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 act requires the HOA to be in compliance with HOA lien or foreclosure laws (lien or foreclosure laws) and applicable lien or foreclosure provisions of the HOA's declaration, bylaws, articles, and rules and regulations (governing documents). If the HOA is not in compliance with the lien or foreclosure laws or the governing documents, the court may stay the foreclosure proceedings to grant the HOA reasonable time to come into compliance and shall consider the effect of the HOA's noncompliance if awarding the HOA attorney fees.

For purposes of sending notices to unit owners relating to delinquent assessments or foreclosure actions, the HOA shall periodically request from a unit owner or the unit owner's designated contact an email address, a telephone number, and a cellular number for texts.

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

• 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;
• An advisement that failure to pay a delinquent assessment could result in the HOA filing a lien and instituting foreclosure of the lien (foreclosure action) and that a foreclosure action could result in the sale of the unit at auction and the unit owner losing some or all of the unit owner's equity in the unit; and
• An advisement that free information relating to the HOA's collection of assessments and the HOA's ability to file a foreclosure action and a link to credit counseling information is available online through the HOA information and resource center (recourse center).

At least 30 days prior to initiating a foreclosure action, the HOA must send notice of the HOA's intent to foreclose the association lien, including notice that the foreclosure of the lien will result in the sale of the unit at auction, which could result in the unit owner losing all or some equity in the unit; the unit owner may obtain credit counseling prior to foreclosure; and free online information relating to foreclosure by an HOA is available through the resource center.

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.

At any time after an HOA files an action for foreclosure of the HOA's 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 list the unit for sale at fair market value or at an alternate amount determined by the court. The court's order is in effect for 9 months after the date of the order. The court may extend the 9-month stay for good cause or upon proof that the sale of the unit is imminent. Proceeds from the sale will be held in escrow for the court to determine the distribution of the sale proceeds.

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 (director), an HOA shall submit the following information, which aggregated data must be included in the resource center's annual report:

• The number of unit owners 6 or more months delinquent in the payment of assessments during the preceding 12 month period;
• 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 and other information requested by the director.
  (Note: This summary applies to this bill as enacted.)