Throughout the United States, an increasing number of people complain about corruption stemming from the homeowners’ associations (HOAs) their homes are a part of. Some HOAs are increasing fees so fast that homeowners can’t keep up with their HOA payments. Others have been accused of laundering the money from the HOAs they preside over for their benefit. An even more alarming trend is emerging: having your home foreclosed on by an HOA with minimal warning and for a minimal amount of unpaid HOA fees.
Luckily, in California, there are laws to protect homeowners from an HOA foreclosing on their home. However, it is essential to understand the laws and ensure you protect your investment and your family home. As a bankruptcy attorney, I have dealt with these kinds of issues. Having been in the business of helping clients avoid foreclosure, I have seen all sorts of different methods banks, lenders, and HOAs may use to foreclose on your home.
In California, the laws governing HOAs and their ability to foreclose on properties are outlined in the Davis-Stirling Common Interest Development Act. This Act provides a comprehensive legal framework for managing and operating common interest developments, including HOAs, in California. Here are critical aspects of these laws as they relate to HOA foreclosures:
Assessment Liens: HOAs in California have the right to place a lien on a property for unpaid assessments. This lien can include regular assessments, special assessments, fines, and fees, including late charges, reasonable costs of collection, and reasonable attorney’s fees incurred by the HOA in pursuit of the unpaid assessments.
Pre-Foreclosure Requirements: Before an HOA can foreclose on a property, it must meet several requirements:
- The amount in arrears must be at least $1,800, or the delinquency must be at least 12 months old.
- The HOA must provide the homeowner with a pre-lien letter notifying them of the delinquent amount and offering a chance to dispute the charges or request a payment plan.
- The HOA must record a lien against the property and provide the homeowner with a notice of the lien.
Right to Redemption: Homeowners have the right to pay off the delinquent amount before their property is sold, which will stop the foreclosure process. This includes all assessments, fines, fees, and collection costs.
Foreclosure Process: California allows both judicial (through the courts) and non-judicial (outside of court) foreclosure processes. However, if the HOA chooses non-judicial foreclosure, it must first offer the homeowner an opportunity for alternative dispute resolution, like mediation or arbitration.
Homeowner Protections: Homeowners have several protections under California law. For example, they have the right to challenge the amount owed, request a payment plan, participate in dispute resolution, and have the option to redeem their property before the foreclosure sale.
Notification Requirements: The HOA must provide the homeowner with various notices throughout the foreclosure process, including notice of the right to request alternative dispute resolution, notice of the decision to foreclose, and notice of the foreclosure sale.
Foreclosure Sale: If the foreclosure proceeds, the property sale must be conducted in a public auction. The HOA must publish a notice of sale and comply with specific notice timelines.
Board Approval: The decision to initiate foreclosure for delinquent assessments must be made by the HOA Board of Directors during an open meeting, and the vote must be duly recorded in the meeting minutes.
Homeowners in HOA communities in California must understand their financial obligations and the potential consequences of failing to meet them. Those facing potential foreclosure by an HOA should consider consulting with a real estate attorney specializing in HOA law to understand their rights and options under California law. If you have problems with foreclosure, contact me for a free consultation.