their loan. The HOA (Southern Highlands) and U.S. Bank each initiated non-judicial foreclosure. SFR Investments Pool 1, LLC purchased the property at the HOA’s trustee’s sale and sued to quiet title and to enjoin U.S. Bank’s trustee’s sale, contending the HOA trustee’s deed had extinguished the bank’s first deed of trust. The district court ruled for U.S. Bank, holding the HOA had to foreclose its super-priority lien judicially, so the bank’s deed of trust survived the non-judicial sale. SFR appealed.

Holding

“NRS 116.3116(2) gives an HOA a true superpriority lien, proper foreclosure of which will extinguish a first deed of trust.”

The court further held that Chapter 116 permits non-judicial foreclosure of HOA liens. It reversed the district court: because the super-priority portion of the HOA’s lien is genuinely prior to the first deed of trust, a proper non-judicial foreclosure of that lien wipes out the senior mortgage.

Reasoning

  • Split-lien structure of NRS 116.3116. NRS 116.3116(2) splits the HOA lien into a super-priority piece (up to nine months of common-expense assessments, plus certain charges) that is prior to “all other liens and encumbrances,” including a recorded first deed of trust, and a sub-priority piece. Modeled on the Uniform Common Interest Ownership Act, the provision reflects a legislative choice to ensure associations can collect the assessments needed to maintain common property even against first mortgagees.
  • True priority, not mere payment priority. The court rejected the argument that the super-priority lien only affected distribution of sale proceeds; because it is a true priority lien, its foreclosure extinguishes junior interests, including a first deed of trust.
  • Non-judicial foreclosure authorized. NRS Chapter 116 supplies a power of sale; the HOA was not required to proceed judicially to foreclose the super-priority lien.

Practical impact

  • For investors / operators: Buying at a Nevada HOA super-priority foreclosure can deliver title free of the first mortgage — a powerful but litigation-heavy strategy. (Subsequent decisions and the 2015 legislative amendments added notice and tender protections that govern whether a given sale actually extinguished the deed of trust; diligence on the specific sale’s compliance is essential.) See lien-survival.
  • For mortgage lenders / servicers: A first deed of trust can be wiped out by an HOA’s nine-months-of-dues super-priority foreclosure; monitoring HOA delinquencies and tendering the super-priority amount is the defensive move.
  • For surplus analysis: The decision determines who holds equity after an HOA sale, directly affecting any surplus-proceeds claim.

Good-law status

Still good law on the core holding. Decided en banc September 18, 2014. The super-priority/extinguishment rule remains controlling, though its application has been heavily litigated: later Nevada and federal decisions address tender, notice, and due-process defenses (e.g., Bank of America v. SFR Investments Pool 1 (2018) on tender), and the Legislature amended NRS 116.31168 in 2015 to add notice requirements. The foundational holding that the super-priority lien is a true priority lien whose proper non-judicial foreclosure extinguishes a first deed of trust has not been overruled as of last_verified 2026-06-02.

Why it matters

SFR makes Nevada the leading HOA super-priority state and is the anchor for any analysis of lien survival and equity capture at a Nevada common-interest-community sale — distinct from the tax-lien track but decisive for who owns the property and any surplus.

Applies in →

nevada (binding state precedent). Persuasive in other UCIOA super-priority states.

Legal information, not legal advice. This page summarizes a court decision for educational purposes and does not create an attorney-client relationship. Verify against the primary opinion and consult a licensed attorney in the relevant jurisdiction before acting. Last verified 2026-06-02.

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