January 06, 1991

By Ronald Campbell
Copyright © Orange County - Register

A few missed bills totaling $120 probably will force Tom Larance and his mother, Edith Anderson, from their home of 24 years.

The bills were for homeowner-association dues, and as Larrance and Anderson have learned, the bottom line on those bills is to pay or lose your home. It is a cautionary tale for the hundreds of thousands of Orange County residents who live in tracts run by homeowner associations.

Larrance, 43, an unemployed carpenter, and his elderly mother are in an unusual bind. While Southern California homeowner associations threaten hundreds of residents with foreclosure each month, foreclosure sales are rare. " I'd say in about 99 percent of the cases, the money ultimately gets collected and there's no foreclosure," said Brad Walker, an Irvine attorney who specializes in condominium law. "Make that 99.9 percent of the cases."

Westminster attorney Larry Rothman represents 600 Southern California homeowner associations. He files 250 foreclosures a month. In his 14 years in practice, he said, he has seen "no more than four or five" such sales.

Larrance and Anderson's home was sold at auction--without their knowledge, they say--for $1,057.26 in April 1983, and a long court battle has ensued. Lotterman Properties Inc., which is trying to evict them, obtained the condo by bidding the minimum amount required, including delinquent dues, penalties, interest and processing costs.

The 700-square-foot townhouse, set in a well-kept neighborhood not far from the ocean, was worth $190,000 at the time, Larrance and Anderson say in court papers. They believe it is worth $150,000 today. They have paid all but $2,700 of the mortgage principal.

Larrrance and Anderson claim in two lawsuits that they are the victims of fraud by CAMS -- a now-lefunct company that managed Surfside Homes by the Sea, where they live -- and of an illegal eviction by Lotterman Properties. Lotterman says the mother and son are the victims of their own mistakes.

California law allows homeowner associations to foreclose on members who fall behind in dues, said attorneys Rothman and Walker, who are not involved in the Larrance lawsuit

Typically the owner owes a small amount compared with the value of his or her house. As drastic as foreclosure might seem, however, associations have no good alternatives for collecting debts, Rothman said. Associations could file liens, entitling them to money when the house is sold, he said, but "that doesn't help you pay for your roof, your facilities."

They could get judgments in small-claims court, he added, "but now what? The individual says, (Try and) collect it."

Foreclosure works like this: The bill collector records a notice of delinquency, putting the debtor, credit agencies and title companies on notice that a bill is unpaid. Thirty days later if the bill is unpaid, the collector records a notice of default. This amounts to a public announcement that the property will be sold in 90 days if the bill remains unpaid. Then comes a notice of sale, followed by a public auction.

Court records say Larrance and his mother failed to pay their $40 association dues in October 1982. The delinquency grew to $120. CAMS held an auction after recording all the proper notices. But Larrance an his mother never got the notices. Sent by certified mail, the notices were returned unclaimed, court records show. Larrance said that at the time, his mother was in Florida and he was away on a job.

They said they paid their bills on time. They believe that CAMS stole their payments and reported them as delinquent. CAMS, which managed hundreds of homeowner associations, collapsed in February 1984. In August 1990, CAMS owner Jack Miller began a four-year prison term for misappropriating $1.8 million in homeowner-association funds sent to CAMS.

Miller's technique, according to court records, was to collect association dues, pay current bills and delay depositing the rest of the money.

After the notices went out, CAMS attorney Paul Bell auctioned the townhouse for the delinquent dues, penalty, interest and costs: a little more than $1,000.

Lotterman got the property, its second bargain purchase of a CAMS-managed condo in four months.

Larrance and his mother claim that Bell colluded with Lotterman. Public records show that Bell did have other dealings with Lotterman and its president, Santa Monica attorney Marilyn Kay Ward. One week before the Larrance auction, Lotterman bought an orange property and arranged for the deed to be mailed to Bell. Later, Bell represented Ward in an Orange County Municipal Court lawsuit. Bell and Ward shared post-office boxes in El Toro in 1984 and in Palo Cedro, a Shasta County town, in 1988. Neither Bell nor Ward returned phone calls seeking comment.

The foreclosure sparked a long court fight. Santa Ana attorney James E. Strachan, who has represented Lotterman since late 1988, said a lawsuit prevented Lotterman from evicting Larrance and his mother years ago.

But the battle is winding down Larrance and his mother have lost at least two attorneys for failure to pay legal bills. And they each have filed bankruptcy to delay the eviction. Larrance said that he has spent $12,000 just in the past two years and that the fight has brought him and his mother "to the point of destitution."

Strachan said he thinks it all will be over within two months. But if you'd asked me that question a year ago," he added, "I would have said two months."



Notes:
Hundreds of homes in California are routinely put into foreclosure by homeowner association lawyers when homeowners miss paying, or dispute their maintenece dues, late charges and fines.

(Boards managers and associations can make up any rules they want and then fine the homeowners) for rules violations their neighbors board members.)

Lawyers can charge thousands of dollars to collect to collect minor amounts of dues or even a $5. late charge. When homeowners seek protection from the courts, multimillion dollar Directors & Officer's Liability Insurance policies are used to subject the homeowners to scorched earth litigation.

California laws were written to allow homeowner association lawyers to seize homes and savings for lawyers fees using either nonjudicial or judicial process.