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Understanding California Hoa Foreclosures And Their Impact On Homeowners

Published on May 10, 2023

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If you do not pay your HOA dues in California, the association may put a lien on your house and foreclose.

If you are a California homeowner and fall behind on your assessments (or dues):

  • The HOA may put a lien against your house.
  • The association typically can charge you for the overdue assessments, plus attorneys' fees, costs, late charges, and interest.
  • The association might choose to foreclose its lien.
  • Lien priority determines what happens to other liens, like a mortgage, if an HOA lien is foreclosed.

If the HOA starts a foreclosure, you might have a defense to the action, such as the association charging you too much, imposing unreasonable fees, or failing to follow state laws.

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Or you might be able to negotiate a way to get caught up on the overdue amounts and save your home. You may be able to negotiate a reduced amount or enter a repayment schedule.

What happens if HOA fees are not paid in California

The Homeowners Association (HOA) can take various actions if you don't pay your dues, including charging you late fees interest, placing a lien on your property, taking legal action, and even foreclosing on your home.

When you buy a single-family home, townhome, or another home in a planned community with covenants, you'll most likely pay fees and assessments, often collectively called "assessments," to an HOA. If you fall behind in the assessments, the association will likely initially try to collect the debt using traditional methods. You may receive a call from the association or a letter.

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If these tactics fail to get you to pay, the association may try to collect money from you in other ways. The association could take away your privileges to use the common facilities or file a lawsuit for a monetary judgment against you.

Based on the association's Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and state law, most HOAs also have the power to get a lien on your property if you become delinquent in assessments. A lien is usually placed on your property if you are behind in your payments. The association may record a lien with the county recording office to notify the public that it exists, even if state law does not require it.

The property's title is clouded by an assessment lien, making it difficult to sell or refinance your home. In addition, the property can also be foreclosed to force a sale to a new owner—even if the property has a mortgage.

HOA Liens and California

California doesn't allow liens to be recorded for 30 days after a homeowner has received notice from the HOA about delinquent assessments. The notice should include:

  • A general description on the procedures for collection and enforcement of liens, including an alert about foreclosure.
  • An itemized list of charges due.
  • There are several options available to solve the problem of unpaid assessments. (Cal. Civ. Code § 5660.)
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Before recording a lien on delinquent assessments the association must offer and, if asked, participate in dispute settlement under the "meet-and-confer" program. (Cal. Civ. Code §§ 5900 to 5920, § 5660(e).) California law also allows you to submit a request for a meeting to discuss payment plans with the board. (Cal. Civ. Code § 5665.)

If you do not find a solution to pay the outstanding amounts, the HOA may record a lien against your property at the county level. (Cal. Civ. Code § 5675.) All record owners must be notified within 10 calendar days of the recording. (Cal. Civ. Code § 5675(e).)

Be on the lookout for legal changes

You'll learn about California common interest laws and statutes in this article. The Davis-Stirling Common Interest Development Act, (Cal. Civ. Code §§ 4000 through 6150) governs "common interest developments" in California, which means nonprofit corporations or unincorporated associations created for the purpose of managing common interest developments. (Cal. Civ. Code § 4100, § 4080). The term "HOA", as used in this article, is intended to include these types of associations.

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Statutes change, so checking them is always a good idea. The way courts and agencies interpret the law and apply it can also change. Some rules may even differ within one state. This is just a small list of reasons why it's worth consulting an attorney.

Before filing a lien, the board must approve it

Only the HOA Board of Directors can decide to record an assessment lien. Most members must approve the board's decision at an open meeting, and the vote recorded in the meeting minutes. (Cal. Civ. Code § 5673.)

Charges that the HOA may include in the Lien

In California, an assessment is considered delinquent 15 days after it is due unless the CC&Rs provide for a longer amount of time. (Cal. Civ. Code § 5650.)

If a delinquent assessment is made, the association can recover:

  • Assessments. HOAs can include unpaid assessment amounts in their lien.
  • Attorney's fees and costs that are reasonable. The association may include the costs of collecting past-due assessments in its lien.
  • Late Charge The association could include a late fee.

What is the maximum amount of late fees for a HOA in California

The late fee can't exceed 10% of the delinquent assessment or $10, whichever is greater, unless the CC&Rs specify a late charge in a smaller amount, in which case any late charge imposed can't exceed the amount specified in the CC&Rs. (Cal. Civ. Code § 5650(b)(2).)

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  • Interest. The HOA may impose interest on all of the above charges, including the delinquent assessments, reasonable attorneys' fees, and reasonable fees and costs of collection at an annual interest rate not to exceed 12%, unless the CC&Rs specify a lesser amount, in which case the lesser rate of interest applies, beginning 30 days after the assessment becomes due. (Cal. Civ. Code § 5650, § 5675(a).)

Can My HOA Foreclose My House in California

In California, 30 days after the lien was recorded, the HOA may foreclose its lien judicially or nonjudicially. (Cal. Civ. Code § 5700, § 5705, § 5710). Most HOA foreclosures in California are nonjudicial.

HOA Foreclosure Limitations

California law limits a HOA’s ability to close in certain circumstances. The HOA is not allowed to foreclose on a property unless the following conditions are met:

  • If the amount due is more than $1,800 (not including late fees, attorney's costs, attorney fees, interest or any other charges), then it is considered delinquent.
  • The assessment secured by the lien is more than 12 months delinquent. (Cal. Civ. Code § 5720.)

What power does an HOA in California have?

If the HOA cannot foreclose on your home, they may instead sue you to obtain a money judgement. (Cal. Civ. Code § 5720.)

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Before initiating a foreclosure, the association must also offer a "meet-and-confer" program or an alternative dispute resolution method with a third-party neutral. (Cal. Civ. Code §§ 5925 to 5965, § 5660(f).)

What is the redemption period in California?

If the HOA forecloses using a nonjudicial process, the foreclosure is subject to a 90-day right of redemption after the sale. (Cal. Civ. Code § 5715.) You must pay all the assessments, interest, lawyers' fees, and repair costs to redeem your property. (See Barry v. OC Residential Properties, LLC 194 Cal.App.4th 861 (2011).)

The redemption period for judicial foreclosures:

  • If the sale proceeds are sufficient to pay the debt, 90 days.
  • If the sale proceeds are insufficient to pay the debt, the year will be extended. (Cal. Code Civ. Proc. § 729.030(a),(b).)

What Happens To My Mortgage In An HOA Foreclosure

It's a common misconception that an association cannot foreclose on your home if you are current with your mortgage. But an association's right to foreclose isn't dependent on whether you're up to date on your mortgage. What happens in a foreclosure depends on the lien priority.

What is the priority of liens?

The priority of lien holders determines whether they will be paid. The "first in time first in right rule" is generally followed by lien holders. This means that the lien recorded first on the land records will have higher priority. The first lien gets priority over other liens and the proceeds from the foreclosure sale.

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Any excess proceeds after the first lien has been paid in full will go to the next lienholder and continue until that lien has been paid. If a lien is low in priority, it may not get anything from a foreclosing sale.

State law or governing documents for an association may adjust the lien priority.

HOA Lien Priority California

In California, an HOA lien is before all other liens recorded after the notice of assessment, except that the CC&Rs may provide that the HOA lien can be subordinated to any other liens and encumbrances. (Cal. Civ. Code § 5680).

Depending on the recording date, a lien from a previous mortgage may remain on a property after an HOA has foreclosed. The purchaser at the sale will take the title to the property subject to the lien.

HOA Fines In California

California law requires HOAs to provide their members with a schedule for fines and charges, which must also be reasonable. (Cal. Civ. Code § 5850.) HOAs can't charge interest on unpaid fines. (Cal. Civ. Code § 5725(b), § 5650(b)(3).)

HOAs can't also charge late fees for unpaid late fines and late fees. Because state law allows a late fee of 10% or $10, whichever is greater (unless the CC&Rs specify a lesser amount) against delinquent assessments, late charges can't be imposed on overdue late charges or unpaid fines. (Cal. Civ. Code § 5650(b)(2).)

Can an HOA foreclose due to unpaid fines?

An HOA cannot collect unpaid fines using the lien or nonjudicial foreclosure process available to delinquent regular and special assessments. (Cal. Civ. Code § 5725(b).) But the HOA may file a lawsuit, like in small claims court, or wait until you sell your home and demand payment during escrow.

Speak to an Attorney If You Are Facing an HOA foreclosure in California

Consider consulting a California foreclosure lawyer to explore all your legal options if you are facing an HOA foreclosure.

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