Introduced January 31, 2024 by Representative Naquetta Ricks, the proposed bill, HB24-1158, would severely hamper an HOA’s efforts to foreclose for unpaid assessments. The bill proposes that prior to turning over a delinquent account to collections or to an attorney for legal action, an HOA must send a notice to the owner that free information about collections and foreclosures may be obtained through the Department of Regulatory Agencies’ HOA Information and Resource Center. Additionally, before foreclosing on an HOA lien, the HOA must provide a notice to the owner that credit counseling is available at the owner’s expense relating to the impact of foreclosure and the options available to avoid foreclosure.
The proposed bill would also limit a court’s award of attorney fees to an HOA in a foreclosure action to $2,500.
HB24-1158 proposes to further limit who may purchase a foreclosed unit. The bill extends the current prohibition to include a prior board member, a community association management company representing the foreclosing HOA, a business entity owned by or affiliated with a community association management company, as well as employees of the HOA’s management company, or employee of the law firm representing the HOA, or such individuals’ immediate family members during a five (5) year period preceding the foreclosure.
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 would have to include at least the amount necessary to satisfy the HOA lien’s, 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 by the bill (which includes obtaining an appraisal of the fair market value for which the HOA may be reimbursed up to a maximum of $750), 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.
Furthermore, HB24-1158 requires the HOA to include the bid and calculation information in the lis pendens recorded with the county clerk and recorder. The HOA must also provide the appraisal to the owner at no charge and notify the owner that the owner may obtain an appraisal at its own expense. If the owner obtains such an appraisal, the fair market value will then be an average of the two appraisals or an amount stipulated to by the owner and the HOA.
For purposes of notice of the sale of a unit at auction, HB24-1158 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, if passed as currently written, would apply to HOA liens foreclosed on or after October 1, 2024.
We will keep you up to date on this bill through our 2024 Legislative Tracker.
If you have any questions about the newly proposed foreclosure sale bill, please contact one of our Altitude attorneys at 303-432-9999 or email us at [email protected].