approves limiting foreclosures in homeowner associations
Article Courtesy of the Associated Press
|By JIM WASSERMAN
Published May 19, 2004
SACRAMENTO - A bill greatly restricting the use of home foreclosures to collect late homeowner association assessments passed the Senate without opposition Tuesday, representing a major initial victory for homeowner activists in more than 36,000 privately governed California neighborhoods.
The Senate voted 34-0 to end a widespread practice of allowing homeowner associations to foreclose on homes when owners get slightly behind on assessments, which has provoked growing opposition in California and nationally. The new bill requires that for amounts less than $2,500, most associations must take the matter to small claims court or put a lien on the property.
Homeowner associations, run by volunteer boards and assisted by an industry of collection attorneys, agencies and trustees, can now auction off homes for any amount of late payments, a practice forbidden in traditional neighborhoods governed by city halls or county courthouses.
Lawmakers introduced the bill after a retired Calaveras County couple lost their home last year over a $120 late payment.
"That's such an extreme example of how the law can lead to a loss of equity that we've got to find a new way to address it," said the bill's author, Sen. Denise Ducheny, D-San Diego.
The Senate vote sets the stage for a summer legislative showdown with national implications as homeowners try to curb the foreclosure power of private associations that govern one fourth of California's residences and 60 percent of its new housing. Nationally, one in five Americans live in 260,000 homeowner associations, many of them also holding the power to take residents' homes for falling behind on assessments.
Previous attempts in California, Arizona and other states to ban most home foreclosures have been blocked by political groups representing association boards, property managers and attorneys.
Without the ability to foreclose, associations will have difficulty getting payment for late fees, said Sandra Bonato, legislative chair for the Executive Council of Homeowners, which represents associations in Northern California.
"To take away all our remedies is very, very worrisome," she said.
Skip Daum, lobbyist for the Virginia-based Community Associations Institute, which advises associations, warned, "If they go judicial, it's going to take longer and cost four times as much."
Homeowners associations collect assessments from residents to cover costs of maintaining neighborhood streets, pools, landscaping and buildings.
Ducheny's bill, which applies only to homeowner associations with more than 25 homes, must clear the full Legislature by Aug. 31 and be signed by Gov. Arnold Schwarzenegger by Sept. 30 to become law.
The idea of foreclosing on homes over small amounts without a judge's oversight originated nearly 20 years ago in California. Amid an explosion in the number of new privately run neighborhoods in California, that law helped associations crack down on homeowners who fell behind on assessments, allowing nonjudicial foreclosure, as well as new late fees, attorneys fees and interest payments on the late amounts.
Now, however, homeowner activists say state law launched the concept of nonjudicial foreclosure nationally and contributed to numerous examples of homeowner associations residents losing their homes over small late assessments. The Calaveras County case involving Tom and Anita Radcliff followed earlier ones in San Diego, Houston, Las Vegas and St. Petersburg, Fla., where residents lost homes over amounts ranging from $81 to $990.
Michael Macomber of Sonora, the Radcliff's lawyer, called the Senate vote "a good first step to make sure a foreclosure like this doesn't happen again to anybody else."
He said the Radcliffs are still living in their home while a lawsuit against their homeowners association proceeds.
The bill passed Tuesday is one of several
up for votes this month as homeowners and association boards struggle over
reforming the rules of private government in a public society. The state
Assembly is soon to vote on a similar bill to rein in foreclosures, and
limit the amount of yearly assessments an association can authorize without
a vote of residents. Another bill to provide potential new homeowners with
more information about assessments and potential hikes to build up reserve
funds is also pending. Monday, the Senate passed a bill requiring secret
ballots for homeowner board elections and prohibiting candidates from counting