She told Jose that the house his family had been living in for seven years — the house that he said he had never missed a mortgage payment on, and that he was almost done paying off entirely — had been sold. She said she was calling on behalf of the home’s new owners.
Jose thought it was a scam. But Lupita, Jose’s ex-wife who still lived in the home with their two children, had gotten a similar strange call that week. Conversations with the city and their realtor confirmed what felt unimaginable.
“We realized it was actually true: Someone else owned the house,” said Naomi Mendoza, Jose and Lupita’s 20-year-old daughter. “We didn’t get any notices that our house was going to go on foreclosure,” she said. “We would have done something to prevent all this.”
The Mendozas’ was the latest in a string of foreclosures initiated last year by the homeowners’ association that governed their neighborhood.
Their problems had started with a series of $100 to $400 charges for what seemed to them like minor violations — oil-stained pavement; a dead tree — and had snowballed into a debt of more than $6,600, more than half of it HOA attorneys’ fees.
They knew they were behind on payments. But they didn’t know that now, like hundreds of Coloradans before them, they would have to pay with their house.
The HOA behind this particular foreclosure process, the Master Homeowners Association for Green Valley Ranch, has developed a reputation in Denver for its litigious behavior, though it says foreclosure judgments are rare.
But the tactics are illustrative of the power wielded by homeowners associations across the US to impose escalating fines for what can appear to be capricious rules, and to enforce missed payments through tools as severe as foreclosures.
As the neighborhood model becomes an increasingly common byproduct of single-family homeownership in the US, not all residents know what they’re getting into.
As of 2021, around 74 million people — nearly a quarter of the US population — lived in community associations, the majority in HOAs. Their ranks have increased 20% since 2010, and are expected to keep growing, in part due to migration to Sun Belt states where new developments are often HOA-run.
According to the Community Associations Institute, the largest lobbying arm in the industry, 65% of single-family homes built in 2020 were in community association-governed developments.
Within their borders, HOAs create their own regulations, meant to keep behavior polite, aesthetics consistent, and property values high. They also collect the dues and assessments that keep the neighborhood solvent.
Elected boards of volunteers often outsource the messier, time-consuming work of enforcement to management companies and lawyers. That’s where foreclosures can come into play: When homeowners fall behind on payments, they can turn to the courts to collect.
There is no national regulation governing how HOAs can set fines, calculate assessments or enforce their payments. And although as of 2018 at least six states including Colorado have a community association ombudsman or resource center, the majority do not have offices that address HOA issues.
In the absence of a government authority, complaints and disagreements typically get resolved through lawsuits.
Amid a patchwork of regulation, only a handful of states prevent HOAs from foreclosing on residents if the only debts they owe stem from fines for violating neighborhood rules, like the Mendozas’ oil stains.
“The problem with homeowner association legislation is basically — depending on which metaphor you like — it’s either Whac-a-Mole, or it’s like putting out small brush fires,” said Bruce Flammey, a lawyer that specializes in HOA disputes based in Nevada.
Colorado’s road to regulation started last year, after a series of resident complaints that Denver HOAs — including Green Valley Ranch — were taking advantage of a lack of oversight to saddle homeowners with fines and associated legal fees, and pushing them out of their homes with little warning.
In response, the state legislature started taking a closer look at the growing industry’s practices, and pushed through a package of homeowners association reforms meant to increase transparency and accountability around the HOA foreclosure process.
Representatives at Green Valley Ranch directed questions to their attorney, Damien Bielli, who declined to comment on specific matters related to the HOA.
When their foreclosure practices were under scrutiny in March 2022, the Master Homeowners Association for Green Valley Ranch issued a statement saying that their foreclosure rate represents less than 1% of their population, “which is similar to or below other HOAs in Colorado.”
Bielli said that HOAs need the option to pursue legal action to force residents to fix violations, but that foreclosure proceedings are rare.
“Our firm — most other firms that I’m aware of — they don’t go straight to foreclosure,” he said. “It’s about recovering the funds that were expended, not trying to put an owner out of their house.”
Since HB 22-1137 was signed last August, HOA-initiated foreclosures have slowed in the state, a March 2023 analysis by ProPublica and Rocky Mountain PBS showed.
But a flurry of filings submitted right before the law took effect are now working their way through the system. After Aug. 10, 2022, at least 14 Green Valley Ranch homes, including the Mendozas’, were advertised for foreclosure sale on a local website.
Kevin Patterson, a Denver-based senior organizer with the Redress Movement, says many foreclosures had originated with debts over unpaid fines alone — something the new legislation barred — and that not everyone was aware they were being foreclosed upon, indicating a breakdown in the notification process.
Patterson, who is now working with residents to reclaim their homes, says that most of the Green Valley Ranchers he’s met who have been foreclosed upon recently are working-class homeowners of color, many of whom speak English as a second language.
“If folks — particularly folks of color — are finally able to get a home, find a community that’s affordable for them to live, and then that’s taken away from them because of the HOAs and their discretion on how they’re able to fine them, that level of displacement is just so devastating,” said Patterson, whose organization advocates for policies to address racial segregation in housing.
The lawmaker who introduced Colorado’s HOA legislation, Naquetta Ricks, says non-compliant foreclosures that were filed before the legislation passed but executed after likely happened within a legal “grey area.”
Still, she says she is committed to reexamining the law next legislative session in response to both resident and HOA concerns.
“HB 1137 was about trying to balance that power between the HOA and homeowners,” said Ricks. “There’s many things more that we still need to look at.”
Muriel Williams-Thompson, the president of Colorado’s chapter of the National Association of Real Estate Brokers, put it more bluntly, calling the legislation a “Band-Aid on a gunshot wound.”
“Mandatory regulation on homeowners’ associations — just like the rest of the real estate industry — it needs to happen,” she said. “It needs to happen, like yesterday.”
There is no national database of foreclosures initiated by HOAs, but a recent Colorado Sun investigation found that since 2018, HOAs in the state have filed about 3,000 foreclosures, which resulted in sales at auction around 8% of the time.
The Community Associations Institute, the industry’s national lobbying arm, maintains that foreclosure is generally seen as a last resort, and that the notification failures that caught attention in Colorado were outliers.
“It’s very rare that a community association will go to foreclosure. It’s expensive, it is not in the best interest of neighbors serving neighbors,” said Dawn Bauman, the organization’s senior vice president of government affairs. “But sometimes it’s the only option to create fairness and equity in the community.”
That depends on what definition of equity you’re working with. The Mendozas had bought their property in 2016 for $324,000.
By 2023 it was worth an estimated $580,000, maybe more if you counted the renovations Jose’s contracting company had done. At the foreclosure auction, the home was sold out from under them for $85,000.
The Mendoza family was drawn to Green Valley Ranch in 2016 because it was quiet and clean, said Lupita. Established in 1984, the HOA had by then become a highly diverse neighborhood in Northeast Denver that offered families and first-time homeowners the opportunity to start building wealth, equity and housing stability even as home prices in the rest of the city ballooned.
The HOA management revealed itself as pesky quickly, Jose said, complaining that his garage doors were painted two different colors a few days after the family moved in. (The paint job was left that way by the previous owner, he said.)
But otherwise, the Mendozas didn’t worry too much about the decision to join South Green Valley Ranch, which today contains about 4,600 homes.
Odds were good that any new house they chose to move into would be in a homeowners’ association, anyway. Colorado has among the highest community association membership rates in the country, with around 46% of the population living in its more than 11,000 condos, cooperatives and HOAs.
“You have a housing market where almost all the new housing is in condos and HOAs,” said Evan McKenzie, a legal scholar and the author of Privatopia: Homeowner Associations and the Rise of Residential Private Government. “And then you say, ‘Well, look, people chose it, the market determined this.’ Well, there was nothing else to choose from!”
Indeed, some homeowners pinpoint a neighborhood first, and find out about the suggested — or mandated — HOA membership later, while others seek out HOA-led communities for the amenities or the dense suburban living they can offer.
These amenities come with extra conditions for homeowners. HOAs have a reputation for sometimes imposing obscure and specific aesthetic rules — like the garage door paint colors in Jose’s house — and then fining people who haven’t complied.
Williams-Thompson, the Denver-based real estate agent, says she now makes it a point to tell prospective homebuyers to participate in their monthly HOA meetings, and warns them never to fall behind on payments.
Because if a homeowner racks up enough debt to their HOA for failing to pay dues, fees or special assessments — or fines, in places where that’s still legal — the board is typically able to file a lien on the property.
And after a lien is filed, a home can move into foreclosure and then be sold at auction to recover the debts.
“What surprised everyone is the fact that if I am fined by my homeowners association, and I’m current on my mortgage, I’m current on my taxes, I’m current on everything else … I can really lose the roof over my head, I can lose my home,” said Williams-Thompson.
Bielli, the Colorado HOA lawyer, said that however arbitrary HOA rules may seem, they are tough to change, and boards need to enforce them or risk becoming the subject of lawsuits from other homeowners.
HOA rules create “a contract that flows both ways,” he said. “If the board does not do the things that the contract says, the board opens itself up to liability.”
The legal process offers HOAs adequate leverage to ensure that homeowners pay their fair share for amenities and follow community rules, said the Community Associations Institute’s Bauman.
“There needs to be an incentive to participate, just like there is paying your taxes at the local level,” she said. “If one neighbor decides not to pay their local taxes, the locality can put a lien on their house. The same thing.”
Some states allow HOAs even more sweeping collection privileges than local governments, however. Even after the new protections established through legislation, Colorado is one of about 20 states where if residents pass a certain debt threshold, HOAs can file so-called “super-liens,” which can get priority over other liens or loans on the property, including a first mortgage.
Super-liens are meant to give HOAs first dibs on the proceeds from a foreclosure sale, a policy that Bauman says protects HOA residents from paying for the mistakes of delinquent neighbors.
During the 2008 financial crisis, for example, it ensured that HOAs that were owed money were paid back before the bank if homeowners defaulted on their mortgages.
But in states like Nevada, New Jersey and Pennsylvania, an HOA super-lien can in extreme cases also wipe out a first mortgage entirely (though often the mortgage lender pays off the lien first).
“That’s powerful. That’s a big deal,” says Amy Loftsgordon, an attorney who writes about HOA foreclosure law for NOLO.com, a publisher of do-it-yourself legal guides. “In super-lien states, HOAs are sometimes even more motivated to foreclose.”
When an HOA foreclosure goes through, the home only needs to sell for enough money to cover the cost of the HOA debt. That means the home can be bought at auction for much less than it’s worth, and a homeowner can lose all of their equity. That’s how the Mendozas’ $580,000 property was taken off their hands for only $85,000.
The Colorado Sun investigation showed that homes selling at foreclosure sale for a “fraction of their value” is a pattern: At least 100 HOA-foreclosed homes have been auctioned off for $60,000 or less since 2018.
While McKenzie says “it’s hard to argue with the fact that associations do need to collect their assessments,” these super-lien policies make it easier for HOAs to get paid out through the foreclosure process, while leaving homeowners with nothing.
“You get into this problem, where you’ve made it so easy for them to get paid out of this,” he says, “that they jump on the opportunity to initiate foreclosure themselves.”
HOA critics say the real winners in these arrangements are the attorneys who are tasked with pursuing the collection and, later, litigation. Legal teams typically charge hourly rates for their services, and HOAs can pass those fees onto homeowners, sometimes resulting in eye-popping ledgers. In Colorado, HOA law has become its own cottage industry.
A March ProPublica and Rocky Mountain PBS investigation found that just seven firms were responsible for the bulk of HOA foreclosures in Colorado, with each handling at least 100 cases – and often more – between January 2018 and February 2022.
Doug Marsh, a Denver-based commercial litigation attorney who helped advocate for the state’s recent HOA reform, says there are few “structural incentives to make extra effort to bring residents up to speed.”
Several years ago, Marsh says an issue with an autopay system meant he fell behind on a couple rounds of $50 quarterly dues to his Colorado HOA. He only found out when he was served with a lawsuit.
By the time he was writing checks in the HOA office, legal fees had helped turn his error into a $3,000-plus bill.
He had the money, so he paid to avoid a prolonged legal hassle. Now serving as president for his own HOA board, he says that however unjust residents feel the charges are, those who can afford it are better off paying rather than arguing over HOA rules.
“This is like the thermonuclear warfare from the movie WarGames: To play is to lose,” he said, referring to collections disputes with litigious HOAs. “Do not play this game. Get out of there. I’ll tell that to every person I can find.”
Monica Villela was on her way to pick up her kids at school last February when she noticed the man in the driveway. He introduced himself as the new owner of her house.
The Villelas had been up to date on their mortgage, but not on their HOA fines, which totaled around $8,000. The family had four kids and one income, and paying the fines off wasn’t their first priority.
Lawyers’ fees bloated the bill, which had started with charges for dead tree branches, and trash cans lingering curbside.
Unbeknownst to Villela, the HOA had put her home up for foreclosure sale, and Christophe Attard, a real estate investor had bought it. (When reached for comment, Attard said he didn’t talk to the press and deferred to Villela.)
Attard offered to let her stay in the house until the end of the school year, if she wanted to pay him rent. Later he offered to sell her the house back, Villela said, for what he paid for it: around $25,000.
Villela turned out to be part of the wave of foreclosures that first put Green Valley Ranch’s foreclosure practices on the map. A Denverite investigation last year showed that in 2021, the HOA was behind more than half of cases of HOAs suing residents citywide, and that it had approved at least 60 foreclosures in the first three months of 2022.
In the statement issued last March, the Green Valley Ranch board said: “The fact of a foreclosure filing does not mean someone loses their home. A majority of the cases are in active payment plans or closed without further legal action.”
The phenomenon is not limited to Green Valley Ranch, nor to Colorado. But in some ways, Green Valley Ranch is unusual. For one thing, it doesn’t perform many of the typical HOA functions.
According to the Colorado Sentinel, in 2007 it had forged an agreement with a special Metro District, which covered maintenance of common properties, and collected assessments through homeowners’ property tax bills.
That means the HOA’s primary remaining duty was to enforce its covenants – and to go after residents who didn’t follow them, said Stan Hrincevich, the president of the Colorado HOA Forum.
The Green Valley Ranch Master HOA’s financial statements reflect this focus on enforcement. According to its 2022 balance sheet, the HOA spent at least $544,000 last year on legal expenses, collections and foreclosure proceedings.
Community events cost about $12,000 in 2022, for comparison; mailbox repairs cost about $14,000. Representatives at Green Valley Ranch declined to answer questions about the HOA’s balance sheet.
The Colorado attorney general’s office launched an investigation into the HOA last year, but did not find evidence of illegal activity. The office declined to comment on the now-closed investigation.
But activists from the anti-segregation organization, the Redress Movement, are continuing to interrogate its practices, drawing a connection between HOA foreclosures’ impact on homeowners of color and the HOA industry’s century-long history of exclusion. The first HOAs showed up in the US as a tool of segregation, according to McKenzie’s book, Privatopia.
In the 1920s, the St. Louis developer Jesse Clyde Nichols pioneered not only the neighborhood association model but the idea of applying racially restrictive covenants to entire master-planned communities.
After residential segregation by race was banned, McKenzie traced how HOAs boundaries and covenants perpetuated similar class and race divides, even as their makeup has become more diverse.
Understanding how and where these policies are impacting homeowners is tricky because of a dearth of public data on the industry’s practices. Stacie Gilmore, a Denver city councilmember who represents Green Valley Ranch homeowners, is working with the city’s Office of Housing Stability to commission a tool that would get more data on the impact of HOA foreclosures on communities of color.
Two generations of Mendozas huddled around their kitchen island on a recent blustery evening, trying to piece together what they had found out since those March phone calls informing them of the impending foreclosure.
They were trying to make sense of two losses at once, after the sudden death of Lupita and Jose’s daughter-in-law, Carla. Above the fireplace mantle hung a sketch of Carla, a 24-year-old biology student who had made reclaiming the family’s home her mission this past spring.
“I guess it’s been a hard start of the year. It was going pretty good. And then it’s kind of been going downhill from that,” said Naomi. “We were all focusing on the house for a minute. And then we lost her.” But Naomi says her memory drives them.
Their lawyer, Ross Ziev, is helping them mount a challenge against the HOA, arguing that the state’s new HOA laws should have prevented the foreclosure sale from happening in the first place.
The law, which took effect on Aug. 10, 2022, instituted a range of reforms, including barring foreclosures like the Mendozas’ that originate solely from fines. It also capped the maximum fine an HOA could charge for any violation at $500, and required HOAs to repeatedly notify delinquent homeowners before taking action.
A lawyer for Green Valley Ranch filed a motion for a default judgment on the Mendozas’ home two days before the law took effect, part of the flurry of filings that got in under the wire. But the court didn’t grant the foreclosure until after Aug. 10.
Green Valley Ranch’s lawyer also says in legal filings that the HOA had made three attempts to inform Jose of the foreclosure, as required by the law, but he said he received no such communication.
Though the board knew to send the bills for his HOA fines to his current address, Jose says he learned from legal filings that they tried to serve him at the house he no longer lives in.
(Aziliah Lopez-Nathan, who originally called the family, told Bloomberg CityLab that the foreclosure buyer she represented had backed out of the purchase; Ziev says the buyers had not relinquished the property.) Bielli declined to comment on the pending case.
As the Mendozas wait for their hearing, debate around the future of the state bill grows louder.
The Community Associations Institute is pushing for further clarifications to the law in the next session. Bauman says since its passage, HOAs have had to spend more on certified mail, postage and legal counsel associated with the notification process.
“These are daily practices that are having to change because there is this unfounded claim that homeowners’ associations are overwhelmingly foreclosing on people,” she said.
Those who advocated for the original bill also see room for improvement. Hrincevich, the president of the Colorado HOA forum, says that because the state law was crafted with the particular concerns about Green Valley Ranch in mind, it missed the deeper issues that plague HOAs nationwide involving out-of-control legal bills and the circumstances surrounding foreclosures that don’t stem from fines alone.
He advocates for capping attorneys’ fees, introducing an out-of-court mediation process for HOA residents, and setting a floor on how little a home can be sold for.
“I think we’ve stopped some of it, but it’s like a balloon,” said Gilmore, the Denver city councilmember. “It will blow another way until you shore that up. And that’s really the work that we’re doing now.”
After the Colorado Sun’s investigation into HOA foreclosures, Governor Jared Polis issued a statement urging HOAs “to be more flexible” and saying the legislature had to do more to “protect people from being ripped off.”
Elina Rodriguez, the manager of policy advocacy at the Community Economic Defense Project, which works with Denver-area residents facing economic hardship, implores lawmakers to also focus on supporting those whose foreclosures preceded the law, “because they have not been made whole.”
The organization is currently working to help Villela buy back her home. As they negotiate a deal, Villela continues to live as a squatter in what was once her home.
She sent her kids to live at her mother-in-law’s last year, so they don’t have to live with the same fear of eviction she does.
After school they have dinner together in the nearly-empty house, which they’d cleared of most furniture in a panic. Then the kids go back to their grandmother’s, where they sleep in the basement. Villela sleeps alone.
“I want to keep fighting,” she said. “I say I’m about to buy a chain and lock my hands to the door.”