707.38 Blanket encumbrances; liens.

(1) Definition. In this section, “blanket encumbrance" means any mortgage, lien or other interest which secures or evidences an obligation to pay money or to convey or otherwise dispose of all or any part of a time-share property, affects the time-share property or time shares owned by more than one time-share owner and permits or requires the foreclosure or other disposition of the time-share property to which it attaches, but does not include any of the following:

(a) A lien for taxes and assessments levied by a public body which are not yet due and payable.

(b) A lien for common expenses in favor of a homeowners', condominium or community association which is not a judgment lien.

(c) A lease.

(d) A recorded agreement for the payment of reasonable fees or other compensation for management services performed on behalf of the time-share property.

(e) Any interest arising from an agreement to sell or pledge the ownership interest in an individual time share.

(1m) Nondisturbance agreement. If delivery of a time-share disclosure statement is required under s. 707.41 (2), a developer whose project is subject to a blanket encumbrance shall, before transferring a time share, obtain from the holder of the blanket encumbrance a nondisturbance agreement, which shall be recorded in the office of the register of deeds under s. 706.05, for the benefit of the purchaser and the purchaser's successors in interest, by which the holder agrees to all of the following:

(a) The holder's rights in the time-share property are subordinate to the rights of time-share owners upon recording of the nondisturbance agreement.

(b) The holder and any successor or assign, or any person who acquires the time-share property through foreclosure or by deed in lieu of foreclosure or in fulfillment of the blanket encumbrance, shall take the time-share property subject to the rights of time-share owners.

(c) The holder and any successor acquiring the time-share property under the blanket encumbrance may not use or cause the time-share property to be used in a manner which would prevent the time-share owners from using and occupying the time-share property in a manner contemplated by the project instrument and time-share instrument.

(2) Release from blanket encumbrance.

(a) If a blanket encumbrance becomes effective against a time share after purchase of the time share, the time-share owner is entitled to a release of the time share from the blanket encumbrance upon payment of an amount proportionate to the ratio that the time-share owner's time-share liability bears to the total time-share liability of all time shares subject to the blanket encumbrance. Upon receipt of payment, the holder shall promptly deliver to the time-share owner a release of the blanket encumbrance covering that time share.

(b) Upon release under par. (a) of a time share from a blanket encumbrance, the managing entity may not assess or have a lien against that time share for any portion of the expenses incurred in connection with the blanket encumbrance.

(3) Effect of other liens. Except as provided in s. 707.37 (2) to (6), after creation of a time-share property, all liens which are not blanket encumbrances exist only against individual time shares in the same manner and under the same conditions as liens or encumbrances may arise or be created upon or against separate parcels of real property owned in individual ownership.

(4) Lienholder's rights.

(a) Except as provided in s. 707.37 (2) to (6), the holder of a lien against an individual time share in a time-share property shall have the lien rights preserved against a purchaser of the time share unless the purchaser objects and shows within the time specified in par. (b) that the project instrument is invalid, void or voidable.

(b) The developer shall give a purchaser written notice, by certified mail or personal delivery, that the developer has assigned a receivable related to the time share to the lienholder and that the time-share owner has 30 days to object and show the invalidity or defect of the project instrument. A purchaser who fails to assert an objection as provided in this paragraph may not raise the issue in any later action for enforcement of the collection of the receivable or enforcement of the lien by the lienholder.

(5) Service of process. If a lien is to be foreclosed or enforced against all time shares in a time-share property, service of process in the action upon the managing entity, if any, shall constitute service upon all of the time-share owners for the purposes of foreclosure or enforcement. The managing entity shall promptly forward, by certified or registered mail, a copy of the process to each time-share owner at his or her last address known to the managing entity. The cost of forwarding shall be advanced by the holder of the lien and may be taxed as a cost of the enforcement proceeding. This notice does not suffice for the entry of a deficiency or other personal judgment against any time-share owner.

History: 1987 a. 399.