Homeowners' Association Foreclosure Sales Requirements

The bill makes changes to the law relating to the foreclosure of a unit owners' association's (HOA) lien on a homeowner's (unit owner's) home (unit) for unpaid HOA assessments.

Prior to the HOA turning over a delinquent account to collections or to an attorney for legal action, the bill requires the HOA to send notice to the unit owner that free information about collections and foreclosures may be obtained through the department of regulatory agencies' HOA information and resource center. Further, before foreclosing on an HOA lien, the HOA shall provide notice to the unit owner that credit counseling is available at the unit owner's expense relating to the impact of foreclosure and options to avoid foreclosure.

The bill limits a court's award of reasonable attorney fees that an HOA incurs when foreclosing on an HOA lien to $2,500. Further, currently, an executive board member, employee of the HOA's community association management company, and employees of the law firm representing the HOA, and such individuals' immediate family members, are prohibited from purchasing a foreclosed unit. The bill extends the individuals or entities prohibited from purchasing a foreclosed unit to include a community association management company representing the HOA and an individual who was a board member, employee of the HOA's community association management company, or employee of the law firm representing the HOA, or such individuals' immediate family members, during any of the 5-year period preceding the foreclosure sale, as well as a business entity owned by or affiliated with a community association management company or such individuals.

The bill establishes a minimum initial bid amount for the HOA's sale at auction of a unit after foreclosure of the HOA's priority lien for assessments. The amount of the HOA's initial bid at auction must be at least the amount necessary to satisfy the HOA lien foreclosed, the liens for unpaid real estate taxes or other government taxes, and the first mortgage secured by the unit, as well as an amount equal to 60% of the unit owner's equity in the unit, as determined in accordance with the bill, unless the percentage of equity included in the bid amount is decreased by agreement of the unit owner and the HOA. The bill authorizes a different minimum bid amount if the unit owner does not have equity in the unit at the time of the foreclosure sale. Further, the HOA is required to include the minimum bid amount and the information necessary to calculate the minimum bid in the lis pendens filed with the county clerk and recorder in the county where the unit is located.

For purposes of notice of the sale of a unit at auction, the bill amends the mailing list to include the unit owner's address listed in the county assessor's records for the unit, if that address is different from the property address, as well as the address of the unit owner's property manager employed by the unit owner, if that person is known to the HOA.

The bill applies to HOA liens foreclosed on or after October 1, 2024.

(Note: This summary applies to this bill as introduced.)