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Families' homes sold out from under them by HOAs due to massive 'gray area': 'Someone else owned the house'

"I want you to know your house has been foreclosed."

“I want you to know your house has been foreclosed.”

Photo Credit: iStock

Some families face eviction as homeowners associations sell their homes right out from under them, despite moves by Colorado to limit it, Bloomberg reports.

One of the affected families was the Mendozas of Denver. They had a home in the Green Valley Ranch neighborhood, where they'd lived for seven years. Not only had they never missed a payment on the house, but Bloomberg reports that the home was nearly paid off.

Imagine their surprise when they received a voicemail saying, "I want you to know your house has been foreclosed." Their $580,000 home had been auctioned off for a mere $85,000, all without their knowledge.

"We realized it was actually true: Someone else owned the house," Naomi Mendoza, the adult daughter of homeowners Jose and Lupita, told Bloomberg.

It works like this: If any home violates an HOA's rules, in even the most petty way, the HOA can issue a fine. Miss paying a fine — or owe the HOA money for any other reason, such as failing to pay dues — and the HOA can place a lien on the home. Once there is a lien, the HOA can foreclose, and the home can be sold at auction for much, much less than its actual value. The HOA isn't even required to notify the homeowners of the proceedings.

At least, that's how it used to work, Bloomberg says. In Aug. 2022, Colorado passed HB 22-1137, which prevents foreclosures by HOAs in cases when the debt came from HOA fines. So the Mendozas, who were cited by the Master Homeowners Association for Green Valley Ranch for oil-stained pavement and a dead tree, would have been safe.

However, the Mendozas fell into a "gray area": The foreclosure was filed before HB 22-1137 passed but executed after it took effect, Bloomberg explains. That makes them one of at least 14 families in the Green Valley Ranch community that appear to have had their cases pushed through by the litigious HOA just ahead of the new legislation.

What's worse, almost a quarter of the United States population lives in HOAs, Bloomberg reports — yet there's no national regulation of HOA fines, and most states don't even have a specific office to address HOA issues. However, some conflicts can be sorted out by individual residents who change rules within their HOAs.

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