Lawmakers Send Bill Restricting Foreclosures To Governor
By Jim Wasserman of Associated Press - August 28, 2004SACRAMENTO (AP) _ A landmark bill outlawing home foreclosures for small sums owed to homeowner associations passed the state Legislature on Friday and headed toward a judgment call with national implications by Gov. Arnold Schwarzenegger.
A 32-1 vote in the Senate and 51-6 in the Assembly provides major new safeguards against association foreclosure actions for a fourth of the California's 12 million households and could spread to other states if Schwarzenegger signs it before Sept. 30.
"This is a compromise that will work for all the homeowners who live in the state,'' said the bill's co-author, Denise Ducheny, D-San Diego, describing a monthslong battle with association attorneys and lobbyists who maintain it will give delinquent homeowners a blank check to avoid paying assessments for months or years.
California's 37,000 associations, like thousands more nationally, depend on association dues to pay for lawn maintenance, building and pool upkeep, private security and roads.
"If this passes, it just is really scary what the consequences can be,'' said Judy Campion, owner of a Los Angeles firm managing 30 Southern California homeowners associations. "It limits an association's ability to pay its bills.''
The legislation, by Assemblyman Darrell Steinberg, D-Sacramento, makes associations recover unpaid sums under $2,500 in small claims court, ending the long-standing practice of foreclosing or threatening to foreclose on the home while tacking on $1,500 to $2,000 in attorneys fees and other collection costs.
"The penalty ought to fit the crime,'' Steinberg said. ``This bill assures when it comes to the relationship between homeowners associations and homeowners that principle applies.''
Lawmakers muscled the proposal toward floor votes after an incident in rural Calaveras County last year, where retirees Anita and Tom Radcliff lost their $285,000 home for failing to pay a $120 annual assessment.
"It is unbelievable to me and any right-minded person that such a thing could happen in our country and our state,'' said Sen. Rico Oller, a San Andreas Republican who represents the Radcliffs. "This will go a long ways toward insuring that no one else will have something like this happen to them.''
The couple remains in the home pending a lawsuit against the association and an anticipated settlement that would allow them to regain ownership of their retirement home.
They couldn't be reached for comment after the vote.
Nationally, nearly a dozen such foreclosures since 2001 have generated damaging publicity for a homeowners association industry favored by developers as the cheapest, easiest way to put more homes and people on less acreage.
Association lobbyists, who fear the bill's financial effect on the state's fastest-growing residential lifestyle and the potential of the law spreading to other states, are pinning their hopes on a Schwarzenegger veto.
Schwarzenegger has not taken a position on the bill, said spokesman Vince Sollitto.
The legislation, unique among states such as Florida, Arizona, Texas and Hawaii, which are home to more than half the nation's 260,000 homeowners associations, would allow nonjudicial foreclosure for owed amounts higher than $2,500. But it would significantly toughen foreclosure practices, making association boards unable to delegate the decision to others, give homeowners 90 days to get back their homes and make buyers at auctions pay a minimum of 65 percent of the home's value.
"This is probably one of the most important bills we're going to deal with this year, as our housing stock continues to move into housing developments controlled by common interest developments,'' said Sen. Debra Bowen, D-Marina Del Rey.
Recent efforts to pass similar reforms in Texas, Arizona and Florida all failed.
The bill also gives nearly 8 million Californians living in association-governed communities more access to private financial records. Associations that balk at records inspection requests could be fined $500 per request and pay attorneys fees and court costs if they lose a legal challenge on the question.
If signed by Schwarzenegger, the bill will affect thousands of California homeowners who fall behind on dues, although association records indicate fewer than 1 percent have lost their homes over unpaid sums. Experts estimate that 60 percent of the state's new housing are in association-governed private communities, while in Sacramento and San Diego, private communities account for more than 40 percent of all housing. Los Angeles, Orange and Ventura counties alone have nearly 1 million association-governed communities. The fewest numbers are in the San Joaquin Valley.
Ducheny and Steinberg's bills overturn a significant piece of a 1985 law that increased nearly tenfold the penalties, fines and attorneys fees an association could add to a delinquent bill.
The foreclosure issue is one of several bills on homeowners associations this year. Others make associations present a clearer picture to potential buyers of their financial obligations in years ahead and require secret ballots in association elections. Another makes boards give reasons in writing for denying homeowners' requests to modify the looks of their homes. | 
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