A new bill proposed in the Arizona Senate this week could speed up the timeline for when homeowners associations (HOA) could foreclose on homeowners who become delinquent in their HOA payments.
Senate Bill 1080, proposed by Sen. John Kavanagh (R-Fountain Hills) would allow for HOA foreclosures after a six-month period, with no minimum debt. Current Arizona law allows HOAs to foreclose on member homes if their dues fall more than a year behind or amount to more than $1,200. You can read the text of the proposed legislation by clicking here.
As quoted by AZ Central, Sen. Kavanaugh said, “Tell a landlord that not paying him for six months isn't a big deal. It is a big deal.”
DS News reached out to attorney Robert W. Norman, Jr. of Houser & Allison, APC to get a legal perspective on the proposed bill. Norman told DS News:
Speeding up the HOA judicial foreclosure process will presumably lead to more HOA foreclosures. This could negatively impact lenders and servicers through increased monitoring costs and more second-position liens being wiped out. Even though an HOA lien is subordinate to a ‘recorded first mortgage’ by statute, more HOA foreclosures could result in increased monitoring costs to ensure HOAs comply with the statute. This could mean, for example, entering an appearance in the HOA foreclosure action to ensure the judgment ultimately entered is consistent with the law. As for second-position lienholders, more HOA foreclosures will force lenders and servicers to redeem more often or let the foreclosure proceed knowing it will wipe out their security interest.
Dennis Legere of the Arizona Homeowners Coalition is strongly opposed to the proposed bill, and has been fighting for homeowner protections against HOAs in the Arizona legislature for several years. He called the bill “dangerous” and told AZ Central that “(foreclosure) should be the absolute last resort, not the first.”
Sen. Kavanaugh on Tuesday told the Arizona Republic that he will amend the bill so that it only applies to “smaller HOAs,” but did not specify what would constitute a “smaller” HOA. When asked about it, he posited an example of a HOA consisting of five homeowners. “If you've got five units and one stops paying, it creates a hardship for the other four," Sen. Kavanaugh said.
According to a 2017 Arizona Republic investigation, HOAs began foreclosure actions on more than 3,000 Phoenix-area homeowners since 2015.