Colorado HOA Collections and Foreclosures: Can This Happen in California?

The Center has been getting questions about a lengthy article published a few days ago by Bloomberg News about aggressive foreclosures in Colorado by homeowner associations (HOAs.)

Can they happen here?

“Yes,” is the short answer, if you are one of the 14 million Californians living in the state’s 55,000 associations.

BUT there are some big differences between a HOA foreclosure in Colorado and one in California.  The differences are due in large part to the campaigns launched by the Center for HOA Law (CCHAL) with other advocates – like Sentinel Fair Housing, the ACLU, and the California Alliance for Retired Americans (CARA) – to get good laws in place to protect owners.

For starters, the Colorado foreclosures described in the article were largely to force payment of fines – not assessments.  Unlike Colorado, California law (Civil Code § 5725(b) bars HOAs from using foreclosure as a legal tool to collect fines unless it’s a fine to reimburse the HOA for damage to a common area.

California law now also lays out detailed procedures that HOAs must follow in order to legally levy assessments and to use legal tools to force payment.  These state laws have been tested in the courts and resulted in Appellate court rulings that protect homeowners further.  Huntington Continental v the JM Trust ((2014) 230 Cal.App.4th 590 states that homeowners can make partial payments to the board, thus bypassing the HOA debt collector, and the HOA is required to accept the payments.  Arlyne Diamond v Sup Court (2013) 217 Cal. App. 4th 1172 requires HOAs to comply exactly with procedures for collecting assessments. “Making a good faith effort to follow the law is insufficient,” said the court.

However, the big worry for California homeowners these days is the huge “emergency” and “special assessments” that HOA boards and property managers are levying – without a vote by – or sometimes even clear notice to – homeowners.

CCHAL is getting reports of “emergency” assessments in the range of $50,000, $60,000, and $100,000 that boards have levied.  Usually there is a “short date” for homeowners to pay up. 

“Emergency” assessments are especially troubling because state law says (1) they require no vote by owners and (2) have no dollar cap, that is: the sky’s the limit.

State law (Civil Code §5610) lays out the three permissible reasons for levying an “emergency” assessment.  It also requires boards to adopt a resolution justifying the price tag (Civil Code §5610(c), but boards seem to be ignoring both laws.  If they are ignoring them, homeowners need to challenge board decisions – in writing to the board president.  Owners also need to tell their representatives in Sacramento in writing what’s going on.

Some HOAs are levying “emergency” assessments as collateral for multi-million-dollar loans that the board and management have taken out with little or no meaningful notice – let alone consent – by homeowners.

There are banks specializing in making such loans to HOAs.  The banks are present at the trade shows convened by the HOA industry, e.g. the Community Associations Institute (CAI). They market aggressively to association boards, because they know HOAs have the apparent power to force payment – through collections and foreclosure.
 
If your HOA has taken out one of these loans or has levied an “emergency” or huge “special” assessment, CCHAL wants to hear from you.

Here’s the Bloomberg article on the Colorado foreclosures.
https://www.bloomberg.com/news/features/2023-09-14/hoa-foreclosures-continue-in-colorado-despite-reform?utm_campaign=bn&utm_medium=distro&utm_source=MSN

CCHAL NewsBrief
September 22, 2023