No Free Ride: An Equitable Remedy to Protect Homeowner's Associations from Delayed Foresclosures

A bank can choose if and when to foreclose on a property in default. Usually, it will choose to foreclose quickly to guarantee that the property remains in the best possible condition for resale, even though foreclosure means the bank will incur the considerable financial obligation to insure and maintain the property until resale. However, a bank will often delay foreclosure, sometimes months or even years, when the property is part of a homeowner’s association since the association must continue to insure and maintain the property regardless of whether the bank or the homeowner makes any contribution to the association. The bank is able to shed its financial obligation at the expense the property’s innocent neighbors.

This Note suggests that a bank that purposely delays foreclosure on a property located in a homeowner’s association is unjustly enriched by the association when the bank knows the homeowner has also defaulted on its homeowner’s association dues. Because there is currently no recourse for the homeowner’s association under California law, this Note proposes that the legislature create a statutory remedy modeled after the theory of unjust enrichment to balance the inequitable burden that a homeowner’s association shoulders when a bank delays foreclosure.