Writing on the Hindman-Sanchez blog (Colorado) in 2011, attorney Sanchez asks, “Is Foreclosure the Right Option?” She offers 3 options: 1) just lien the property and wait, 2) get a money judgment on the debt owed and garnish money source, and 3) foreclose. Sanchez answers that option 1 is not quick; option 2 will not work if there is no cash available; so that leaves option 3, foreclose on the house.
However, working on behalf of the HOA and its supposed survival concerns, Sanchez fails to address the practical matter of 1) not enough equity in the home to for the HOA to collect its debt after the mortgage is paid off, or assumed, and 2) the moral and ethical question of a discriminatory, unethical, and inequitable option that amounts to a cruel and unusual punishment. It affects only those who have paid their mortgage and assessments obligations over many years.
And remember, the HOA has not advanced any hard cash as a bank or lender to warrant a special foreclosure law, but is functioning as a state entity collecting on the failure to pay taxes. Nor has it performed any services to warrant special treatment under a mechanics lien analogy. Its services have been performed on behalf of the fictional but legal and separate person, the HOA.
From a broader aspect on the nature of the “contract” between the homeowner and the HOA, the homeowner was not told that buying into the HOA corporation is like buying into a closely held business that has limited marketability (ease of selling out, which amounts to selling his home), and whose source of additional funds is very, very limited – increased assessments, special assessments, and obtaining a bank loan if possible. That’s the bargain the homeowner made when he bought his home. That is the hidden downside of HOA corporations kept hidden by the HOA, the developer, the real estate agent and the consumer protection agency, if any.
The use of foreclosure focuses the members’ attention to the other guy and not on the nature of the contract. It is an irrational attempt by an HOA attorney to “get blood from a turnip,” which after all, is just what one would expect when dealing with “deadbeats.” It serves to intimidate and punish homeowners by taking away the homeowner’s home, leaving him nothing.
Sanchez ignores the reality of the present economic situation, which she admits to. She speaks, however, of foreclosure as a “necessary tool” to punish and to intimidate.
While associations have other options available, foreclosure is a powerful and necessary tool in the association’s collection efforts arsenal. People take notice when there [sic] property is being foreclosed. Foreclosure may motivate those who have not been making assessments to bring their account current. More often than not once a delinquent homeowner gets notice of a pending foreclosure on their property, they make some type of payment arrangement or refinance.
If HOA covenants and statutes that allow the HOA to take a member’s home or money based on an HOA fine was held to be an unconstitutional punishment or penalty[i], so must foreclosure statutes be held as an unconstitutional preemption of government power. The argument that foreclosure is just a legal collection method and not a punishment falsely states reality.
(Loura Sanchez and Hindman are Colorado attorney members of CAI and members of its College of Community Associations Lawyers (CCAL)).
[i]In Unit Owners Association v. Gilman, 292 S.E.2d 378 (1982), the Virginia Supreme Court heldthat a fine was “A pecuniary punishment imposed by lawful tribunal upon person convicted of crime or misdemeanor. A pecuniary penalty. It may include a forfeiture . . .” and that “The imposition of a fine is a governmental power. The sovereign cannot be preempted of this power, and the power cannot be delegated or exercised other than in accordance with the provisions of the Constitutions of the United States and of Virginia. Neither can a fine be imposed disguised as an assessment.”