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A key new California law, similar to legislation passed but vetoed by
Gov. Arnold Schwarzenegger in 2004, gives home owners greater protection
from foreclosure proceedings initiated by their homeowners association.
Effective Jan. 1, 2006, SB 137, sponsored by Denise Moreno Ducheny
(D-San Diego) places limits on when and how homeowner associations
(HOAs) can foreclose upon home owners for delinquent assessments and
provides some related protections for those living in common interest
developments (CIDs), housing developments governed by HOAs.
Previously, and unique to homeowner associations in California and
elsewhere, a tough debt-collection tool called a non-judicial
foreclosure has been used to take homes from owners who only owed a few
hundred dollars in delinquent HOA dues.
In one case, a Calaveras County couple's $285,000 home was auctioned off
over $120 in disputed dues. In Northern California, a disabled man, lost
his home for $123, according to the American Homeowners Resource Center,
a San Juan Capistrano, CA public interest information network for
HOA-governed home owners.
Under the new law, before an HOA can foreclose -- either judicially or
non-judicially -- for delinquent assessments, one of two thresholds must
be met
* The assessment debt must be $1,800 or more (2004's vetoed
legislation and the original SB 137 called for $2,500), exclusive of
assessment charges; or
* The debt -- at any level -- must be more than 12 months delinquent.
"It is very important to note that these are alternative provisions,"
says Consumers Union in a synopsis of the new law. "For example, a
homeowner association would be permitted to initiate foreclosure for a
debt of only $120 if that debt is more than 12 months delinquent," the
consumer advocacy group explained.
If neither of the thresholds are met, the HOA seeking to collect
delinquent assessments can either --
* File a civil action in Small Claims Court; or
* Record a lien upon which it can foreclose later after the $1,800
or 12 month delinquency thresholds are met.
Once the threshold has been met, the HOA can initiate foreclosure to
recover both the assessment debt and all collection charges and fees.
When the thresholds are met to allow foreclosure, the HOA can proceed,
but only subject to further provisions of the new law.
The HOA board of directors must make a formal decision to foreclose upon
a lien --
* at an executive meeting of the board;
* by a majority vote;
* at least 30 days prior to any foreclosure auction to sell the
property.
The board must also record the results of the vote in the association's
minutes.
The HOA must disclose its foreclosure activities to the home owner by
sending all debt collection correspondence and legal notification to
both a primary and secondary address, if a secondary address is available.
The association must record with any notice of delinquent assessments an
itemized list of charges owed by the home owner.
The new law also allows the home owner, in writing, to seek a meeting
with the HOA's board of directors to resolve the dispute over assessment
debt. The board must respond to the home owner's request within 15 days
of the postmark on the request.
If dispute resolution finds that an HOA has filed a lien in error, the
HOA must reverse the lien and assume all costs.
http://realtytimes.com/rtcpages/20060104_newlaw.htm
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New California Law Protects Against HOA Foreclosure
