Article Courtesy of The Desert Sun

By Jake Henshaw
Published February 15, 2005

Legislative lawmakers this year are expected to return to the often difficult and sometimes controversial topic of homeowners associations that serve more than 3million households in the state.

More than half of Coachella Valley residents live in developments governed by a homeowners association, industry analysts say.

Bills are in the works, the governor's staff is involved and a hearing has been scheduled March 9 on a range of touchy subjects, from the use of foreclosure to collect delinquent assessments to the possible need for a state bureau to address conflicts.

"The truth is many homeowners' associations now function very much at some level like a small city council, collecting a tax, if you will, a fee, to do services that otherwise are municipal services," said Sen. Denise Ducheny, D-San Diego.

Ducheny is the author of a bill on foreclosure by homeowners associations that the governor vetoed last year.

"I think there is this dichotomy where people have been moving out of (the notion) that 'well, it's just a little local thing' into 'this is a very public thing,'" Ducheny said in discussing the role of associations.

At issue are the operation of community-based organizations that may have responsibility for such services as reviewing home architectural plans, garbage pickup, landscape and street maintenance and private security.

The services are funded with homeowner assessments that are administered by a board, which may employ the services of management agencies, attorneys and others.

There are more than 36,000 associations, or common interest developments, ranging in size from three up to 27,000 housing units, according to the California Law Revision Commission, which has been reviewing rules governing their operation since about 2001 at the Legislature's direction.

The commission estimated that these association developments represent about a quarter of the state's housing stock and that they account for 60 percent of all residential constructions starts during the 1990s.

In recent years the law revision commission has recommended and the Legislature has enacted measures outlining basic procedures to ensure public notice and opportunity for comment on HOA boards' actions, tightening of rules for dispute resolution and establishing a process for architectural reviews.

"It is an industry that in my opinion is flailing out of control," Madelene Patterson said of the multi-billion dollar operation of associations statewide. She is a resident of Sunrise Villas Homeowners Association in Palm Springs.

Legislative attention was galvanized last year by reports of a Calaveras County couple that lost their home in a foreclosure for failing to pay $120 in assessments.

That case prompted Ducheny to introduce a bill prohibiting homeowners associations from using foreclosures to collect delinquent assessments under $2,500.

A version of that bill was vetoed by Gov. Arnold Schwarzenegger, but he acknowledged that the issue needs attention and directed staff to work to refine the assessment collection process.

Ducheny is back with a similar measure this year, Senate Bill 137. Despite some dissatisfaction about the process, spokesmen for the governor said meetings are under way to develop his plan.

The foreclosure legislation continues to be strongly supported by a group of senior organizations, including the CIC Homeowner Bill of Rights Coalition, which argues that foreclosure is overkill.

"The basic issue is it's the wrong collection tool to collect small amounts of money," said Marjorie Murray, lobbyist for the CIC coalition.

The Community Associations Institute, which represents businesses that provide management, legal, financial and other services to homeowners' associations, was "extremely pleased" with the governor's veto because the bill would have undermined the financial stability of associations, said Jill Van Zeebroeck, president of the institute in California.

While she said foreclosure should be that last step in a dispute over delinquent fees, Van Zeebroeck emphasized that "nonjudicial foreclosure works."

Mary Roche, a member of the Indian Wells City Council who used to serve on the Desert Horizon homeowners' association board, said she wasn't sure if Ducheny's bill was the answer to the problem.

"Certainly there needs to be some other solution than is in place now for an association to collect those fees short of foreclosures," Roche said.

One possible approach to help fill this gap that is being considered this year is a state HOA bureau.

The law revision commission is seriously considering recommending this step, perhaps as soon as its March 17-18 meeting. That will be after the March 9 hearing by the Assembly Housing and Community Development Committee on a possible state role in overseeing homeowners' associations.

A draft proposal before the law commission calls for establishing a bureau in the Department of Consumer Affairs to provide education on the laws and obligations in associations and to offer a neutral, nonjudicial forum for dispute resolution. It also could collect data on disputes which largely are anecdotal now.

It would be funded by fee of up to $10 per association dwelling, though the recommendation is for an initial fee of $5 each, and eventually could produce up to $30 million.

Roche said the agency likely won't be in a position to deal with such core issues as delinquent fees.

"I don't see where that would be an answer at this time," she said.

Ducheny said it might be worth considering an ombudsman, but not a whole agency. Sen. Jim Battin, R-La Quinta, said he's exploring possible introduction of legislation for an ombudsman, though he's undecided.

"There just seems to be so much in the way of conflict or controversy or problems and there doesn't seem to be any oversight," he said.

Assemblyman John J. Benoit, R-Palm Desert, said he'd prefer first letting a private group formed by the associations try to address the issues.

"I don't know that we need to add to the government bureaucracy," Benoit said.

Ducheny said at least some problems might be resolved if homeowners were more active in their associations as voters should be in city and county governments.

"One of the things we haven't seen enough of in some ways is homeowners' appreciation of that and participation in their own associations," Ducheny said.