Home rule

Courts issue two defeats to powerful homeowners associations. Governor signs reform legislation.

See SN&R’s prior coverage of this story here.Read the text and analyses of both bills, A.B. 1098 and S.B. 137, at www.leginfo.ca.gov/bilinfo.html.Courts issue two defeats to powerful homeowners associations. But reform is in limbo.

A disabled man whose home was sold out from under him by his homeowners association will get his property back. Another man who was denied access to his homeowners association’s financial records is a step closer to knowing how his $126 in monthly dues is being spent. Two legal victories for homeowners in their fights against their homeowners associations.

On Monday, Governor Arnold Schwarzenegger signed three new laws that will affect the other 9 million Californians who live in these “residential common-interest developments.” However, critics say one of those bills had its teeth sawed off along the way, and another could prove too costly for homeowners associations.

In August, SN&R wrote about Don Chaney, a 75-year-old retiree who had sought financial records from the Sun City Roseville Community Association. After being denied time and again access to detailed records, such as receipts and bills of sale, he sued in small-claims court. (See “Rockin’ the suburbs,” SN&R News, August 11.)

Placer County Superior Court Judge Joseph W. O’Flaherty ruled last month in Chaney’s favor. He ordered the Sun City association to produce the records Chaney seeks and fined the association $500.

Marjorie Murray, a lobbyist for the California Alliance for Retired Americans who has led efforts to write new laws protecting homeowners, was cautious about the small-claims-court ruling because it did not give the association a deadline to comply.

A bill authored by Assemblyman Dave Jones, D-Sacramento, that outlines more clearly what kind of documents homeowners associations would be required to cough up, received a unanimous vote from the Assembly at the end of the legislative session. Jones recently used a press conference to urge the governor to sign Assembly Bill 1098 into law.

“These homeowners-association boards work like many governments,” Jones said, arguing that they should be open and accountable the way a city council or board of supervisors is. “In a lot of ways, they have more power than local governments.”

In a cooperative effort with Republican Senator Jim Battin, Jones tied his bill to Battin’s Senate Bill 61, which also deals with common-interest developments. That meant that if Schwarzenegger had vetoed one of the bills, the other would have died along with it. The bills will take effect in July.

At least one group, the Executive Council of Homeowners (ECHO), remains opposed to A.B. 1098, said Sandra Bonato, an attorney who lobbies for ECHO.

“The approach that Assemblyman Jones has taken with the legislation could hurt associations financially, increase liability and make volunteer directors less willing to serve,” Bonato said.

She said the homeowners associations could have to spend considerable amounts of time and money to properly comply with the law.

“The concern is whether the bill, as written, is feasible,” Bonato said.

Murray, who worked to see the bill passed, however, said A.B. 1098 provides good access to financial records and called it “an important piece of consumer legislation.”

Senate Bill 137, Murray said, is another story.

The law, authored by Senator Denise Ducheny, D-San Diego, aimed to prevent homeowners from losing their homes for tiny sums of money.

Willard Harrington, a 61-year-old Magalia man, had his house sold out from under him by his homeowners association because he neglected to pay a $123 annual assessment. An attorney who worked on his case, Joe Earley, said Harrington has a reading disability and therefore did not get adequate notice of the late payment. His $68,000 home was sold for just $3,134 to collect on the debt.

Recently, the Paradise Pines Property Owners Association agreed to reverse the foreclosure and give Harrington back the title to his home.

But because the case was settled outside a courtroom, it will not affect how other homeowners associations in the state deal with foreclosures.

Murray says that Ducheny’s bill, as now written, lacks teeth and would not have changed Harrington’s situation.

“Senate Bill 137 still does not solve the foreclosure problem,” Murray said.

Bonato said that ECHO and other groups proposed a “right of redemption” addition to S.B. 137, which would protect homeowners by allowing them the ability to reverse a disclosure sale within a certain timeframe.