HOA Law Blog
BILL BANNING FORECLOSURES ON SMALL DEBTS ADVANCES
By JIM WASSERMAN Associated Press
SACRAMENTO – A bill proposing to ban home foreclosures as a tool to collect small debts in private communities easily cleared a key Senate hurdle Tuesday, beginning a journey that could eventually collide with the veto pen of Gov. Arnold Schwarzenegger.
The Senate Judiciary Committee voted 4-1 to send the bill affecting more than one-fourth of California’s households to a full Senate vote later this spring. Lawmakers passed a near identical bill last year making California’s 37,000 homeowner associations use small claims court to collect unpaid sums below $2,500, but Schwarzenegger vetoed it.
Schwarzenegger said it could force dues-paying homeowners to make up for lost money caused by those who don’t pay.
The new version, by Sen. Denise Ducheny, D-San Diego, would end the long-standing power of homeowner associations to auction off a member’s home for failing to pay assessments that average about $200 a month in California.
“Often for less than $200 people are losing their homes and being evicted without the due process rights given to tenants,” Ducheny told the committee. “We understand the need for everyone to pay their agreed-upon debts, but we also want to protect both the equity of homeowners and their due process rights.”
Nearly a dozen homeowners across the United States have lost their homes over small unpaid sums since 2001, triggering widespread negative publicity for one of the nation’s fastest growing residential lifestyles.
Ducheny’s bill would continue to allow foreclosures for amounts over $2,500 without a court’s review. It would also significantly toughen foreclosure practices, giving homeowners 90 days to get back their homes and make buyers at auctions pay a minimum of 65 percent of the home’s value.
Attempts to reach compromises that would meet Schwarzenegger’s favor haven’t worked, Ducheny said, adding that meetings haven’t led to any specific proposals.
Several retirees groups backed the bill Tuesday, saying it protects home equity that takes a lifetime to build.
“Homeowners need to pay assessments and homeowners associations need legal tools to collect them,” said Marjorie Murray, lobbyist for the California Alliance for Retired Americans. “But it is our strong belief that foreclosure should be the last procedure used and only used reasonably.”
While no definitive figures exist of how many foreclosure actions associations initiate in California, an unofficial survey of state association lawyers last summer indicated nearly 20,000 filings during the last five years. Most homeowners quickly paid their debts.
Lobbyists representing association managers and boards of directors tried unsuccessfully to reduce the amount qualifying for small claims court collection procedures to $1,000 or six months worth of late payments. They also failed to win changes to make the bill effective for only two years.
Though the bill moved forward, significant disagreements still loom over its future.
Especially large is the idea of a $2,500 grace period before foreclosure can begin.
”We feel by placing the threshold it requires us to increase assessments on all other innocent homeowners who do try to pay their assessment on time,” said Jennifer Wada, lobbyist for the California Association of Community Managers.
California associations collect dues for a range of needs that including lawn mowing, pool maintenance and private security.
Ducheny’s original bill surfaced last year after a pair of Calaveras County retirees lost their home for missing a $120 payment to their association. The couple still live in the residence pending the outcome of a lawsuit against the association and collection agency.