BILL NUMBER: AB 2502 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 27, 2010
AMENDED IN ASSEMBLY APRIL 5, 2010
INTRODUCED BY Assembly Member Brownley
FEBRUARY 19, 2010
An act to amend Sections Section
1367.1 and 1367.4 of the Civil Code, relating to
homeowners' associations.
LEGISLATIVE COUNSEL'S DIGEST
AB 2502, as amended, Brownley. Homeowners' associations:
delinquencies.
The Davis-Stirling Common Interest Development Act defines and
regulates common interest developments and authorizes a homeowners'
association that manages the development to levy assessments to
fulfill its obligations. The act provides that a regular or special
assessment of the association, fees, reasonable costs of collection,
attorney's fees, late charges, and interest, as specified, are a debt
of the owner of the separate interest at the time the assessment or
other sums are levied. Existing law provides that payments made by a
homeowner to reduce the debt shall first be applied to the
assessments owed, and may only be applied to fees, reasonable costs
of collection, attorneys attorney's
fees, late charges, and interest only after the assessments owed are
paid in full.
This bill would clarify that the provisions that set forth the
order in which payments are to be allocated apply to any agent
or representative of the homeowners' association
and to any 3rd party assigned to collect payment for purposes of
collection of the debt. This bill would provide that a homeowner may
not waive the right to have payments allocated in the order specified
and would provide that any contract requiring a homeowner
to waive this right would be void and unenforceable . This
bill would also require the homeowners' association ,
and its agent and representatives, and
any 3rd party assigned to collect payments for purposes of the
collection of the debt are required to accept partial
payments of the debt if the partial payments comply with the
terms of a written agreement .
Existing law requires a homeowners' association, if requested by
a homeowner, to meet with the board in special session, within 45
days of the request, to discuss a payment plan. Existing law provides
that if there is no special session scheduled within the 45-day
period, that the board may designate a committee to meet with the
homeowner to discuss a payment plan within that time period.
This bill would, instead, if requested by the homeowner,
require a meeting to discuss a payment plan to be held in an open
session. This bill would only allow the board to designate
a committee to meet with the homeowner if the homeowner authorizes
the designation of that committee, and, if the homeowner does not
authorize the designation of the committee, would require the meeting
to take place at the next regularly scheduled board meeting. This
bill would provide that the homeowners' association may not authorize
an agent, representative, or any other third
3rd party to discuss or negotiate a payment plan without the
consent of the homeowner and would require that all payment plans
would be subject to the approval of the board at an open meeting of
the board. This bill would also provide that, in the event the
association assigns or pledges its right to collect payments or
assessments to a financial institution, lender, or other 3rd party,
that the 3rd party would be subject to the provisions of the act and,
if the owner has entered into a payment plan with the homeowners'
association, would require that 3rd party to conduct any collection
procedures in accordance with the provisions of an existing payment
plan.
Existing law provides that a homeowners' association may not
collect a debt of an amount less than $1,800, exclusive of specified
charges, through judicial or nonjudicial foreclosure but provides
that the homeowners' association must either file a civil action in
small claims court or record a lien upon which it would be prohibited
from foreclosing until the amount equals or exceeds $1,800 or the
assessments are more than 12 months delinquent.
The bill would, instead, provide that a homeowners' association
may not collect a debt of an amount less than $3,600, exclusive of
specified charges, through judicial or nonjudicial foreclosure but
would provide that the homeowners' association must either file a
civil action in small claims court or record a lien upon which it
would be prohibited from foreclosing until the amount equals or
exceeds $3,600 or the assessments are more than 18 months delinquent.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. (a) The Legislature finds and declares:
(1) The Davis-Stirling Common Interest Development Act was
enacted to provide protections to homeowners that have
purchased residences in common interest developments.
enacted to provide protections, in part, to owners in common interest
developments.
(2) The Davis-Stirling Common Interest Development Act establishes
procedures to be followed by homeowners' associations in the
collection of delinquencies of regular and special assessments.
(3) Many homeowners' associations assign or pledge the association'
s right to collect these delinquencies to third parties who require
the homeowner to enter into payment plans that require the homeowner
to waive his or her rights to the protections provided by the
Davis-Stirling Common Interest Development Act, including the right
to have all payments first applied to the assessments owed.
(4) By waiving these rights many homeowners are coerced into
payment plans that require the payment to be first applied to costs
of collection, attorneys fees, late charges, and interest without
lowering the underlying assessment that serves as the basis for
computing these charges, thereby forcing the homeowner to sink deeper
into debt.
(3) Some homeowners' associations assign the association's right
to collect these delinquencies to agents that have required the owner
to enter into payment plans that are different than the payment plan
by and between the association and the owner. Some of the contracts
have required the owner to waive his or her rights to the protections
provided by the Davis-Stirling Common Interest Development Act.
(4) By waiving these rights, some owners have been coerced into
payment plans that require the payments to be first applied to the
costs of collection, attorney's fees, late charges, and interest,
rather than to the principal, forcing the homeowner to sink deeper
into debt.
(b) It is the intent of the Legislature, by enacting this act, to
clarify and guarantee that apply the
requirements of the Davis-Stirling Common Interest Development Act,
with respect to the collection of delinquencies, shall apply
to any agent or representative of the homeowners' association and to
any third party assigned to collect delinquent assessments.
of delinquencies, to agents of the homeowners'
associations assigned to collect delinquent assessments.
SEC. 2. Section 1367.1 of the Civil Code is amended to read:
1367.1. (a) A regular or special assessment and any late charges,
reasonable fees and costs of collection, reasonable attorney's fees,
if any, and interest, if any, as determined in accordance with
Section 1366, shall be a debt of the owner of the separate interest
at the time the assessment or other sums are levied. At least 30 days
prior to recording a lien upon the separate interest of the owner of
record to collect a debt that is past due under this subdivision,
the association shall notify the owner of record in writing by
certified mail of the following:
(1) A general description of the collection and lien enforcement
procedures of the association and the method of calculation of the
amount, a statement that the owner of the separate interest has the
right to inspect the association records, pursuant to Section 8333 of
the Corporations Code, and the following statement in 14-point
boldface type, if printed, or in capital letters, if typed:
"IMPORTANT NOTICE: IF YOUR SEPARATE INTEREST IS PLACED IN FORECLOSURE
BECAUSE YOU ARE BEHIND IN YOUR ASSESSMENTS, IT MAY BE SOLD WITHOUT
COURT ACTION."
(2) An itemized statement of the charges owed by the owner,
including items on the statement which indicate the amount of any
delinquent assessments, the fees and reasonable costs of collection,
reasonable attorney's fees, any late charges, and interest, if any.
(3) A statement that the owner shall not be liable to pay the
charges, interest, and costs of collection, if it is determined the
assessment was paid on time to the association.
(4) The right to request a meeting with the board as provided by
paragraph (3) of subdivision (c).
(5) The right to dispute the assessment debt by submitting a
written request for dispute resolution to the association pursuant to
the association's "meet and confer" program required in Article 5
(commencing with Section 1363.810) of Chapter 4.
(6) The right to request alternative dispute resolution with a
neutral third party pursuant to Article 2 (commencing with Section
1369.510) of Chapter 7 before the association may initiate
foreclosure against the owner's separate interest, except that
binding arbitration shall not be available if the association intends
to initiate a judicial foreclosure.
(b) (1) Any payments made by the owner of a separate interest
toward the debt set forth, as required in subdivision (a), whether
made to the association, an agent or representative of the
association, or to a third party assigned to collect any unpaid debt,
made to the association or an agent of the
association assigned to collect the debt, shall first be
applied to the assessments owed, and, only after the assessments owed
are paid in full shall the payments be applied to the fees and costs
of collection, attorney's fees, late charges, or interest. When an
owner makes a payment, the owner may request a receipt and
the association, its agent or representative, or a third party
a receipt and the association or its agent
assigned to accept payment for purposes of collection of the
debt shall provide it. The receipt shall indicate the date of payment
and the person who received it. The association shall provide a
mailing address for overnight payment of assessments.
(2) The association, an agent or representative of the
association, or a third party assigned to collect payment for
purposes of collection of the debt shall not refuse to accept partial
payment of the debt.
(2) The association or agent of the association assigned to
collect payment of the debt shall not refuse to accept partial
payment of the debt should the partial payment comply with the terms
of the written agreement between the association and the owner.
(3) The provisions set forth in paragraph (1), regarding the order
in which the payments made are to be allocated, shall apply
to any agent or representative of the association and to any third
party to an agent of the association that
accepts payment for purposes of collection of the debt. An owner
shall not waive the provisions of paragraph (1) that set forth the
order of the allocation of payments made toward the debt.
Any contract or payment plan that requires a waiver of the allocation
of payments made, as set forth in paragraph (1), shall be void and
unenforceable.
(4) An owner and the association may mutually agree to amend a
payment plan so long as the amended payment plan is in compliance
with paragraph (1).
(c) (1) (A) Prior to recording a lien for delinquent assessments,
an association shall offer the owner and, if so requested by the
owner, participate in dispute resolution pursuant to the association'
s "meet and confer" program required in Article 5 (commencing with
Section 1363.810) of Chapter 4.
(B) Prior to initiating a foreclosure for delinquent assessments,
an association shall offer the owner and, if so requested by the
owner, shall participate in dispute resolution pursuant to the
association's "meet and confer" program required in Article 5
(commencing with Section 1363.810) of Chapter 4 or alternative
dispute resolution with a neutral third party pursuant to Article 2
(commencing with Section 1369.510) of Chapter 7. The decision to
pursue dispute resolution or a particular type of alternative dispute
resolution shall be the choice of the owner, except that binding
arbitration shall not be available if the association intends to
initiate a judicial foreclosure.
(2) For liens recorded on or after January 1, 2006, the decision
to record a lien for delinquent assessments shall be made only by the
board of directors of the association and may not be delegated to an
agent of the association. The board shall approve the decision by a
majority vote of the board members in an open meeting. The board
shall record the vote in the minutes of that meeting.
(3) (A) An owner, other than an owner of any interest that is
described in Section 11212 of the Business and Professions Code that
is not otherwise exempt from this section pursuant to subdivision (a)
of Section 11211.7, may submit a written request to meet with the
board to discuss a payment plan for the debt noticed pursuant to
subdivision (a). The association shall provide the owners the
standards for payment plans, if any exist. The board shall meet with
the owner in executive session, or if requested by the
owner, in an open meeting of the board, within 45 days of
the postmark of the request, if the request is mailed within 15 days
of the date of the postmark of the notice, unless there is no
regularly scheduled board meeting within that period, in which case
the board, if authorized by the owner, may designate a committee of
one or more members to meet with the owner. If the owner does not
authorize the board to designate a committee to meet with the owner,
the board shall meet with the owner at the next regularly scheduled
board meeting. The board shall not, without the consent of the owner,
authorize an agent or representative of the association or any other
third party to discuss or negotiate a payment plan. All payment
plans are subject to the approval of the board at an open meeting of
the board.
(B) Payment plans may incorporate any assessments that accrue
during the payment plan period. Payment plans shall not impede an
association's ability to record a lien on the owner's separate
interest to secure payment of delinquent assessments. Additional late
fees shall not accrue during the payment plan period if the owner is
in compliance with the terms of the payment plan. In the event of a
default on any payment plan, the association may resume its efforts
to collect the delinquent assessments from the time prior to entering
into the payment plan.
(d) The amount of the assessment, plus any costs of collection,
late charges, and interest assessed in accordance with Section 1366,
shall be a lien on the owner's separate interest in the common
interest development from and after the time the association causes
to be recorded with the county recorder of the county in which the
separate interest is located, a notice of delinquent assessment,
which shall state the amount of the assessment and other sums imposed
in accordance with Section 1366, a legal description of the owner's
separate interest in the common interest development against which
the assessment and other sums are levied, and the name of the record
owner of the separate interest in the common interest development
against which the lien is imposed. The itemized statement of the
charges owed by the owner described in paragraph (2) of subdivision
(a) shall be recorded together with the notice of delinquent
assessment. In order for the lien to be enforced by nonjudicial
foreclosure as provided in subdivision (g), the notice of delinquent
assessment shall state the name and address of the trustee authorized
by the association to enforce the lien by sale. The notice of
delinquent assessment shall be signed by the person designated in the
declaration or by the association for that purpose, or if no one is
designated, by the president of the association. A copy of the
recorded notice of delinquent assessment shall be mailed by certified
mail to every person whose name is shown as an owner of the separate
interest in the association's records, and the notice shall be
mailed no later than 10 calendar days after recordation. Within 21
days of the payment of the sums specified in the notice of delinquent
assessment, the association shall record or cause to be recorded in
the office of the county recorder in which the notice of delinquent
assessment is recorded a lien release or notice of rescission and
provide the owner of the separate interest a copy of the lien release
or notice that the delinquent assessment has been satisfied. A
monetary charge imposed by the association as a means of reimbursing
the association for costs incurred by the association in the repair
of damage to common areas and facilities for which the member or the
member's guests or tenants were responsible may become a lien against
the member's separate interest enforceable by the sale of the
interest under Sections 2924, 2924b, and 2924c, provided the
authority to impose a lien is set forth in the governing documents.
It is the intent of the Legislature not to contravene Section 2792.26
of Title 10 of the California Code of Regulations, as that section
appeared on January 1, 1996, for associations of subdivisions that
are being sold under authority of a subdivision public report,
pursuant to Part 2 (commencing with Section 11000) of Division 4 of
the Business and Professions Code.
(e) Except as indicated in subdivision (d), a monetary penalty
imposed by the association as a disciplinary measure for failure of a
member to comply with the governing instruments, except for the late
payments, may not be characterized nor treated in the governing
instruments as an assessment that may become a lien against the
member's subdivision separate interest enforceable by the sale of the
interest under Sections 2924, 2924b, and 2924c.
(f) A lien created pursuant to subdivision (d) shall be prior to
all other liens recorded subsequent to the notice of assessment,
except that the declaration may provide for the subordination thereof
to any other liens and encumbrances.
(g) (1) An association may not voluntarily assign or pledge the
association's right to collect payments or assessments, or to enforce
or foreclose a lien to a third party, except when the assignment or
pledge is made to a financial institution or lender chartered or
licensed under federal or state law, when acting within the scope of
that charter or license, as security for a loan obtained by the
association; however, the foregoing provision may not restrict the
right or ability of an association to assign any unpaid obligations
of a former member to a third party for purposes of collection. If
the association assigns or pledges its right to collect payments or
assessments to a financial institution, lender, or other third party,
that then the third party shall be
subject to the provisions of this section and, if the owner has
entered into a payment plan with the association, that
then the third party shall also conduct any
collection procedures in accordance with the provisions of that
payment plan.
(2) Subject to the limitations of this subdivision, after the
expiration of 30 days following the recording of a lien created
pursuant to subdivision (d), the lien may be enforced in any manner
permitted by law, including sale by the court, sale by the trustee
designated in the notice of delinquent assessment, or sale by a
trustee substituted pursuant to Section 2934a. Any sale by the
trustee shall be conducted in accordance with Sections 2924, 2924b,
and 2924c applicable to the exercise of powers of sale in mortgages
and deeds of trust. The fees of a trustee may not exceed the amounts
prescribed in Sections 2924c and 2924d, plus the cost of service for
either of the following:
(A) The notice of default pursuant to subdivision (j) of Section
1367.1.
(B) The decision of the board to foreclose upon the separate
interest of an owner as described in paragraph (3) of subdivision (c)
of Section 1367.4.
(h) Nothing in this section or in subdivision (a) of Section 726
of the Code of Civil Procedure prohibits actions against the owner of
a separate interest to recover sums for which a lien is created
pursuant to this section or prohibits an association from taking a
deed in lieu of foreclosure.
(i) If it is determined that a lien previously recorded against
the separate interest was recorded in error, the party who recorded
the lien shall, within 21 calendar days, record or cause to be
recorded in the office of the county recorder in which the notice of
delinquent assessment is recorded a lien release or notice of
rescission and provide the owner of the separate interest with a
declaration that the lien filing or recording was in error and a copy
of the lien release or notice of rescission.
(j) In addition to the requirements of Section 2924, a notice of
default shall be served by the association on the owner's legal
representative in accordance with the manner of service of summons in
Article 3 (commencing with Section 415.10) of Chapter 4 of Title 5
of Part 2 of the Code of Civil Procedure. The owner's legal
representative shall be the person whose name is shown as the owner
of a separate interest in the association's records, unless another
person has been previously designated by the owner as his or her
legal representative in writing and mailed to the association in a
manner that indicates that the association has received it.
(k) Upon receipt of a written request by an owner identifying a
secondary address for purposes of collection notices, the association
shall send additional copies of any notices required by this section
to the secondary address provided. The association shall notify
owners of their right to submit secondary addresses to the
association, at the time the association issues the pro forma
operating budget pursuant to Section 1365. The owner's request shall
be in writing and shall be mailed to the association in a manner that
shall indicate the association has received it. The owner may
identify or change a secondary address at any time, provided that, if
a secondary address is identified or changed during the collection
process, the association shall only be required to send notices to
the indicated secondary address from the point the association
receives the request.
(l) (1) An association that fails to comply with the procedures
set forth in this section shall, prior to recording a lien,
recommence the required notice process.
(2) Any costs associated with recommencing the notice process
shall be borne by the association and not by the owner of a separate
interest.
(m) This section only applies to liens recorded on or after
January 1, 2003.
(n) This section is subordinate to, and shall be interpreted in
conformity with, Section 1367.4.
SEC. 3. Section 1367.4 of the Civil Code is
amended to read:
1367.4. (a) Notwithstanding any law or any provisions of the
governing documents to the contrary, this section shall apply to
debts for assessments that arise on and after January 1, 2006.
(b) An association that seeks to collect delinquent regular or
special assessments of an amount less than three thousand six hundred
dollars ($3,600), not including any accelerated assessments, late
charges, fees and costs of collection, attorney's fees, or interest,
may not collect that debt through judicial or nonjudicial
foreclosure, but may attempt to collect or secure that debt in any of
the following ways:
(1) By a civil action in small claims court, pursuant to Chapter
5.5 (commencing with Section 116.110) of Title 1 of the Code of Civil
Procedure. An association that chooses to proceed by an action in
small claims court, and prevails, may enforce the judgment as
permitted under Article 8 (commencing with Section 116.810) of Title
1 of the Code of Civil Procedure. The amount that may be recovered in
small claims court to collect upon a debt for delinquent assessments
may not exceed the jurisdictional limits of the small claims court
and shall be the sum of the following:
(A) The amount owed as of the date of filing the complaint in the
small claims court proceeding.
(B) In the discretion of the court, an additional amount to that
described in subparagraph (A) equal to the amount owed for the period
from the date the complaint is filed until satisfaction of the
judgment, which total amount may include accruing unpaid assessments
and any reasonable late charges, fees and costs of collection,
attorney's fees, and interest, up to the jurisdictional limits of the
small claims court.
(2) By recording a lien on the owner's separate interest upon
which the association may not foreclose until the amount of the
delinquent assessments secured by the lien, exclusive of any
accelerated assessments, late charges, fees and costs of collection,
attorney's fees, or interest, equals or exceeds three thousand six
hundred dollars ($3,600) or the assessments secured by the lien are
more than 18 months delinquent. An association that chooses to record
a lien under these provisions, prior to recording the lien, shall
offer the owner and, if so requested by the owner, participate in
dispute resolution as set forth in Article 5 (commencing with Section
1363.810) of Chapter 4.
(3) Any other manner provided by law, except for judicial or
nonjudicial foreclosure.
(c) An association that seeks to collect delinquent regular or
special assessments of an amount of three thousand six hundred
dollars ($3,600) or more, not including any accelerated assessments,
late charges, fees and costs of collection, attorney's fees, or
interest, or any assessments secured by the lien that are more than
18 months delinquent, may use judicial or nonjudicial foreclosure
subject to the following conditions:
(1) Prior to initiating a foreclosure on an owner's separate
interest, the association shall offer the owner and, if so requested
by the owner, participate in dispute resolution pursuant to the
association's "meet and confer" program required in Article 5
(commencing with Section 1363.810) of Chapter 4 or alternative
dispute resolution as set forth in Article 2 (commencing with Section
1369.510) of Chapter 7. The decision to pursue dispute resolution or
a particular type of alternative dispute resolution shall be the
choice of the owner, except that binding arbitration shall not be
available if the association intends to initiate a judicial
foreclosure.
(2) The decision to initiate foreclosure of a lien for delinquent
assessments that has been validly recorded shall be made only by the
board of directors of the association and may not be delegated to an
agent of the association. The board shall approve the decision by a
majority vote of the board members in an executive session. The board
shall record the vote in the minutes of the next meeting of the
board open to all members. The board shall maintain the
confidentiality of the owner or owners of the separate interest by
identifying the matter in the minutes by the parcel number of the
property, rather than the name of the owner or owners. A board vote
to approve foreclosure of a lien shall take place at least 30 days
prior to any public sale.
(3) The board shall provide notice by personal service in
accordance with the manner of service of summons in Article 3
(commencing with Section 415.10) of Chapter 4 of Title 5 of Part 2 of
the Code of Civil Procedure to an owner of a separate interest who
occupies the separate interest or to the owner's legal
representative, if the board votes to foreclose upon the separate
interest. The board shall provide written notice to an owner of a
separate interest who does not occupy the separate interest by
first-class mail, postage prepaid, at the most current address shown
on the books of the association. In the absence of written
notification by the owner to the association, the address of the
owner's separate interest may be treated as the owner's mailing
address.
(4) A nonjudicial foreclosure by an association to collect upon a
debt for delinquent assessments shall be subject to a right of
redemption. The redemption period within which the separate interest
may be redeemed from a foreclosure sale under this paragraph ends 90
days after the sale. In addition to the requirements of Section
2924f, a notice of sale in connection with an association's
foreclosure of a separate interest in a common interest development
shall include a statement that the property is being sold subject to
the right of redemption created in this paragraph.
(d) The limitation on foreclosure of assessment liens for amounts
under the stated minimum in this section does not apply to
assessments owed by owners of separate interests in timeshare
estates, as defined in subdivision (x) of Section 11112 of the
Business and Professions Code, or to assessments owed by developers.