Kansas Supreme Court Opinion Limits Enforceability of Lender Remedies Under Mortgage Agreement

September 24, 2020 Advisory

On Sept. 11, 2020, the Kansas Supreme Court issued an opinion that restricts lender remedies if a borrower defaults under a mortgage agreement. In Fairfax Portfolio LLC v. Carojoto, the Kansas Supreme Court held that a mortgage agreement alone cannot provide the express consent necessary for a lender to take possession of the mortgaged property prior to a court action. This opinion must be considered by mortgage lenders first when entering mortgage agreements and further when determining courses of action against a borrower if a borrower defaults.

In Fairfax, the lender took possession of the mortgaged property, over the objection of the borrower, due to a default of the borrower under the parties’ loan documents. After the lender had taken possession of the property, it filed a mortgage foreclosure action. Subsequently, the lender acquired the property through a foreclosure sale authorized by the district court. The borrower then filed a lawsuit claiming that the lender improperly took possession of the property prior to a foreclosure action.

The mortgage clause reviewed by the Kansas Supreme Court provided, in part, that the borrower agreed that the lender may take possession of the mortgaged property if a borrower defaults under the mortgage. The Court analyzed the enforceability of this clause by citing K.S.A. 58-2301, which states: “In the absence of stipulations to the contrary, the mortgagor of real property may retain the possession thereof.” The Court emphasized that Kansas case law provides that a lender cannot take possession of mortgaged property before filing suit against the borrower without the consent or acquiescence of a borrower. After reviewing this case law, the Court determined that the mortgage alone is unable to provide consent required for a lender to take possession of the property without a proper court action. As such, the Court concluded that the language from the mortgage that purportedly allowed the borrower to take possession of the property if a borrower defaults was unenforceable under K.S.A. 58-2301.

Fairfax makes clear that under Kansas law, mortgage lenders cannot rely solely on a mortgage agreement to take possession of mortgaged property if a borrower defaults. Rather, the Kansas Supreme Court instructed that, absent subsequent consent or acquiescence of a borrower, a lender must first file an action with the district court and then seek its remedies for a borrower’s default.

Contact Us
  • Worldwide
  • Boston, MA
  • Denver, CO
  • Edwardsville, IL
  • Jefferson City, MO
  • Kansas City, MO
  • Las Vegas, NV
  • New York, NY
  • Philadelphia, PA
  • Princeton, NJ
  • Salt Lake City, UT
  • St. Louis, MO
Worldwide
abstract image of world map
Boston, MA
225 Franklin Street
26th Floor
Boston, MA 02110
Google Maps
Boston, Massachusetts
Denver, CO
4643 S. Ulster St.
Suite 800
Denver, CO 80237
Google Maps
Denver, Colorado
Edwardsville, IL
115 N. Second St.
Edwardsville, IL 62025
Google Maps
Edwardsville, Illinois
Jefferson City, MO
3405 W. Truman Boulevard
Suite 210
Jefferson City, MO 65109
Google Maps
Jefferson City, Missouri
Kansas City, MO
2345 Grand Blvd.
Suite 1500
Kansas City, MO 64108
Google Maps
Kansas City, Missouri
Las Vegas, NV
3770 Howard Hughes Parkway
Suite 200
Las Vegas, NV 89169
Google Maps
Las Vegas, Nevada
New York, NY
919 Third Ave., 37th Floor
New York, NY 10022
Google Maps
New York City
Philadelphia, PA
2005 Market Street
29th Floor, One Commerce Square
Philadelphia, PA 19103
Google Maps
Philadelphia, Pennsylvania
Princeton, NJ
100 Overlook Center
Second Floor
Princeton, NJ 08540
Google Maps
Princeton, New Jersey
Salt Lake City, UT
257 East 200 South
Suite 350
Salt Lake City, UT 84111
Google Maps
Salt Lake City, Utah
St. Louis, MO
7700 Forsyth Blvd.
Suite 1800
St. Louis, MO 63105
Google Maps
St. Louis, Missouri