New Foreclosure Protection

Print this page
Resize Text: Small Normal Large
Senior Housing Information
New Foreclosure Protection


Governor Signs Bill to Protect Consumers from Homeowner Association Foreclosure Abuse

Governor Gray Davis signed AB 2289 this week, legislation that strengthens consumer protection to homeowners facing foreclosure by their community association for late homeowner dues.

More than 8 million Californians - one-quarter of the state's population -- live in the state's 35,000 town-homes, condos, co-ops, mobile home parks, and subdivisions run by association boards.

AB 2289 (Kehoe, D-San Diego) requires that associations follow new due process rules, when dealing with homeowners, who the association claims are late paying their assessments. The bill curbs some of the more serious abuses of association foreclosures by requiring that:

  1. The association wait 30 days after notifying the homeowner of its intent to lien the property before recording the lien.
  2. The 30-day "window" give the owner the opportunity to meet with the board to discuss the debt and to work out a payment plan, if one is needed.
  3. If the association has recorded a lien in error, it must immediately remove the lien and bear all the costs.
  4. The association shall not use foreclosure to collect fines and penalties.
  5. The association shall not sell assessment debt to third parties, thus creating an incentive for third-party debt collectors to extend the foreclosure process and increase their collection charges.
  6. The association give complete, written disclosure to homeowners about the use of foreclosure as a collection tool.

"This is an important consumer protection measure to help preserve affordable homeownership in California and to protect against arbitrary actions by homeowner associations that can result in foreclosure," said Norma Garcia, senior attorney with Consumers Union, publisher of Consumer Reports magazine and a supporter of AB 2289.

Association foreclosures have become big business in California, threatening the security of many seniors and the disabled in the state, who have neither the stamina nor the resources to defend themselves. One such homeowner was David Donnell, a disabled man whose association tried to foreclose for $1400 in late assessments. [His lawyers are now suing the association in federal court (Eastern District/Sacramento).]

Steve Cogswell, associate director of Oakland's Sentinel Fair Housing, says that last year alone Sentinel documented 884 foreclosure actions brought by associations in five Bay Area counties: Alameda, Contra Costa, San Mateo, Santa Clara, and Sacramento.

Under California law, when a homeowner falls behind on association dues, an association can foreclose on his home - even for very small amounts of money. Under California law, there is no minimum amount that must be owed before an association can start foreclosure.

In its August 2002 editorial of support for AB 2289, the Los Angeles Times cited the case of Patrick Mahaffay, whose association auctioned his $300,000 Sea Ranch home for $2403, because he owed $567 in homeowner assessments.

When the homes are auctioned, the minimum bid is the amount owed the association plus collection charges, as Mahaffay's case shows.

"Too many seniors and disabled Californians are facing foreclosure on their homes by falling slightly behind on their association dues," said William Powers, legislative director for the Congress of California Seniors, which sponsored AB 2289. "We recognize that associations must have the legal tools to collect unpaid homeowner dues, but foreclosure should be the last — and not the first — legal tool to be used."

In addition, AB2289 prohibits an association from denying an owner physical access to his home for frivolous reasons.

The last provisions were triggered by the case of disabled Karon Cave, whose Nevada County association has fined her $50,500 for removing the snow in front of her home during the winter so she and her family could exit the subdivision. The association says the road is needed for snow mobiles.

Typically, associations do not manage the foreclosure process themselves, but turn the debt over to an attorney or a collection agency, which charges the homeowner for doing the foreclosure paperwork. There are essentially no legal caps on the fees the homeowner gets charged. Caps that do exist are not enforced. The Los Angeles Times editorial cited the case of "Staci", a young woman who owed her association $62. Her account was turned over to a foreclosure lawyer. By the time he got through piling on his legal fees, her bill was $598.

"AB 2289 enacts common sense protections for Californians so they won't face foreclosure on their homes for falling behind slightly on their homeowner association fees," said Powers. "We believe it will help prevent minor problems from escalating into major disagreements that threaten the security and well-being of vulnerable homeowners."

AB 2289 was supported by Consumers Union, California Association of Realtors, California Trustees Association, the Older Women's League (OWL), Sentinel Fair Housing, the California Council of Churches/IMPACT, California Land Title Association (CLTA), the Gray Panthers, Protection and Advocacy, Inc, California Nurses Association, Law Center for the Elderly and Disabled, California Rural Legal Assistance, Western Center for Law and Poverty, Disability Rights Education and Defense Fund, Golden State Manufactured-Home Owners Association (GSMOL), and other advocacy groups and individuals.

Back to Top
Congress of California Seniors
1230 N Street, #201
Sacramento, CA 95814
(800) 543-3352
Connect with some of our key supporters: