Judge orders sale of home even after assessments are paid

November 01, 1985

By AHRC News Services
Copyright © 1985

Most community associations leaders understand that the association has the power to foreclose on a home to collect delinquent assessments, but rarely is that power tested to the limit.

In California, however, a superior court ordered that an elderly woman's home be sold at auction to satisfy a minimal association debt. The foreclosure has sparked public interest and lingering debate in the California legislature over the fairness of this action.

Starlite Pines Homeowners Association (San Jose, CA) began collection proceedings against Jeanette Swindle when she stopped paying her yearly assessments in December, 1981.

The association's attorney placed a lien on the woman's residence in February, 1984, after repeated attempts to collect $205 in delinquent assessments. Swindle paid the association $100 in April, 1984, with a letter explaining that she had no more money to give.

She did pay the remaining $105 over the next few months, but the association's attorney billed her an additional $635 for attorney costs, collection expenses, and late fees. Court costs of $270 were later added to this bill.

Swindle said, "I refused to pay his fees because the Pines is already paying a lawyer to do their work. Why should I pay for his work."

Later that year, the Superior Court ordered the foreclosure sale of Swindle's home in 60 days unless she paid $1,010. She did not take advantage of this opportunity and the house was sold at auction 61 days later for $10,000, approximately $105,000 under market value. The court paid the $1,010 to the association and withheld an additional $64 in auction costs from the sale.

The remainder of the $10,000 was sent to Swindle, who said she turned the check over to her attorney.

Swindle had paid all but $15,000 of her house loan, giving her $100,000 in equity in the house. She was presumably capable of paying the association by borrowing against this equity or through a special loan program for senior citizens. Newspaper reports state, however, that her lawyer told her that she would not lose her home.

As a result of this case, a bill to make assessments a personal obligation rather than an obligation running with the land was introduced into the California legislature. Since a decision was not reached on this issue during the last legislative session, the bill will continue to be reviewed when the legislature reconvenes in January.

The CAI California Legislative Committtee, the trade lobbying group for foreclosure lawyers and manager opposed the bill, stating that it would "weaken the ability of associations to enforce assessment collection."

Following is an Editorial by AHRC News Services on the above CAI article

The California legislature should pass a bill making assessments a personal obligation rather than giving CAI lawyers power to lien and foreclose on private property.

Lawyers have been collecting unlimited lawyers fees for minor amounts of dues owed. The current system is an incentive for lawyers and allied managers and boards to ratchet up lawyers fees in order to do non-judicial foreclosures on a home, and steal the equity.

AHRC has interviewed several women whose homes were snatched by association lawyers for minor amounts of dues. Two, who appeared on our Los Angeles radio shows in 1994 were living in run down cars.

CAI (Community Associations Institute) and CLAC (California Legislative Action Committee) are lobby groups for lawyers who act as collection agents and make a living suing the homeowners and taking their homes..

These lawyers have a stranglehold on boards of homeowner associations. They have bought a vast majority of politicians and even judges in California.

Dan Hauser was the longtime chair of the California Assembly Housing Committee. The night before legislative hearings on an association housing bill, he was wined and dined by CAI/CLAC lobbyists. The following morning, at the legislative hearing, he would follow their beck and call.

Julie Bornstein, the current Housing Consultant for California Governor Gray Davies was vice chair of the Assembly Housing Committee. She sat next to Hauser and did the same. Representatives from AHRC and AHA spent two years fighting Bornstein's CAI sponsored bill to put association assessment liens before the first trust deed.

Consumer advocate Willowdean Vance points out:

"The California State Bar Rules of Conduct states that no lawyer shall collect an unconscionable fee. How can the California Bar justify refusing to enforce their own laws?

$1074 fees and costs are excessive on a $204 bill the owner paid off in a few months. These lawyers grabbed a poor senior's lady's home worth $115,000 and sold it for $10,000. for the lawyers fees and some behind the scenes beneficiaries.

No goverment agency, non-profit group, or legislator came to her rescue. "

Credit card companies, banks and mortgage companies work with borrowers. CAI lawyers gouge homeowners.

California legislators have an obligation to protect its citizens.