Two DC rulings shut the door on lender attacks on condo foreclosure sales
Two DC rulings shut the door on lender attacks on condo foreclosure sales
2026-09-09 · District of Columbia · Courts
The District of Columbia Court of Appeals decided two cases in 2025 that together make it substantially harder for a mortgage lender to unwind a condominium association's assessment-lien foreclosure sale. One closed off the unconscionability attack; the other cut the limitations period from fifteen years to three.
Flagstar: a bargain price is not unconscionable as a matter of law
Flagstar Bank, FSB v. Advanced Financial Investments, LLC, No. 23-CV-0267, was decided April 10, 2025 and is reported at 333 A.3d 851. Judge Deahl wrote for a panel of Judges Beckwith, Deahl and Senior Judge Ruiz.1
The New Hampshire House Condominium unit owners' association foreclosed in 2014 on unpaid dues. The sale terms said the unit sold subject to Flagstar's first deed of trust of roughly $256,632. A buyer paid $26,000 for a unit assessed at $237,930. Flagstar later sued for judicial foreclosure.
The court held the trial court was wrong that Flagstar's unconscionability argument was time-barred — rebuttals to affirmative defences are not subject to a limitations period — but affirmed anyway on the alternative ground that the sale “as a matter of law, was not unconscionable.” Applying New Penn Financial, LLC v. Daniels, 319 A.3d 997 (D.C. 2024), it held that the fact that Flagstar's lien was specifically identified in the sale terms as surviving was “not a meaningful distinction.”
Claims for declaratory relief and breach of fiduciary duty against the association were time-barred, with neither the discovery rule nor equitable tolling available; an institutional lender, the court said, had a responsibility to keep abreast of the law governing the instruments defining its interests. Only an unjust enrichment claim against the buyer went back for trial.
Tyroshi: three years, not fifteen
Tyroshi Investments, LLC v. U.S. Bank, N.A., No. 23-CV-0977, was decided September 11, 2025, again by Judge Deahl.2
The Jenkins Row association foreclosed in 2014; a buyer paid $10,000. The first-deed-of-trust holder foreclosed separately in 2016 for $385,000, then sued in 2020 to void the association's sale. The trial court applied D.C. Code § 12-301(a)(1), the fifteen-year period for actions “for the recovery of lands,” and voided the sale.
The Court of Appeals reversed. That extended period “applies only to adverse possession or ejectment-type claims seeking to recover physical possession of real property from a party wrongfully occupying it.” A title claim that first requires invalidating a foreclosure sale sounds in tort and contract — three-year clocks that had long since run. Laches was raised too late and does not apply to purely legal claims. Only unjust enrichment survived, and only for taxes and assessments paid within three years of the 2020 complaint.
What the two decisions do together
Read side by side, they remove the two arguments lenders have used most often against DC association foreclosure sales.
Price is off the table for the pre-2017 sales. The window in which DC law on lien priority was genuinely uncertain — between Chase Plaza in 2014 and the statutory amendment — depressed bidding at association sales. Flagstar holds that this does not make the resulting prices unconscionable, even where the advertisement told bidders the mortgage would survive.
Time is off the table generally. Tyroshi is the more consequential of the two because it is not confined to pre-2017 sales. Any claim whose first step is to invalidate a foreclosure sale carries a three-year clock. That is a rule about the shape of the claim, not about the vintage of the sale.
What it means for a DC board
Title from an association sale settles sooner than most boards assume. A purchaser at a DC association assessment-lien foreclosure is, as the court put it in Tyroshi, the unquestioned title holder unless and until the sale is upended — and after three years, in the ordinary case, it cannot be.
That should widen the bidding pool. The practical reason association sales in the District have drawn thin bidding is uncertainty about what the buyer gets and for how long. Two published decisions narrowing collateral attack are the kind of thing that moves prices at auction, which is directly in an association's interest — a higher sale price means a larger recovery on the assessment lien.
Unjust enrichment is the residual exposure. Both cases let an unjust enrichment claim proceed, and in Tyroshi it was limited to taxes and assessments the lender paid in the three years before filing. A lender who has been paying the association's assessments on a unit it does not own has a live claim for that money against whoever benefited.
The gap nobody has filled
Both cases concern 2014 sales under the pre-amendment statute. Neither construes the current six-month priority provision of D.C. Code § 42-1903.13 as amended in 2017.
That leaves DC associations operating the current statute largely without appellate guidance. The practical questions — how much of an arrearage to include in the foreclosure amount, and what that choice does to a superior deed of trust — are the ones that decide whether a sale nets the association anything. Getting that election wrong is the single most expensive mistake available in DC association collections, and it is a question for counsel on the specific facts, not one this column can answer for a category.
What to watch next
A DCCA decision construing the amended § 42-1903.13. Until one arrives, the appellate law on DC association foreclosure runs on a statute that no longer reads the way it did.
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