BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2016
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 2016 (Torres)
          As Amended  June 22, 2010
          Majority vote
           
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          |ASSEMBLY:  |75-0 |(May 3, 2010)   |SENATE: |32-0 |(June 28,      |
          |           |     |                |        |     |2010)          |
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           Original Committee Reference:    B. & F.  

           SUMMARY  :  Allows a homeowner's association (HOA) to record one  
          notice with a county recorder against all properties with a  
          trustee's deed upon sale in a Common Interest Development (CID).  
           Specifically,  this bill  provides that a request by HOAs for  
          notification of a trustee's deed upon sale does not constitute a  
          request for a document that either effects or evidences a  
          transfer of encumbrance of an interest in real property or that  
          releases or terminates any interest, right or encumbrance of an  
          interest in real property.  

           The Senate amendments  make minor technical changes.
           
          EXISTING LAW  : 

          1)The Davis-Stirling Common Interest Development Act (The Act)  
            defines and regulates CIDs, including the ability of the  
            association to levy regular and special assessments sufficient  
            to perform its obligations. [Civil Code Section 1350]

          2)Defines "association" as a nonprofit corporation or  
            unincorporated association created for the purpose of managing  
            a CID.  [Civil Code Section 1351]

          3)Allows an association to file in a county recorder's office a  
            request that a mortgagee, trustee, or other person authorized  
            to record a notice of default regarding any of those separate  
            interests, mail to the CID a copy of any trustee's deed upon  
            sale concerning a separate interest.  The requested  
            information shall be mailed to the association within 15  
            business days following the date the trustee's deed is  
            recorded.  [Civil Code Section 2924b]

          4)Provides that any regular or special assessment, and any late  








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            charges, reasonable fees and costs of collection, reasonable  
            attorney's fees, if any, and interest, if any, shall be a debt  
            of the owner of the separate interest at the time the  
            assessment or other sums are levied.  That amount is a lien on  
            the owner's interest in the common interest development from  
            the time the association records a notice of delinquent  
            assessment with the county recorder.  Prior to recording that  
            lien, the association must send the owner a certified letter  
            that includes a general description of the collection and  
            enforcement, right to request a meeting with the board, right  
            to dispute the assessment debt, and to request alternative  
            dispute resolution.  [Civil Code 1367-1367.1]

          5)Prevents an association from using judicial or non-judicial  
            foreclosure to collect delinquent assessments that are less  
            than $1,800.  [Civil Code 1367.4]

          6)Regulates the non-judicial foreclosure of properties pursuant  
            to the power of sale contained within a mortgage contract.   
            Requires the trustee, mortgagee, or beneficiary to record a  
            Notice of Default and allow three months to lapse before  
            setting a date for sale of the property. [Civil Code 2924,  
            2924f.]
           
          7)Allows a person to record a request to be notified upon the  
            filing of a notice of default or notice of sale and requires  
            the trustee to mail notice to those persons. [Civil Code 2924b  
            (a), 2924b (b) (1)]

           AS PASSED BY THE ASSEMBLY  , this is substantially similar to the  
          current version.
           
          FISCAL EFFECT  :   None 

           COMMENTS  :  AB 2016 will allow homeowners associations in CIDs to  
          record one notice against all properties where there has been a  
          trustee's deed upon sale in that homeowner's association.  The  
          notice will notify the trustee that the HOA is requesting  
          further notice of the name and mailing address of the successor  
          in interest if a property in a HOA is foreclosed upon.  In  
          California, the county assessor's office interprets current law  
          to require an association to record a notice on each individual  
          home versus the entire association in one notice request.  This  
          interpretation is more costly and time consuming to a HOA.  AB  
          2016 also clarifies that when a HOA files a request in the  








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          county recorder's office for the trustee's deed upon sale; this  
          action does not constitute a request for a document that  
          evidences a transfer of interest in a property or that releases  
          or terminates any interest in a property. 

          To summarize, this measure will allow a CID to record one notice  
          with the county recorder's office pertaining to all properties  
          within that CID rather then record a notice for each individual  
          property within the CID.  It is imperative that a CID has the  
          ability to know when there has been a trustee's deed upon sale  
          on any property in the CID so assessments can be collected as  
          soon as possible.  It is also good to note that the failure to  
          request a notice does not affect the title to real property.  

          Background:  Currently, over 40,000 HOAs exist in California.   
          If a consumer purchases a home in a CID, membership in an HOA is  
          automatic.  The foreclosure crisis has caused HOAs to fight to  
          stay out of the red as owners facing foreclosure become  
          increasingly delinquent in their assessments.  If a homeowner is  
          struggling to make their mortgage payment, HOA dues are usually  
          the first to fall by the wayside.  The community management  
          industry estimates that delinquent assessments have increased  
          tenfold due to foreclosure activity.  In one CID, unpaid dues by  
          homeowners in foreclosure amounted to $20,000 for just one  
          month.

          HOAs are hugely popular because they help protect homeowners'  
          investments by maintaining both the appearance and  
          infrastructure of the community.  If there isn't enough money  
          available to provide services, pay for contractors or secure  
          insurance coverage, the quality and safety of the community is  
          compromised for all owners.  In a market where owners are  
          struggling to maintain home value, a poorly-funded HOA could  
          become a greater liability than asset, since the negative  
          impacts would be evident throughout the community and not  
          limited to solely those homes in or near foreclosure.

          Previous legislation:  SB 1511 (Ducheny) Chapter 527, Statutes  
          of 2007 allows a HOA with respect to a trustee's deed upon sale  
          relating to separate interests governed by the HOA, to request  
          the mortgagee or trustee to mail to the HOA a copy of any  
          trustee's deed upon sale concerning a separate interest.   
          Requires the mortgagee or trustee to mail that information to  
          the HOA within 15 business days following the date the trustee's  
          deed is recorded.








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           Analysis Prepared by  :    Mark Farouk / B. & F. / (916) 319-3081 


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