In this case, a homeowners association (Association) filed suit against lenders holding liens on a homeowners property seeking to recover unpaid HOA assessments owed by the homeowner. Association sought to impose liability on the lenders contending that they were strategically delaying foreclosing on the defaulting homeowners residence to allow the real estate market to recover without paying for the benefits that were being provided by Association for such things as insurance, maintenance, and utilities. By not paying for the assessments relating to the subject property and receiving the benefits, Association contended that the lenders were unjustly enriched.
In rejecting the Associations claims against the lenders, the Court held that lenders are not owners that are responsible for the payment of Associations assessments, and lenders are entitled to foreclose if and when they feel it is appropriate. The Court further held that the lenders were protected by the California lien priority statutes which would allow Association to foreclose its junior lien on the defaulting owners property without waiting for senior lienholders to foreclose on their liens.
Additionally, because Associations Declaration authorized Association to sue the homeowner for unpaid HOA assessments, Association had the right to sue the homeowner, or the homeowners estate since the homeowner had died, for the unpaid HOA assessments without foreclosing on the owners interest in the subject property. In deciding not to seek collection of the unpaid assessments from either the owners estate, or through a foreclosure of its junior lien on the property, Association had made the same type of strategic decisions that it accused the bank of making.
UNPUBLISHED California Appellate Court decision (September 15, 2017).
See case decision: Palms__Sands_Owners_Ass’n_Inc._v._Bank_of_Am._N.A._(Cal._App._2017)1[4]