HOAs in California have a lot of power. Most homeowners are vaguely aware that HOAs can obtain liens. Some homeowners have “a friend of a friend” who was foreclosed upon. But most do not know what the extent of an HOA’s authority to file a lien or foreclose entails.
The short answer is yes, an HOA can file a lien, and foreclose on your property. But the how, what, when, where, and why is much less clear to the average California homeowners.
Fortunately, there are legal and technical hoops in place that HOAs are mandated to jump through, or risk failing to effectuate a foreclosure due to technical glitches. It is imperative for homeowners to understand not only these hoops, but the basic requirements for HOAs to begin the foreclosure process.
First, there is a minimum required amount of $1,800 in delinquent regular or special assessments. In other words, in order for an HOA to begin foreclosure proceedings, the alleged debt most both be: (i) $1,800 or more (not including late charges, fees and costs of collection, attorney’s fees or interest) and (ii) be for regular or special assessments (not disciplinary charges). That means that if an HOA is attempting to collect less than $1,800, they may not do so via foreclosure, judicial or otherwise. That doesn’t mean they are without options.
They may file a lawsuit in small claims court. (Civ. Code § 5720(b)(1)). They may also record a lien when the amount is less than $1,800, but they may not move forward with foreclosure until the amount (not including late charges, fees and costs of collection, attorney’s fees or interest) increases to $1,800 or more. (Civ. Code § 5720(b)(2)). The HOA may also record a lien under this section if the debt is delinquent 12 months or more. However, if the HOA elects to move forward with a lien under this section, it must offer a homeowner dispute resolution, and must participate in dispute resolution if the homeowner agrees, prior to recording the lien. (Id). The third option HOAs have is characterized by a catch-all provision: “[a]ny other manner provided by law, except for judicial or nonjudicial foreclosure.” (Civ. Code § 5720(b)(3)). This essentially means that an HOA could move forward in limited or unlimited civil court.
So, while the above answers the question regarding the amount of a lien, what happens if the debt isn’t for regular or special assessments? Civil Code section 5725(b) has the answer: “[a] monetary penalty imposed by the association as a disciplinary measure for failure of a member to comply with the governing documents . . . may not be characterized nor treated in the governing documents as an assessment that may become a lien against the member’s separate interest enforceable by the sale of the interest under Sections 2924, 2924b, and 2924c.” This means that an HOA cannot nonjudicially foreclose on a property for disciplinary fines. The statute appears to leave them with the ability to file a foreclosure action in court.
As articulated above, there are also a variety of procedural requirements that an HOA must satisfy for a lien or foreclosure proceeding to be valid. It is the HOA’s job to comply with these requirements. Any failure to do so may result in the ability to overcome the lien or foreclosure outright.
That’s why it is important to have an experienced HOA attorney assist if your HOA is threatening a lien or foreclosure. The experts at Lubin Pham + Caplin LLP will work tirelessly to ensure that your rights are protected, and to hold your HOA accountable for failing to comply with any of the above requirements.