Real Estate & Property Law

HOA Disclosure of Delinquent Accounts - Is It A Breach Of Privacy?

I got a phone call in the office the other day. The person on the other end just said (no hello, how are ya, I am, or I have a question): "Is it a breach of privacy to disclose a homeowner's debt?" I was on my way out to a meeting so I said, "It can be, I'm on my way out to a meeting, sorry, you can call back tomorrow if you want a consultation," and hung up.

(Brevity and lack of manners lends itself to brevity and lack of manners I guess, my apologies if you are out there.) If I had thought it through I would have made it clear that disclosure of private information about the debtor's particular situation is probably a breach of privacy. It is certainly a no no.

Anyway, some Boards want to disclose the names of homeowners who are delinquent; they want to post it on the mailboxes, in the common area, publish it in the newslettter, announce it on a loudspeaker from the back of a pickup truck while driving through the development, things like that. They see it as a way to "make them pay", either from embarrassment or humiliation. But it they can't pay, I think some Board members just consider that a fair trade ... a way to extract a pound of flesh. Not very humane in my opinion. But I cannot come down too hard, I have seen plenty of owners who thumb their nose at the HOA.

Anyway, California law requires HOA Boards to consider recording of liens and moving into foreclosure processes in open meetings. There was a lot of screaming when this legislation was proposed, some of it not so publicly loud - from the angle that Boards would now actually have to consider each delinquency situation in the open, rather leaving the undesirable processes to their collections agent or manager, to conduct behind closed doors. But the other screaming came from issues about privacy. Boards and owners were concerned about public disclosure of debt situations. So, the lawmakers put in some parameters - consider the actions to lien or file a Notice of Default not by name or address, but by APN #. Of course anyone could call the local assessors office and find who is behind in assessments with a parcel number. But at least they would have to work for the information.

Thus, while I do not believe it is patently illegal to post the names of delinquent owners (although you had better be right or the HOA is in for a defamation claim), I do believe the practice should be discouraged. I could see the possibility at some point, of some owner who is embarrassed and humiliated, intentionally on the Board's part, getting some kind of relief in court for breach of privacy. One might use the California statutory mandate to consider properties by parcel number rather than name or address as support for the position that it is not right to humiliate people because they are in debt. And that is consistent with the Fair Debt Collection Practices Act. Maybe there is a pertinent case already from that angle that could be cited as persuasive.

The statute I am referring to is California Civil Code Section 1367.1 which contains the processes for nonjudicial foreclosure.

Yes, it's frustrating for Boards and many are having serious issues finding money to pay the bills, because of delinquencies, but public shame is not on my list of suggestions for successful collections.

Full post as published by California Condo & HOA Law on January 27, 2009 (boomark / email).