Owner Equity Protection in Homeowners' Association Foreclosure Sales

Prior to taking enforcement actions to recover money owed to a unit owners' association (HOA) and related collection costs or attorney fees through the foreclosure of an association lien , the bill requires the HOA to be in compliance with HOA lien or foreclosure law and the HOA's declaration, bylaws, articles, and rules and regulations.

An HOA's written policy concerning the collection of unpaid assessments must require the notice of deficiency sent to a unit owner to include:

• An advisement that the unit owner may request a copy of the HOA's ledger verifying the amount owed, which copy of the ledger shall be sent to the unit owner no later than 7 business days after the request; and
• An advisement that free information relating to the HOA's collection of assessments and its ability to foreclose and force the sale of a unit is available online through the HOA information and resource center and that information relating to credit counseling from the federal department of housing and urban development is available through a link on the department of local affairs' website; and
• An advisement that the failure to pay the assessments could result in the sale of the unit at auction, which could result in the unit owner losing some or all of the unit owner's equity.

The bill requires the division of real estate in the department of regulatory agencies (division) to present data to certain committees of the general assembly concerning the number of requests the HOA information and resource center receives annually concerning credit counseling, the collection of assessments, or foreclosure actions.

Before initiating a legal action to foreclose an HOA lien, the HOA must send written and electronic notices to the unit owner stating that the unit owner has the right to participate in credit counseling at the unit owner's expense in order to understand the consequences of foreclosure and that information about credit counseling may be found on through the HOA information and resource center's website center or through a link to the federal department of housing and urban development on the department of local affairs' website .

As part of an HOA's annual registration (annual registration) with the director of the division of real estate in the department of regulatory agencies (division) , the HOA shall submit information concerning:

• The number of unit owners that were, at any time during the preceding 12-month period, 3 or more or 6 or more calendar months delinquent in the payment of an annual assessment or special assessment;
• The number of judgments obtained against unit owners;
• The number of payment plans entered into with unit owners; and
• The number of foreclosure actions filed by the HOA.

The HOA information officer in the division shall include as part of the annual HOA information and resource center report the information required to be submitted by the HOAs in their annual registration concerning the number of delinquencies, judgments, payment plans, and foreclosures.

If an HOA forecloses an HOA priority lien against a unit owner's home (unit) in an HOA-governed community, and the unit is sold at a sheriff's auction, the bill requires the HOA to make a minimum bid for the unit that is not less than 80% of the fair market value of the unit, as determined by an independent appraisal or other methods described in the bill. The bill amends the foreclosure sale statute to conform to the minimum bid requirement required in the bill. At any time after an HOA files an action for foreclosure of the unit association lien on a unit, but prior to the date of auction, the unit owner may file a motion with the court to stay the auction of the unit to allow the unit owner to sell the unit at fair market value or alternate value as determined by the court. The court's order is in effect for 9 months after the date of the order. Proceeds from the sale will be held in escrow for the court to determine the distribution of the proceeds. No later than 5 business days after the HOA initiates legal action to foreclose a lien and sell a unit at auction, the HOA shall provide the unit owner with notice that the unit owner has a right to cure the delinquency and to file a motion with the court to stay the sale of the property at auction.

(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)

(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)