Section 101: The Right to Security against Foreclosure

I. An association shall not foreclose against a homeowner except for significant unpaid assessments, and any such foreclosure shall require judicial review to ensure fairness.


1. Limit on Creating Foreclosure Power. No association may foreclose against a homeowner on any lien without express authority granted by the declaration. Foreclosure power cannot be added by amendment, except by unanimous homeowner vote.


2. Non-Judicial Foreclosures, and Precipitate Foreclosures, Prohibited. No association

may foreclose against a homeowner on any lien unless, in addition to compliance with all

other applicable laws, the association obtains a court order that specifies the assessments

due, confirms the association followed proper procedure, and allows at least three months

before the sale date for the homeowner to pay the court-specified debt.


3. Predicates for Judicial Foreclosure. No association may seek an order to foreclose

against a homeowner on any lien unless, in addition to compliance with all other laws governing foreclosure of a mortgage on residential real estate, (a) the lien secures only a debt for an assessment authorized by a declaration recorded before the homeowner bought the home, (b) the directors by a two-thirds vote approve the foreclosure action, and (c) the assessment past due on the date of the vote exceeds $2,500. Notwithstanding the foregoing, any lawfully recorded lien (including liens that do not themselves provide a suitable basis for foreclosure) may be enforced on conveyance of any interest in a home, including conveyance by otherwise proper foreclosure sale.


4. Right to Cure. Each association shall, in governing documents, establish rights to make

payments that ensure the following:


a. Homeowners may at any time make full or partial payment on any amount due. Any homeowner payment shall be credited first toward any past due assessment or other amount due to avoid foreclosure.


b. At least for homeowners who suffer job loss, disability, divorce, or family medical expenses, the association shall without penalty allow a homeowner 30 days after an assessment to propose an installment plan. Upon receiving the homeowner’s installment proposal, the directors shall designate a committee to meet with the homeowner privately, and the association shall provide a written response to the homeowner. If the association does not approve the request in full, the response shall allow the homeowner at least 15 days after denying the request to pay without incurring attorney fees. Nothing prohibits the directors from approving an installment plan more lenient than provided by existing rules, in which case the directors shall amend the existing rules so that all homeowners shall receive fair notice and equal treatment.


c. Within five days after any vote by directors to seek foreclosure, the association shall give the affected homeowner notice of the vote, and include the ombudsperson’s Notice of Foreclosure Rights. Within five days after filing any lawsuit seeking foreclosure, the association shall give the ombudsperson Notice of Foreclosure Filing.


d. If a homeowner pays all overdue assessments after directors properly vote to seek foreclosure, a court order nonetheless may permit foreclosure if (i) the homeowner has not paid all overdue late charges plus all attorney fees actually and reasonably incurred after the directors’ vote; and (ii) the declaration authorizes foreclosure for such nonpayment.


e. Upon a homeowner’s request, within three days, an association shall provide the

amount due to avoid foreclosure, including past due assessments and any other

amounts allowed by ¶ 4d or approved by court order under ¶ 2.


5. Minimum Bid and Notice of Redemption Rights. If an association forecloses against a

homeowner, and sets the home for sale, the following provisions apply:


a. A price below 75 percent of the equity, measured by appraised fair market value less senior liens subject to which the successful bidder takes title, makes the sale void.


b. Within 30 days after the sale, the association shall provide the homeowner notice including the date and time of sale, the buyer’s name and purchase price, and the ombudsperson’s Notice of Right of Redemption. Within ten days after sending this notice, the association shall record, in the real property records of the county where the home is located, an affidavit stating the date on which the association sent the notice and containing a legal description of the lot.


6. Right of Redemption after Foreclosure. Except to the extent that governing documents

provide greater rights, after a foreclosure sale by an association the homeowner has


a. a right of redemption not less than if a secured lender foreclosed; and,


b. at least 180 days, after recording of notice under ¶ 5b, to redeem the home. [46]


Discussion Homeowners expect reasonable protection against foreclosure. Some state constitutions and statutes strictly limit what circumstances can justify foreclosure, and specify protection in foreclosure proceedings. [47]  State and federal bankruptcy law provides more homeowner protection. Recognizing the immense harm caused by even a threat of foreclosure, governments and lenders with the right to foreclose--even with great sums at risk--typically take extraordinary steps first to seek payment without foreclosure.

[46]  For an example of a statute securing a 180-day right of redemption, see Tex. Prop. Code 209.010 & .011.

[47]  E.g., Tex. Const., art. XVI, § 50; Fla. Const., art. X § 4.

These protections, and hesitancy to seek foreclosure even when possible, reflect that “the home is not only the center of family life but also the family’s major financial asset.” [48] Even when homeowners fall into debt, society protects their home as the foundation on which to rebuild their lives.


Many associations respect the sanctity of the home, rarely if ever foreclose, and thrive. Appropriately, CAI calls for foreclosure to be the “last” resort. [49] Unfortunately, problems arise because some associations seek foreclosure over small amounts past due, in minor disputes, or to sell homes without going to court (non-judicial foreclosure).


The model statute starts from the basic American rule: creditors in almost all cases, no matter how legitimate or important their claims, do not deserve the immense power of foreclosing on a home--even if that means a creditor does not get paid because of bankruptcy. The most significant exception to the American rule allows foreclosure for nonpayment of taxes or home loans. Even for these exceptions, foreclosure typically requires judicial approval. [50]

In allowing foreclosure based on unpaid assessments (akin to taxes), but not otherwise, the model statute follows the trend of recent legislation. Assessments, regular

The introduction describes some extreme cases of foreclosures. Some associations have a pattern of high foreclosure rates.


For example, in Harris County, Texas, associations several times have filed foreclosure cases against more than 10 percent of their homeowners in a single year (and that does not include non-judicial foreclosures)[51].  Additional foreclosure cases involve minor disputes [52]. To the extent that current statutes permit such foreclosure

lawsuits, they underscore the need for restrictions and procedural protection.

or special, must be specified in the declaration and be imposed uniformly (in amount or percent of property value) on homeowners. The model statute does not permit characterization of fines or other charges as assessments, but includes a provision to collect on non-assessment liens upon conveyance of the home. [53]

[48] M. Stivers, Homeowner Association Foreclosure: Does the Punishment Fit the Offense?, at 1 (Calif. Sen. Housing & Community Development Comm., Chief Consultant’s Background Paper 2/17/04)

[49]  CAI, “Rights and Responsibilities for Better Communities,” supra n.37.

[50]  The model statute would bar non-judicial foreclosure, to ensure neutral review and other safeguards for homeowner equity. The “non-judicial foreclosure process often” costs homeowners “a significant amount of their equity due to the small amounts at which the homes are sold in auction.” M. Stivers, Homeowner Association Foreclosure: Does the Punishment Fit the Offense?, supra n.48, at 3.

The Following Footnotes correspond to the Sidebar on Page 19:

[51] See the data presented at (15,000 foreclosure lawsuits filed in Harris County from 1985 to 2001, increasing in frequency since 1995); see also Testimony of Stephen Cogswell, Calif. State Sen. Housing & Community Devel. Comm., supra n.29, at 3 (study by Sentinel Fair Housing/Oakland found associations filed about 12 percent, one in eight, of all foreclosure cases in five northern California counties).

[52] See, e.g., (media reports); (newsletter); (webcast weekly radio show, and collecting links to other pro-homeowner web sites); see also, e.g., E. McKenzie, Privatopia, supra n.5, at 15–18 (1994) (additional examples).

[53]  E.g., Ariz. Rev. Stat. 33-1256A & 33-1807A (allows foreclosure for assessments as if mortgage on real estate, but for other charges liens may be created only by court judgment, may not be the basis for foreclosure, and are effective only upon conveyance of an interest in the property); see also Nev. Rev. Stat. 116.31162(4) (precludes foreclosure for liens based on fine or penalty, with limited exceptions); Cal. Civ. Code 1367 (distinguishes assessments from most charges for noncompliance with governing documents); cf. Tex. Property Code 209.009 (disallows foreclosure solely for fines or associated attorney fees); Fla. Stat. Ann. 720.305 (disallows liens for fines). The model statute permits liens only for assessments or after court judgment. See Section 109 (¶ 6), The Right to Reasonable Associations and Directors.

Given the extraordinary force of foreclosures, the model statute requires a minimum amount past due. [54]  This is akin to statutes that set limits before a government can pursue foreclosure. As the Restatement comments, the law should preclude “[s]evere measures against minor, insubstantial infractions.” [55]  The vast majority of creditors in America thrive without foreclosure power, so associations should be limited to foreclosure only for truly significant nonpayment.


The model statute also includes procedural safeguards. Requiring a two-thirds vote by directors provides some assurance that the community consensus supports this action. State law typically specifies that notice be given during the foreclosure process, and the model statute relies on the ombudsperson to keep such notices up to date. [56]


To account for homeowners who honestly want to meet their obligations but face real hardship,

the model statute favors use of installment payment plans. [57]  CAI “supports reasonable procedures to accommodate unit owners experiencing difficulties in meeting their assessment obligations.” [58]  “In times of difficulties, illness, loss of employment or other economic problems, CAI advocates flexibility and compassion in the application of collection policies and procedures.” [59]  This model statute calls for these rights to be stated clearly, and to be available equally to all homeowners. In addition, associations must credit payments first to minimize the risk of foreclosure. [60]

[54] The model statute follows the $2,500 threshold proposed in California’s SB 1682/AB 2598 (2004), which passed by large margins (34–0 in the state senate). In vetoing that bill, the governor “recognize[d] that additional clarification in the foreclosure statutes is necessary … so that all homeowners are treated equitably and foreclosure only occurs after every reasonable alternative is exhausted.” Quoting, last visited 11/6/04. The next year the legislature passed, and the governor signed, a bill providing less protection for homeowners. SB 137 (2005) amended Cal. Civ. Code 1365.1 & 1367.4 to stop, for at least one year, foreclosures involving less than $1,800 past due (“exclusive of any accelerated assessments, late charges, fees, attorney's fees, interest, and costs of collection”).

[55] Restatement § 6.13 comment b, at 238.

[56] In the context of tax foreclosures, the Supreme Court recently affirmed the importance of giving homeowners actual notice before tax foreclosure sale. Jones v. Flowers, 126 S.Ct. 1708 (2006).

[57]  See, e.g., Cal. Civ. Code 1365.1 & 1367.1.

[58]  Community Associations Institute, “Public Policies”, reprinted at, last visited 1/24/05 (“CAI Public Policies”), at (this policy effective 10/9/93).

[59] Id.

[60] See, e.g, Nev. Rev. Stat. 116.31145; Ariz. Rev. Stat. 33-1803(A & B) & 33-1807K; Cal. Civ. Code 1367.1(b). Nevada requires notice to the ombudsperson as well as to the homeowner, posted if not actually delivered. Nev. Rev. Stat. 116.311635. California also requires notice, and related procedures including a formal vote by the board to foreclose. Cal. Civ. Code 1365.1 & 1367.1.