Yes, HOA Can Sell Property for Delinquent Fees
By Jennifer Felten
Howard Rich purchased a single-family residence at an execution sale. The execution sale was conducted to satisfy a judgment against Yung-Shen Steven Lee. Rich was a third-party purchaser. The plaintiff and judgement creditor was Spyglass Hill Community Association, the HOA which managed the residence where Lee lived. After the sale, the trial court granted Lee’s motion to vacate the judgement on the ground it had been obtained by the HOA through fraud. The court also granted Lee’s motion for restitution and cancelled the sheriff’s deed to Rich. Rich appealed the court’s ruling. The appellate court reversed the order granting Lee’s motion for restitution and cancellation of the sheriff’s deed of sale.
The facts of the case, as detailed by the court, indicate that Lee purchased a single-family home in Corona del Mar, CA in early 1991. The property was part of the HOA at time of purchase. In 2007, Lee ceased paying the HOA assessments. Over the next two years, the HOA sent Lee notices of delinquency, intent to record a lien, and lien recordation. Lee did not dispute receiving those notices. By May of 2009, Lee owned a total delinquent amount to the HOA of nearly $8,000.00.
In May, 2009, the HOA filed a lawsuit against Lee for foreclosure of the assessment lien. Between June, 2009 and October, 2009, the HOA made 24 attempts at personal service to Lee to serve process by notice and acknowledgement. Lee refused to acknowledge he was home and refused to open or answer the door. By November of 2009, the HOA filed an ex parte application for publication of summons, which included a declaration from a registered process server. In June 2010, the HOA obtained, be default, a judgment of foreclosure of the assessment lien against Lee. The notice of entry of judgement was served on Lee by mail. In October 2010, the HOA obtained a writ of sale issued against Lee. In June 2011, the Orange County Sheriff’s Office posted a notice the property would be sold at auction to the highest bidder on July 24, 2011.
Rich learned of the property auction via the sheriff’s posting. He and four other bidders attend the auction, where Rich had the winning bid of $210,000. Rich paid the mandatory amount. In November, 2011, Rich received the sheriff’s deed to the property, with no action by Lee. Rich then served an unlawful detainer in an attempt to evict Lee from the property. Rich obtained an unlawful detainer judgement by default against Lee as Lee vacated the property, but only after destroying portions of it.
In February of 2012, Lee filed a motion to set aside and vacate the default judgment obtained by the HOA because he never received the summons. The trail court granted Lee’s motion. However, Rich was not a party to this ruling and was not notified of it. Once Lee’s motion was granted, he filed a new motion for restitution and to cancel the sheriff’s deed to Rich. The trial court granted Lee’s new motion, cancelling the sheriff’s deed, but then ordered restitution be made to Rich.
Rich appealed the decision. The appellate court reversed the Trial Court’s decision based upon the 1982 Enforcement of Judgments Law (EJL) Code of Civil Procedure section 680.010 et seq. Section 701.680(a)(1)(c) states “a sale of property pursuant to this article is absolute and shall not be set aside for any reason.” There were many other factors for the reversal, including Rich was not fraudulent in his actions, did not have any connection to the HOA, was one of five bidders at the auction, and did not try to manipulate the system. The record shows, to the contrary, that Lee manipulated the system, avoided service, knew of the default judgment and foreclosure sale, avoided service of Rich’s unlawful detainer complaint, and damaged the property before vacating it.
Jennifer Felten, Esq., Relaw Ms. Felten specializes in representing both individuals and legal entities, providing representation and guidance on a variety of real estate related matters. Relaw APC 699 Hampshire Road, Suite 105 Westlake Village, CA 91361 US Phone: (805) 265-1031 or email her at: firstname.lastname@example.org
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