BILL ANALYSIS AB 2016 Page 1 Date of Hearing: April 27, 2010 ASSEMBLY COMMITTEE ON JUDICIARY Mike Feuer, Chair AB 2016 (Torres) - As Introduced: February 17, 2010 PROPOSED CONSENT SUBJECT : Common Interest Developments: requests for notices KEY ISSUE : Should a homeowners association be allowed to record a single request for a copy of notices of a trustee's deed, instead of having to file multiple requests for each separate interest within the association? FISCAL EFFECT : As currently in print this bill is keyed non-fiscal. SYNOPSIS This non-controversial measure seeks to clarify the intent of SB 1511 (Chapter 527, Stats. of 2008), which permitted a homeowners association (HOA) to record a request, in the event of a foreclosure on a separate interest within the HOA, that the mortgagee or trustee mail to the HOA a copy of the trustee's deed upon sale. The purpose of the 2008 measure was fairly straightforward: existing law makes all owners of separate interests within the association members of the association, and as members they must pay association fees. However, when a separate interest in the HOA is foreclosed upon and the property is subsequently sold, the HOA does not always know the name or address of the successor in interest until months after the sale. Although the purpose of SB 1511 was apparently to permit an HOA to record a single request for all of its separate interests, a handful of county recorders have rejected HOA filings on the grounds that other provisions of existing law appear to require a separate request for each separate property and the name of each separate owner and mortgagee or trustee. This bill seeks to clarify that an association's single recorded request applies to all of the separate interests within the association, and the request when filed only needs to include the name of the association, notwithstanding provisions elsewhere that appear to require separate requests naming each owner and mortgagee. This bill passed out of the Assembly Banking & Finance Committee on a 12-0 vote. There is no known AB 2016 Page 2 opposition to the bill. SUMMARY : Allows a homeowners association (HOA) in a common interest development to record a single request for a copy of a trustees deed upon sale of a separate interest within the HOA, and clarifies that such a request does not constitute a request for a document that transfers an interest in real property or terminates a right to title in real property. Specifically this bill : 1)Specifies that an HOA's recorded request for a copy of trustee's deed upon sale of separate interest within the HOA, does not, for the limited purposes specified, constitute a request for a document that either effects or evidences a transfer of an interest in real property or terminates any interest, right, or encumbrance of an interest in real property. 2)Specifies that an HOA's recorded request for a copy of a trustee's deed upon sale of any separate interest within the HOA shall provide a legal description or assessor's parcel number of all of the separate interests within the HOA, notwithstanding the existing law requiring that requests for copies of notices of default and sale under deed of trust or mortgage can only be recorded if they contain the names of the mortgagor/trustor and mortgagee/mortgagor. EXISTING LAW : 1)Provides, generally, that any person desiring a copy of a notice of default and of sale under deed of trust or mortgage may record, at any time subsequent to the recordation of the deed of trust or mortgage and prior to a recordation of notice of default, a request for a copy of the notice of default and of sale. Specifies that the request must be recorded in the office of the county recorder in which the property is situated and must contain specified information identifying the particular deed of trust or mortgage, and the names of the trustor/mortgagor and trustee/mortgagee. (Civil Code Section 2924b (a).) 2)Provides, with respect to a separate interest in a homeowners association, that the association may record a request for a copy of a trustee's deed upon sale of a separate interest within the association. Specifies that the request shall AB 2016 Page 3 include a legal description or the assessor's parcel number of the separate interests. Specifies that a request recorded pursuant to this provision must identify the association and must be recorded before the filing of the notice of default. Requires the trustee, mortgagee, or other person to mail the requested information to the association within 15 business days after the trustee's deed is recorded. (Civil Code Section 2924b (f).) 3)Specifies that no request made pursuant to 1) or 2) above, nor any statement made therein, shall affect the title to real property or be deemed notice to any person that the person requesting the copies of notice has or claims any right, title, or interest in the subject property. (Civil Code Section 2924 (g).) 4)Requires that any document recorded with a county recorder that effects or evidences a transfer of an interest in real property or that terminates an interest or right in real property must contain certain information, including the name or names of persons having title or interest in the property. (Government Code Section 27288.1.) COMMENTS : According to the sponsor, the Community Association Institute (CAI), this bill will clarify existing law by expressly allowing a homeowners association (HOA) in a community interest development to file a single request for a copy of a trustee's deed in the event of a foreclosure and subsequent sale of a separate interest within the HOA. The author and sponsor contend that the purpose of this bill is merely to clarify the intent of prior CAI-sponsored legislation, SB 1511 (Chapter 527, Stats. of 2008). Prior to the enactment of SB 1511, then existing law permitted any person desiring a copy of any notice of default or notice of sale under deed to record a document with the county recorder requesting that the mortgagee or trustee send to the requester a copy of the notice of default or sale. However, then existing law required that the request contain certain information, including the name of the owner of record and the name of mortgagee or trustee. (Civil Code Section 2924b (a).) SB 1511 added a new subdivision to that statute so that, with respect to an HOA, the association could file a single request for all the separate interests within the HOA, and the recorded request would only need to contain the name and address of the AB 2016 Page 4 association and a legal description or assessor's parcel numbers of the separate interests. An HOA's interest in obtaining a copy of the trustee's deed upon sale is straightforward enough: under existing law, every owner of a separate interest in the HOA is also a member of the HOA and must pay association fees. However, when a separate interest is foreclosed upon and the mortgagee or trustee sells the property to another party, the HOA does not always have the name and address of the successor in interest and, accordingly, has difficulty collecting fee assessments. SB 1511's sponsor, who is also the sponsor of this bill, stated in 2008 that "Learning the name and address of the successor in interest and the date of the foreclosure sale within a timely manner would be of tremendous help to the financial stability of homeowners associations. Today, this information is provided many months after the date of sale and as a consequence, associations experience financial hardship." (As quoted in Senate Third Reading Analysis of SB 1511, As Amended August 4, 2008.) However, according to the sponsor, after SB 1511 went into effect a few county recorders did not permit HOAs to record the requests because those requests did not meet the requirements of Government Code Section 27288.1. That statute specifies that any document that is presented for recordation that "effects or evidences a transfer or encumbrance of an interest in real property" or that "releases or terminates any interest, right, or encumbrance" in real property must contain specified information, including the name or names of the owners or other parties with a title or interest in the property. Of course, the author and sponsor of SB 1511 had sought to eliminate this very requirement in cases where an HOA was only attempting to obtain a copy of the document for the limited purpose of identifying the successor in interest - and not for the purpose of evidencing a transfer of title or termination of a property right or interest. Therefore, in order to clarify the intent of SB 1511 and allow an HOA to record a single notice for all association properties, this bill makes two minor and technical changes to existing law. First, this bill specifies that the provision permitting an HOA to record a single request for all separate interests within the association applies notwithstanding the general provision in the same statute that requires specified information for each individual property. Second, the bill clarifies that for AB 2016 Page 5 purposes of Government Code Section 27288.1 - the statute that requires specified content for documents involving a transfer of title or termination of a property right or interest - that a request by an HOA for a trustee's deed does not constitute a request for a document that effects or evidences a transfer of title or a termination of a property right or interest. ARGUMENTS IN SUPPORT : According to CAI, the sponsor, an HOA must have timely notice when a separate interest within the association is foreclosed upon and sold to a new purchaser, so that the HOA may "begin to receive monthly assessment payments from the new owner in a timely manner, instead of waiting up to 8 months following the foreclosure sale." CAI claims that the few county recorders that refuse to record the "blanket" requests that apply to all separate interests in the association are frustrating the purpose of the recently enacted SB 1511. CAI notes that such "blanket recordation" is common in other contexts, such as when amendments are made to an association's Covenants, Conditions, and Restrictions (CC&R). This bill, the CAI believes, will make it absolutely clear that an HOA may record a single document for all separate interests, so long as the request names the association and includes a legal description or assessor's parcel numbers. REGISTERED SUPPORT / OPPOSITION : Support Community Association Institute (sponsor) Opposition None on file Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334