Appellate Court Holds that § 2924m Applies to HOA Lien Foreclosures

In a decision set for publication, the California Court of Appeal affirmed that the extended bidding period under Civil Code section 2924m applies to nonjudicial foreclosure sales enforcing liens for unpaid homeowner’s association (“HOA”) assessments.  Bird Rock Home Mortgage, LLC v. Breaking Ground, LP (D084138, filed Sept. 16, 2025) (“Bird Rock”).  The appellate court reached this conclusion in Bird Rock by determining that the HOA's declaration, which created a contractual lien for unpaid assessments enforceable via nonjudicial foreclosure under Civil Code § 2924 et seq. fits the statutory definition of a "mortgage" as a security interest in property for performance of an obligation (e.g., payment of assessments), regardless of whether it's a traditional home loan.  This is the first published case to review the interplay between 2924m and the Davis Stirling- Common Interest Development Act and will provide guidance for foreclosure trustees, foreclosure bidders and owners of home in common interest developments going forward.  While this case involved a specific HOA declaration, it is likely that other courts will treat such declarations as "mortgages" in similar contexts. Bird Rock has not indicated plans to petition for review by the California Supreme Court, but we'll monitor for any developments.

Implications:

• For Investors and Bidders: If you're bidding at HOA foreclosure sales for 1-4 unit residential properties, expect trustees to apply the 15-45 day extended bidding period if the initial high bidder isn't a prospective owner-occupant. This could allow eligible entities (e.g., tenants, nonprofits, or community land trusts) to outbid you post-sale, reducing certainty in acquiring title.  This is in addition to the homeowner’s 90-day redemption right – which will run from the date the sale is deemed final.

• For HOAs and Trustees: The ruling reinforces that HOA liens can be treated as mortgages for foreclosure purposes.

• For Homeowners: Defaults on HOA assessments now carry heightened risks of extended sales, but the 90-day redemption right remains intact, starting after the sale is deemed final.

All of the Details:

Case Background

The case arose from a nonjudicial foreclosure sale of a single-family residential property in an Oceanside HOA-managed development. The property owners defaulted on their HOA assessments, leading the HOA's trustee (Delphi Law Group, LLP) to record a lien and initiate a foreclosure sale under the Davis-Stirling Common Interest Development Act (Civil Code §§ 4000 et seq.) and the HOA's governing declaration.

• At the initial trustee's sale on April 26, 2022, Bird Rock Home Mortgage, LLC bid $60,000—the highest bid—and tendered payment.

• The trustee, however, kept bidding open after the sale pursuant to Civil Code § 2924m, which delays finality of certain residential foreclosure sales to allow "eligible bidders" (e.g., nonprofits focused on affordable housing) to match or exceed the highest bid.

• During this extended period, Breaking Ground, LP (an eligible bidder through its nonprofit partner) submitted a $203,000 bid and received the trustee's deed.

  
  

Bird Rock sued, arguing that § 2924m does not apply to HOA lien foreclosures because such liens are not "mortgages" or "deeds of trust" under the statute. Bird Rock sought to void the sale to Breaking Ground and quiet title in its favor. The trial court ruled against Bird Rock, and the appellate court affirmed.

Key Holding

The Court of Appeal held that § 2924m's extended bidding period applies to HOA lien foreclosures when the lien qualifies as a "mortgage" under California's nonjudicial foreclosure framework. Key reasoning includes:

·        HOA Liens as "Mortgages": The court examined the HOA's declaration, which created a contractual lien for unpaid assessments enforceable via nonjudicial foreclosure under §§ 2924 et seq. This lien fits the statutory definition of a "mortgage" as a security interest in property for performance of an obligation (e.g., payment of assessments), regardless of whether it's a traditional home loan.

·        Integration with Statutory Schemes: The Davis-Stirling Act incorporates nonjudicial foreclosure procedures from § 2924 et seq., including § 2924m. The court rejected arguments that applying § 2924m would conflict with HOA-specific rules, such as the 90-day redemption period (Civil Code § 5715), noting the statutes can harmoniously coexist.

The court dismissed Bird Rock's claims for declaratory relief, cancellation of the deed, set-aside of the sale, and quiet title, upholding the distribution of sale proceeds.