Bill would limit homeowner associations' foreclosure rights


By Shonda Novak


Published February 5, 2005


State Sen. Jeff Wentworth has filed a bill that would prohibit homeowners' associations from foreclosing on property owners solely because of delinquent fines or attorney's fees.

The San Antonio Republican's bill mirrors similar legislation nationwide to address an issue that homeowners' rights groups say affects thousands of homeowners whose property rights are being trampled by property associations that have far too much power.

Similar bills recently have been introduced in Colorado and California, and many states already have such legislation on their books, supporters say.

Wentworth's bill would keep homeowners' associations from foreclosing if the debt on a lien "consists solely of fines assessed by the association," or attorney's fees solely associated with such fines.

The bill also requires that if payments are made, they be applied to delinquent and current association assessments before before being applied to fines or attorney fees related to the fines.

Wentworth was not available for comment, but advocates say the change is greatly needed. Homeowners' rights groups say association foreclosures are just a profit center for lawyers.

"The practice has been to add fees to charges, to interest, etc. until the charges are 10, 20 and 30 times the delinquent assessment," said Beanie Adolph, a Houston-based advocate for homeowners.

Adolph said, on average, at least 1,000 association-related foreclosures are filed each year in Harris County.

Wentworth filed the bill after being contacted by Mary McGarr, a Katy resident and former association board member. McGarr said she became an advocate for homeowners' rights after witnessing what she said were association abuses that targeted the elderly, minorities and people with disabilities.

McGarr said foreclosure actions were filed against 76 homeowners during the past 10 years in her subdivision, Nottingham Country, resulting in each homeowner having to pay between $2,000 and $6,000 to get their homes back.

"It's the burden of everyone in Texas to stop this wholesale greed," McGarr said. "You think you're paying the maintenance fee, but they take their money off the top, so you still owe it."

McGarr said she went to Wentworth, who is also a lawyer and real estate agent, because he has taken on other homeowners' issues in the past.

In Central Texas, the extent of this problem is unknown. Homeowners' associations initiated foreclosure actions against 200 homeowners in Travis County in 2004, according to figures from Foreclosure Listing Service Inc. , which tracks foreclosures. But the statistics do not break down the reasons for the foreclosures.

Peter Sajovich, a real estate broker representing investors who buy foreclosures, said he has never heard of any Travis County homeowners who have been foreclosed on only because of delinquent fines or legal bills.

Sajovich said he has mixed views about the bill.

"On the surface, it sounds like you really shouldn't have to lose your home for a bunch of fines," he said. "But when you bought the condo, you agreed to make the monthly payments. If you don't do that and the HOA has to incur costs to get you to abide by the agreement, they shou ld be able to recoup the costs."

Homeowner associations say they are reluctant to foreclose.

"While there are isolated instances of inappropriate foreclosure, this action is viewed as a last and unavoidable step by the overwhelming majority of community associations," said Frank Rathbun, a spokesman for the Community Associations Institute, which represents associations and their boards and managers. "Knowing that people occasionally face financial hardship . . . many community associations do work with homeowners to develop deferred or special payment plans."