Washoe County recently conducted the sale of tax delinquent properties. According to Nevada statutes the properties are placed for sale if the taxes have not been paid for at least three years.
The RGJ reported on the purchase of 92 condominiums by David Lonich, the attorney representing Bijan Madjlessi of Belvedere LLC. Madjlessi planned to market the condos in the Sundowner’s north tower, but the economy and the real estate market soured and he was unable to sell as planned.
The lawyer for the developer of downtown Reno condominiums — converted from rooms in the former Sundowner Hotel and Casino — on Wednesday purchased 92 of the condos for nearly $2 million at auction, after his client was delinquent in paying nearly $800,000 in taxes to the county.
But, here is the part that the RGJ, for whatever reason, did not tell.
The story was related to me by people that had attended the Washoe County Tax sale last week.
Lonich bought all 92 units and experienced little or no competition. Others bid on some of the properties, but were all out bid.
The nature of the tax lien is that it is superior to all other liens. Consequently, when a tax sale is conducted, all other liens are wiped out.
So, what else was wiped out? Since the taxes take precedence over all else, any financing, or mortgage loans were eliminated. According to notices of default totalling approximately $47.9 million, debt in that amount was eliminated, completely. The RGJ reported that the property was purchased for $7.89 million. I’m not clear how debt could grow to 47.9 million. Nevertheless, it would appear the banks lost, big time.
Likewise, public records showed a total of 359 liens had been filed against Belvedere LLC and the property. Some of these liens may have been satisfied, but this has not been verified. A total of 771 documents have been recorded associated with Belvedere LLC and I have not reviewed all of them. These liens have all been completely wiped out by the tax foreclosure. Each of these liens represents someone that Belvedere LLC owed money, and each was left holding the bag.
Contractors didn’t get paid. Vendors didn’t get paid. The HOA didn’t get paid. and even the City of Reno didn’t get paid.
Now, I believe that some of these liens may have been satisfied because some of the units may have been sold but this has not been verified. Therefore the total numbers may vary a bit, but this is still close.
And what did Madjlessi lose? You may be surprised to learn that he fared a bit better than his associates, the banks and the contractors and vendors. He was able to eliminate $47.9 million
in debt for a mere $2 million and he got a lot of his building upgrades for free.
It’s nice work if you can get it.