Homeowners associations (HOAs) play a central role in maintaining common interest communities across California. When homeowners fail to pay assessments, HOAs have the authority to place liens on properties and enforce them through foreclosure. While creditors are familiar with the mechanics of mortgage and deed of trust foreclosures, HOA liens often introduce additional complications.
A recent California Court of Appeal case, Bird Rock Home Mortgage, LLC v. Breaking Ground, LP (Sept. 16, 2025), highlights one such complication. The court ruled that Civil Code section 2924m, which establishes an extended bidding process after foreclosure sales, applies not only to mortgage foreclosures but also to HOA lien foreclosures. For creditors and investors, this decision is a game-changer, as it alters the timing, finality, and risks associated with HOA sales.
The Case: Bird Rock Home Mortgage, LLC v. Breaking Ground, LP
The facts
The case arose out of the Oceanside Community Association, which managed a residential development in San Diego County. Like many HOAs, its declaration of covenants, conditions, and restrictions (CC&Rs) gave the association the right to collect annual, special, and individual assessments from property owners. The CC&Rs also created a continuing lien on each property for unpaid assessments and expressly allowed the lien to be enforced by nonjudicial foreclosure in accordance with California’s foreclosure statutes.
When the owners of one lot defaulted, the HOA, through its trustee and agent Delphi Law Group, recorded a notice of delinquent assessment. The unpaid assessments and estimated costs totaled approximately $37,700. A notice of default and a notice of trustee’s sale followed, culminating in a nonjudicial foreclosure auction on April 26, 2022.
Bird Rock Home Mortgage, LLC placed the highest bid at $60,000 and tendered payment immediately. Normally, that would have been the end of the matter. But under section 2924m, if the highest bidder is not a natural person intending to occupy the property, the trustee must keep the bidding open for up to 45 days to allow bids from certain qualified buyers. Delphi kept the bidding open.
Within the statutory window, Breaking Ground, LP, backed by its partner, a qualified nonprofit affordable housing organization, submitted a much higher bid of $203,000. Delphi awarded the trustee’s deed to Breaking Ground in June 2022, returning Bird Rock’s $60,000 payment. Bird Rock refused to accept the refund and filed suit, arguing the extended bidding period in section 2924m does not apply to HOA lien foreclosures.
The litigation
Bird Rock sued Breaking Ground, the nonprofit partner, and Delphi. It sought to quiet title in its favor, cancel the trustee’s deed to Breaking Ground, and invalidate the later sale. Delphi responded with a cross-complaint in interpleader, asking the court to determine the parties’ rights to the property and sale proceeds.
The case was submitted to the court on stipulated facts. The central legal question was narrow but significant: Does section 2924m apply to HOA lien foreclosures, or only to mortgage and deed of trust foreclosures?
The trial court ruled for Breaking Ground and Delphi, holding that the statute applied. Bird Rock appealed, but the Court of Appeal affirmed.
The Court’s Reasoning
The statutory scheme
Section 2924m was enacted in 2020 as part of Senate Bill 1079, during the height of the COVID-19 pandemic. Legislators feared a wave of foreclosures would result in investor takeovers, leaving neighborhoods blighted with vacant properties. The statute introduced an extended bidding period to give owner-occupants, tenants, and certain nonprofits a chance to purchase foreclosed homes, stabilizing communities.
Under the statute:
- If the highest bidder is an owner-occupant, the sale is final immediately.
- If not, the sale remains open for up to 45 days.
- During this period, eligible tenant buyers or nonprofits may match or exceed the winning bid.
Bird Rock argued that section 2924m does not apply to HOA liens because they are statutory creations under the Davis-Stirling Act, not mortgages or deeds of trust. The appellate court disagreed.
HOA liens as mortgages
The court emphasized that for purposes of nonjudicial foreclosure, the Civil Code defines mortgage broadly. Section 2920 states that a mortgage is any security device or instrument, other than a deed of trust, that confers a power of sale to secure payment of an obligation. Section 2924 adds that any transfer of an interest in property as security for performance of an act is deemed a mortgage.
The CC&Rs at issue explicitly authorized the HOA to enforce delinquent assessments through a lien and trustee’s sale under Civil Code procedures. The court held that this contractual and statutory framework created exactly the kind of security interest that qualifies as a mortgage under the foreclosure statutes.
Therefore, the trustee’s sale for the HOA lien was a trustee’s sale of property under a power of sale contained in a deed of trust or mortgage within the meaning of section 2924m.
Legislative purpose
The court also looked at legislative intent. While the history of section 2924m did not specifically mention HOA liens, the statute’s goal was to prevent investor-driven vacancy and protect community stability. Defaults on HOA dues can lead to the same problems as mortgage defaults: vacant homes, disrepair, and displacement. Applying the statute to HOA liens therefore aligned with its purpose.
The court dismissed Bird Rock’s concerns about conflicts with the Davis-Stirling Act. While the Act grants homeowners a 90-day right of redemption after an HOA foreclosure, the court held that section 2924m simply delays the start of that period by up to 45 days, without undermining the right itself.
Why This Case Matters for Creditors
This ruling is a landmark clarification of how California courts treat HOA liens in the foreclosure process. For creditors, it carries several important implications:
HOA liens function like mortgages
The decision reinforces that HOA liens are not second-class security interests. When backed by CC&Rs and statutory authority, they operate like mortgages for foreclosure purposes. Creditors must treat them with the same level of seriousness and anticipate the same statutory protections.
Extended bidding applies to HOA foreclosures
Investors who purchase at HOA sales must now account for the 45-day extended bidding period if they are not natural-person owner-occupants. A winning bid at auction is no longer final in many circumstances. This uncertainty can affect bidding strategies and valuations.
Higher recovery is possible
For HOAs, the ruling may prove beneficial. In this case, the final bid increased from $60,000 to $203,000, dramatically raising the sale proceeds. That means associations may recover more, but creditors hoping to acquire property through HOA sales may face stiffer competition.
Redemption timelines are extended
Because the 90-day redemption period begins only when the sale becomes final, section 2924m effectively pushes the redemption timeline back by as much as 45 days. Creditors must plan for this delay when calculating enforcement and collection strategies.
Litigation risk for investors
Bird Rock’s refusal to accept the refund and its aggressive litigation show that disputes over sale finality are likely. Creditors and investors should be prepared for challenges and should structure bids with the statutory scheme in mind.
Broader Context: HOA Liens, the Davis-Stirling Act, and Creditors’ Rights
HOA liens have long been a source of tension for lenders and other creditors. The Davis-Stirling Common Interest Development Act governs HOAs and provides that assessments, when delinquent, become liens on the property. Those liens may be enforced by judicial or nonjudicial foreclosure, subject to notice and redemption rules.
Creditors holding deeds of trust often worry that HOA liens, which can sometimes take priority, may impair their security. The Bird Rock decision does not change lien priority rules, but it does alter the process of enforcement. By treating HOA liens as mortgages, the court brought them fully within the Civil Code’s nonjudicial foreclosure framework, including section 2924m.
For creditors, this means the line between HOA foreclosure and mortgage foreclosure has blurred. Strategies must adapt accordingly.
Practical Steps for Creditors
In light of this decision, creditors should consider the following best practices:
- Monitor HOA assessments: Stay alert to delinquencies in associations where your borrowers own property. HOA foreclosure can create unexpected risks.
- Adjust acquisition strategies: If acquiring property at HOA foreclosure sales, build in the possibility of being outbid during the extended period.
- Budget for longer timelines: Factor the extra 45 days, plus the redemption period, into enforcement schedules.
- Coordinate with HOAs: Open communication with associations can sometimes avoid foreclosure altogether by facilitating payment plans or lien resolutions.
- Prepare for litigation: Be ready to defend your rights in court if disputes arise over sale finality or statutory interpretation.
Implications Beyond HOA Foreclosures
The decision also signals how California courts may approach future creditor disputes. The court’s willingness to interpret mortgage broadly suggests that other statutory protections could be extended to nontraditional liens if doing so serves legislative purposes. Creditors should be aware that courts may prioritize community stability and consumer protection over narrow readings of foreclosure statutes.
This case may also influence negotiations between lenders, HOAs, and investors. With higher sale proceeds possible under section 2924m, HOAs may be more aggressive in pursuing foreclosure. Lenders may need to negotiate lien payoffs sooner to protect collateral.
Key Takeaways
- HOA liens can be treated as mortgages for purposes of California’s foreclosure statutes
- Section 2924m’s extended bidding period applies to HOA lien foreclosures
- Bids at HOA sales are not final if the highest bidder is not an owner-occupant
- Sale proceeds may increase substantially due to competitive extended bidding
- Redemption rights remain intact but are delayed until the sale is final
- Creditors must adapt bidding strategies, enforcement timelines, and litigation plans
How Tatman Legal Can Help
At Tatman Legal, we focus exclusively on protecting creditors’ rights. HOA liens present unique challenges that can affect collateral value, recovery prospects, and foreclosure strategy. With our experience in both state court and bankruptcy proceedings, we help creditors:
- Evaluate risks posed by HOA liens and assessment defaults
- Develop strategies for bidding, redemption, and sale challenges
- Litigate disputes over foreclosure finality and title
- Protect creditor claims in multi-party proceedings involving HOAs, lenders, and investors
Final Thoughts
The Bird Rock Home Mortgage decision confirms that HOA liens are mortgages for foreclosure purposes and are subject to Civil Code section 2924m’s extended bidding period. For creditors, this ruling changes the landscape of HOA foreclosures. It adds time, uncertainty, and complexity to the process, but also creates opportunities for higher recovery in certain cases.
Creditors must approach HOA lien foreclosures with caution and strategy. With the right legal guidance, these challenges can be navigated effectively. If you are a creditor facing issues with HOA liens, nonjudicial foreclosures, or disputes over sale finality, Tatman Legal is ready to advise and protect your interests. Contact us today to discuss your options.