The 2018 Arizona Legislative session has gotten off to a fairly unremarkable start for homeowners that potentially promises to make some really bad law for homeowners and fails to fix any of the real problems that homeowners, individuals, and consumers face on a daily basis.
Let’s start with a bill so bad that its own sponsor pulled it after less than one week. Senator John Kavanaugh, R-Fountain Hills, proposed amending legislation to HOA laws that would speed up the foreclosure process. Although the current laws allow homeowners associations and condominiums to foreclose if the homeowner is either one year or $1,200.00 past due, Senator Kavanaugh's proposed legislation (SB-1080) would have shortened that period to just six months. Apparently, he tried to package this nonsense as friendly for homeowners. This was literally the only change to the existing law that Senator Kavanaugh proposed. Fortunately, he withdrew the proposed bill just days later. With HOAs already foreclosing thousands of homes in Arizona (yes, I said thousands), do we really need to speed up this process?
But homeowners are not out of danger yet. A new bill seeking to amend the same laws has recently dropped in the House: HB-2609. While this might seem like another feel-good measure that, on its face, might be beneficial homeowners, it is a wolf in sheep's clothing.
Why? It requires an association, before filing for foreclosure, to first seek and obtain a money judgment against the homeowner. If the HOA cannot recover "the full amount of the assessments owed by execution or garnishment," then it is free to proceed with foreclosure. Sounds great; right? Homeowners cannot lose their home right away because the HOA or condominium association must first take you to court, get a money judgment, and then try to collect that money judgment.
So what's the problem with this? Fees, for starters. Those money judgments come at a substantial cost and, you, the homeowner, are the one who is expected to pay for them. All of them. Then there's the ambiguity that the new statute creates. If your HOA gets a money judgment against you for $1,000.00 in assessments and $2,500.00 in fees and costs, that's $3,500.00 that you have to pay. If you don't have $3,500.00, does this mean that the HOA can proceed to foreclosure?
There's also a problem with the amounts. The lawyers who prepare these money judgments for the HOA often contain "blank check" language purporting to award the HOAs with all future costs and fees incurred collecting the money judgment. This means that the $3,500.00 judgment easily could become $5,000.00 or more. Sadly, this is often done without a court ever looking at any of these additional fees or the HOA even asking for permission to collect them. Quite simply, it becomes impossible to pay off the money judgment.
Then there's the biggest question of all -- what is the amount that you have to pay to avoid foreclosure? Is it the $1,000.00? Is if the $3,500.00? What if you paid $500? What is the new amount you have to pay? You can bet the bank (and you may have to) that the HOA will argue that, to avoid foreclosure, you have to pay not just the $1,000.00 but the entire amount of the prior judgment. They'll wrap the money judgment into the new foreclosure lawsuit.
The bottom line is that this new legislation benefits the HOA lawyers. It gives them the power to charge virtually unlimited fees. At best, this proposed bill creates further ambiguities and problems. At worst, it codifies a system that is already in place designed to run up attorneys' fees on behalf of an HOA to make it difficult, if not impossible, for Arizona homeowners to catch up once they fall behind.
If Legislators wanted to fix the problem, one solution is an easy one -- clarify that homeowners can avoid foreclosure, at any time (before or after a lawsuit is filed), simply by paying the amount of the unpaid assessments. All too often, homeowners are paying thousands of dollars to pay these unpaid assessments only to find that the attorneys representing the HOAs refuse to dismiss the foreclosure lawsuits because the homeowners won't pay the attorneys' fees and costs that have not yet been (and may not be) awarded.