Sec 37-255. Sale of or mortgage or other lien on interest of lessee or holder of certificate of purchase

A. The interest of the holder of any certificate of purchase of state land, or any lease or permit on state land, shall be subject to sale, mortgage or other lien to the same extent as patented land, without prejudice to the state. A contract of sale, mortgage or other lien affecting any certificate of purchase, lease or permit on state land shall not become effective unless a copy of the document is filed with the state land department. When filed, no assignment of the certificate of purchase, lease or permit affected shall be made without notice to and the consent of all parties.

B. Upon foreclosure of a contract of sale, mortgage or other lien filed with the department as provided in subsection A of this section, the department shall assign the instrument in question to the party entitled to the instrument, if all taxes, rent and assessment payments are current.

C. If a cancellation or assignment order is issued pursuant to section 37-247, 37-281.04 or 37-289, the cancellation or assignment order shall not become final until any foreclosure action by a party registered with the department as a mortgagee or other lienholder of the purchaser's interest or the lessee's interest is finally resolved, if the mortgagee or lienholder does both of the following:

1. Within thirty days of the date of issuance of a notice of default, files written notice with the department of its intent to proceed with a foreclosure action.

2. Within one hundred twenty days of the date of issuance of a notice of default, has commenced either a foreclosure action in court or a nonjudicial foreclosure of a deed of trust, and has provided the department with a certified copy of the complaint or other document that officially commences the foreclosure process, and thereafter prosecutes the foreclosure with reasonable diligence.

D. If a default notice has been sent to a purchaser pursuant to section 37-247, subsection A or to a lessee pursuant to section 37-289, subsection A, and the purchaser or lessee thereafter applies to assign the certificate of purchase or lease to a mortgagee or lienholder registered with the department, before the date a cancellation or assignment order becomes final and conclusive, the department shall approve the assignment if all taxes, purchase payments, rent and assessment payments are current and subject to the written consent of any other mortgagees or lienholders of record.

E. On proof that a lessee or purchaser has rejected a lease or certificate of purchase in a bankruptcy proceeding, the department shall issue a lease or certificate of purchase to the registered mortgagee or other lienholder in order of priority on application by the mortgagee or other lienholder within thirty days after the rejection if all taxes, purchase payments, rent and assessment payments are current. Any lease or certificate of purchase that is issued pursuant to this subsection shall be for the remaining term and on the same conditions and priority as the rejected lease or certificate of purchase.