Forced Home Sale Limits Vetoed

A bill that would have curtailed homeowners groups’ powers to foreclose on members’ homes has been vetoed by the governor, who said the legislation was too sweeping and that he instead favored incremental changes to the current law.

AB 2598 would have banned so-called nonjudicial foreclosures in cases in which homeowners owe $2,500 or less in association dues.

It also would have added restrictions in cases involving higher amounts.

“We fought hard to strike a balance” among the different interests, Assemblyman Darrell Steinberg (D-Sacramento), one of the bill’s authors, said Monday. “But bottom line is, no one should lose their home for being behind $80, $100 or $150 on their assessment dues.”

Currently, homeowners associations can foreclose on delinquent members without filing a lawsuit or going in front of a judge, regardless of how little is owed. Nonjudicial foreclosure is one of the most contentious issues for the fast-growing associations, whose rules affect the homes of an estimated quarter of the state’s population.

Defenders of the practice say nonjudicial foreclosure is the only effective tool associations have to enforce assessments that help maintain private communities, paying for items like streets in a gated community or roofing in a condominium.

But critics say the power is too broad and open to abuse. In California, only mortgage banks and the government have similar foreclosure powers.

Although most residents pay their association dues before their properties are auctioned, thousands have lost their homes, sometimes over disputes involving a few hundred dollars. Last year, a retired Calaveras County couple lost their home over an unpaid $120 assessment.

In his veto message released last week, Gov. Arnold Schwarzenegger said AB 2598 could increase assessments for those homeowners who pay their dues on time because it would make it easier for others to evade paying their bills.

He said he welcomed changes to the current laws, but that those changes should happen incrementally. The governor’s office declined to elaborate further.

The bill would have required homeowners associations to go to Small Claims Court to collect amounts of $2,500 or less. For larger amounts, it would have required the associations to offer mediation or other forms of dispute resolution before foreclosure, and guarantee that the homeowner would receive a portion of the property’s equity after a foreclosure sale.