Amended in Senate April 7, 2016

Senate BillNo. 918


Introduced by Senator Vidak

January 27, 2016


An act tobegin insert amend Sections 5660, 5665, 5670, 5690, 5700, 5705, 5710, 5720, and 5730 of, and to add Section 4041 to, the Civil Code,end insert relating to common interest developments.

LEGISLATIVE COUNSEL’S DIGEST

SB 918, as amended, Vidak. Common interest developments.

Existing law, the Davis-Stirling Common Interest Development Act, defines and regulates common interest developments. Existing law authorizes a homeowners association to place a lien on a property and to take specified enforcement actions to satisfy outstanding dues or assessments owed on a property in the development.

begin insert

This bill would require the owners of the separate interests in a common interest development to annually provide the association with specified written information for the purpose of receiving notice of an assessment lien on their property. The bill would require the association to provide specified notice by personal service to an owner and to offer to participate in dispute resolution procedures with an owner prior to recording a notice of default against the owner’s separate interest. The bill would require that specified language be included in a written notice provided to an owner prior to the recording of a notice of default by the association.

end insert
begin insert

The bill would also require the association to try to personally serve the owner on at least 3 occasions, including at specified times, and to prepare a statement regarding the attempts at personal service. The bill would make conforming changes.

end insert
begin insert

Existing law requires an association to provide an owner with an opportunity to meet and confer with the association prior to recording a lien for delinquent assessments.

end insert
begin insert

This bill would suspend any action to enforce a lien by the association for up to 90 days when an owner requests to meet and confer.

end insert
begin delete

This bill would state the intent of the Legislature to enact legislation to address issues relating to notice to unit owners in common interest developments who are delinquent in the payment of association assessments.

end delete

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 4041 is added to the end insertbegin insertCivil Codeend insertbegin insert, to read:end insert

begin insert
2

begin insert4041.end insert  

(a) An owner of a separate interest shall, on an annual
3basis, provide written notice to the association of all of the
4following:

5
(1) The mailing address or addresses to which notices from the
6association are to be delivered.

7
(2) An alternate or secondary address where notices from the
8association are to be delivered.

9
(3) The name and address of his or her legal representative, if
10any, including any person with power of attorney or other person
11who can be contacted in the event of the owner’s extended absence
12from the separate interest.

13
(4) Whether the separate interest is owner-occupied, is rented
14out, if the parcel is developed but vacant, or if the parcel is
15undeveloped land.

16
(b) The association shall solicit these annual disclosures of
17each owner and enter the data into its books and records at least
1830 days prior to making its own required annual disclosures to
19members under Section 5300.

20
(c) If an owner fails to provide the notices as set forth in
21paragraphs (1) and (2) of subdivision (a), the property address
22shall be deemed to be the mailing address to which notices are to
23be delivered.

end insert
24begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 5660 of the end insertbegin insertCivil Codeend insertbegin insert is amended to read:end insert

25

5660.  

At least 30 days prior to recordingbegin delete aend deletebegin insert an assessmentend insert lien
26upon the separate interest of the owner of record to collect a debt
P3    1that is past due under Section 5650, the association shall notify
2the owner of record in writing by certified mail of the following:

3(a) begin deleteA general description of the end deletebegin insertThe actual end insertcollection and lien
4enforcement procedures of the associationbegin insert adopted by the board,
5disclosed to owners under Section 5310, and in effect at the time
6that the notice is sent under this sectionend insert
and the method of
7calculation of the amount, a statement that the owner of the separate
8interest has the right to inspectbegin insert and copyend insert the association records
9pursuant to Section 5205,begin delete andend deletebegin insert and the right to request a copy of
10the owner’s own assessment account ledger, if any, in the custody
11of the association’s agents. The association shall also notify the
12owner ofend insert
the following statement in 14-point boldface type, if
13printed, or in capital letters, if typed:


begin insertend insert

15“IMPORTANT NOTICE: IF YOUR SEPARATE INTEREST
16IS PLACED IN FORECLOSURE BECAUSE YOU ARE BEHIND
17IN YOUR ASSESSMENTS, IT MAY BE SOLD WITHOUT
18COURT ACTION.”


begin insertend insert

20(b) An itemized statement of the charges owed by the owner,
21including items on the statement which indicate the amount of any
22delinquent assessments, the fees and reasonable costs of collection,
23reasonable attorney’s fees, any late charges, and interest, if any.
24
begin insert The itemized statement shall show how and when the owner’s
25payments were applied to the assessment debt and to collection
26charges by the association or by its agent.end insert

27(c) A statement that the owner shall not be liable to pay the
28charges, interest, and costs of collection, if it is determined the
29assessment was paid on time to the association.

begin insert

30
(d) A statement that the collection practices of the association
31may be governed by state and federal laws regarding fair debt
32collection and that penalties can be imposed for debt collection
33practices that violate these laws.

end insert
begin delete

34(d)

end delete

35begin insert(e)end insert The right to request a meeting with the board as provided
36in Section 5665.

begin delete

37(e)

end delete

38begin insert(f)end insert The right to dispute the assessment debt by submitting a
39written request for dispute resolution to the association pursuant
P4    1to the association’s “meet and confer” program required in Article
22 (commencing with Section 5900) of Chapter 10.

begin delete

3(f)

end delete

4begin insert(g)end insert The right to request alternative dispute resolution with a
5neutral third party pursuant to Article 3 (commencing with Section
65925) of Chapter 10 before the association maybegin delete initiate foreclosureend delete
7begin insert record the assessment lienend insert against the owner’s separate interest,
8except that binding arbitration shall not be available if the
9association intends to initiate a judicial foreclosure.

10begin insert

begin insertSEC. 3.end insert  

end insert

begin insertSection 5665 of the end insertbegin insertCivil Codeend insertbegin insert is amended to read:end insert

11

5665.  

(a) An owner, other than an owner of any interest that
12is described in Section 11212 of the Business and Professions Code
13that is not otherwise exempt from this section pursuant to
14subdivision (a) of Section 11211.7 of the Business and Professions
15Code, may submit a written request to meet with the board to
16discuss a payment plan for the debt noticed pursuant to Section
175660. The association shall provide the owners the standards for
18payment plans, if any exists.

19(b) The board shall meet with the owner in executive session
20within 45 days of the postmark of the request, if the request is
21mailed within 15 days of the date of the postmark of the notice,
22unless there is no regularly scheduled board meeting within that
23period, in which case the board may designate a committee of one
24or more directors to meet with the owner.

25(c) Payment plans may incorporate any assessments that accrue
26during the payment plan period. Additional late fees shall not
27accrue during the payment plan period if the owner is in
28compliance with the terms of the payment plan.

29(d) Payment plans shall not impede an association’s ability to
30record a lien on the owner’s separate interest to secure payment
31of delinquent assessments.

32(e) In the event of a default on any payment plan, the association
33may resume its efforts to collect the delinquent assessments from
34the time prior to entering into the payment plan.

begin insert

35
(f) Nothing in this section restricts the right of an owner, with
36or without a payment plan in place, from making a payment in any
37amount directly to the association pursuant to subdivision (a) of
38Section 5655. The association shall accept the payment and shall
39apply it per subdivision (a) of Section 5655.

end insert
40begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 5670 of the end insertbegin insertCivil Codeend insertbegin insert is amended to read:end insert

P5    1

5670.  

begin insert(a)end insertbegin insertend insert Prior to recording a lien for delinquent assessments,
2an association shall offer the owner and, if so requested by the
3owner, participate in dispute resolution pursuant to the association’s
4“meet and confer” program required in Article 2 (commencing
5with Section 5900) of Chapter 10.

begin insert

6
(b) When an owner requests to meet and confer under this
7section, the association shall suspend all collection efforts for 90
8days or until the meet and confer procedures have been completed,
9whichever is sooner. If the association fails to respond in writing
10within 30 days from the date of the owner’s request with a good
11faith effort to establish a time and place to meet and confer, then
12any lien recorded thereafter by the association shall be void and
13unenforceable. If the owner fails to respond to the association's
14effort to establish a time and place to meet and confer within 30
15days thereof, then the association may proceed with collection
16efforts, including the recording of a lien, without further pursuing
17a meet and confer procedure.

end insert
18begin insert

begin insertSEC. 5.end insert  

end insert

begin insertSection 5690 of the end insertbegin insertCivil Codeend insertbegin insert is amended to read:end insert

19

5690.  

An association that fails to comply with the procedures
20set forth in this article shall, prior to recording a lien, recommence
21the required noticebegin delete process.end deletebegin insert process, commencing with Section
225660.end insert
Any costs associated with recommencing the notice process
23shall be borne by the association and not by the owner of a separate
24interest.

25begin insert

begin insertSEC. 6.end insert  

end insert

begin insertSection 5700 of the end insertbegin insertCivil Codeend insertbegin insert is amended to read:end insert

26

5700.  

(a) Except as otherwise provided in this article, after
27the expiration of 30 days following the recording ofbegin delete aend deletebegin insert an
28assessmentend insert
lien created pursuant to Section 5675, the lien may be
29enforced in any manner permitted by law, including sale by the
30court, sale by the trustee designated in the notice of delinquent
31assessment, or sale by a trustee substituted pursuant to Section
322934a.

33(b) Nothing in Article 2 (commencing with Section 5650) or in
34subdivision (a) of Section 726 of the Code of Civil Procedure
35prohibits actions against the owner of a separate interest to recover
36sums for which a lien is created pursuant to Article 2 (commencing
37with Section 5650) or prohibits an association from taking a deed
38in lieu of foreclosure.

39begin insert

begin insertSEC. 7.end insert  

end insert

begin insertSection 5705 of the end insertbegin insertCivil Codeend insertbegin insert is amended to read:end insert

P6    1

5705.  

(a) Notwithstanding any law or any provisions of the
2governing documents to the contrary, this section shall apply to
3debts for assessments that arise on and after January 1, 2006.

4(b) Prior tobegin delete initiating a foreclosureend deletebegin insert recording a notice of defaultend insert
5 on an owner’s separate interest, the association shall offer the
6owner and, if so requested by the owner,begin insert shallend insert participate in dispute
7resolution pursuant to the association’s “meet and confer” program
8required in Article 2 (commencing with Section 5900) of Chapter
910 or alternative dispute resolution as set forth in Article 3
10(commencing with Section 5925) of Chapter 10. The decision to
11pursue dispute resolution or a particular type of alternative dispute
12resolution shall be the choice of the owner, except that binding
13arbitration shall not be available if the association intends to initiate
14a judicial foreclosure.

15(c) The decision tobegin delete initiate foreclosure ofend deletebegin insert record a notice of
16default in order to enforceend insert
a lien for delinquent assessments that
17has been validly recorded shall be made only by the board and
18begin delete mayend deletebegin insert shallend insert not be delegated to an agent of the association. The
19board shall approve the decision by a majority vote of the directors
20in an executive session. The board shall record the vote in the
21minutes of the next meeting of the board open to all members. The
22board shall maintain the confidentiality of the owner or owners of
23the separate interest by identifying the matter in the minutes by
24the parcel number of the property, rather than the name of the
25owner or owners. A board vote to approve foreclosure of a lien
26shall take place at least 30 days prior tobegin delete any public sale.end deletebegin insert recording
27the notice of default.end insert

28(d) begin deleteThe end deletebegin insertAfter the board votes to enforce the lien but before
29recording the notice of default, the end insert
board shall provide notice by
30personal servicebegin insert of its vote and of its intention to enforce the lienend insert
31 in accordance with the manner of service of summons in Article
323 (commencing with Section 415.10) of Chapter 4 of Title 5 of
33Part 2 of the Code of Civil Procedure to an owner of a separate
34interest who occupies the separate interest or to the owner’s legal
35representative, if the board votes to foreclose upon the separate
36interest. begin delete The board shall provide written notice to an owner of a
37separate interest who does not occupy the separate interest by
38first-class mail, postage prepaid, at the most current address shown
39on the books of the association. In the absence of written
40notification by the owner to the association, the address of the
P7    1owner’s separate interest may be treated as the owner’s mailing
2address.end delete
begin insert To effect personal service, the association and its agent
3shall rely on the data provided annually by the owner of the
4separate interest under Section 4041.end insert

begin insert

5
(e) If the association or its agents have attempted personal
6service, in accordance with the manner of service of summons as
7set forth in Article 3 (commencing with Section 415.10) of the Code
8of Civil Procedure three or more times, including at least one
9attempt after 6:00 p.m. and one attempt on a weekend or legal
10holiday, on an owner who occupies the separate interest and, then
11both the association and its agents shall jointly subscribe a
12statement of compliance with the personal service requirement.
13This statement shall be recorded with the county recorder where
14the subject property is located. The statement shall include all of
15the following data:

end insert
begin insert

16
(1) The physical address of subject property.

end insert
begin insert

17
(2) The names of owners of the separate interest as they appear
18on the deed of title.

end insert
begin insert

19
(3) The addresses where official notices are to be sent, per
20Section 4041, as shown on the association’s membership books.

end insert
begin insert

21
(4) The names and titles of documents to be delivered including
22the board’s vote as it will appear in the association minutes and
23a copy of the statement.

end insert
begin insert

24
(5) The names of, and contact information for, the persons
25attempting service.

end insert
begin insert

26
(6) The dates and times of attempted service.

end insert
begin insert

27
(f) The board shall provide written notice to an owner of a
28separate interest who does not occupy the separate interest by
29first-class mail, postage prepaid, at the most current address shown
30on the books of the association per Section 4041. In the absence
31of written notification under Section 4041 by the owner to the
32association, the address of the owner’s separate interest shall be
33deemed to be the owner’s mailing address.

end insert
34begin insert

begin insertSEC. 8.end insert  

end insert

begin insertSection 5710 of the end insertbegin insertCivil Codeend insertbegin insert is amended to read:end insert

35

5710.  

(a) Any sale by the trustee shall be conducted in
36accordance with Sections 2924, 2924b, and 2924c applicable to
37the exercise of powers of sale in mortgages and deeds of trust.

38(b) In addition to the requirements of Section 2924, the
39association shall serve a notice of default on the person named as
40the owner of the separate interest in the association’s records or,
P8    1if that person has designated a legal representative pursuant to this
2subdivision, on that legal representative. Service shall be in
3accordance with the manner of service of summons in Article 3
4(commencing with Section 415.10) of Chapter 4 of Title 5 of Part
52 of the Code of Civil Procedure.begin delete Anend deletebegin insert If the association or its agents
6have attempted personal service three or more times then it may
7execute a statement of due diligence pursuant to Section 5705,
8regarding the attempts to serve the notice of default. Pursuant to
9paragraph (3) of subdivision (a) of Section 4041, anend insert
owner may
10designate a legal representative in a writing that is mailed to the
11association in a manner that indicates that the association has
12received it.

13(c) The fees of a trustee may not exceed the amounts prescribed
14in Sections 2924c and 2924d, plus the cost of service for either of
15the following:

16(1) The notice of default pursuant to subdivision (b).

17(2) The decision of the board to foreclose upon the separate
18interest of an owner as described in subdivision (d) of Section
19 5705.

20begin insert

begin insertSEC. 9.end insert  

end insert

begin insertSection 5720 of the end insertbegin insertCivil Codeend insertbegin insert is amended to read:end insert

21

5720.  

(a) Notwithstanding any law or any provisions of the
22governing documents to the contrary, this section shall apply to
23debts for assessments that arise on and after January 1, 2006.

24(b) An association that seeks to collect delinquent regular or
25special assessments of an amount less than one thousand eight
26hundred dollars ($1,800), not including any accelerated
27assessments, late charges, fees and costs of collection, attorney’s
28fees, or interest, may not collect that debt through judicial or
29nonjudicial foreclosure, but may attempt to collect or secure that
30debt in any of the following ways:

31(1) By a civil action in small claims court, pursuant to Chapter
325.5 (commencing with Section 116.110) of Title 1 of Part 1 of the
33Code of Civil Procedure. An association that chooses to proceed
34by an action in small claims court, and prevails, may enforce the
35judgment as permitted under Article 8 (commencing with Section
36116.810) of Chapter 5.5 of Title 1 of Part 1 of the Code of Civil
37Procedure. The amount that may be recovered in small claims
38court to collect upon a debt for delinquent assessments may not
39exceed the jurisdictional limits of the small claims court and shall
40be the sum of the following:

P9    1(A) The amount owed as of the date of filing the complaint in
2the small claims court proceeding.

3(B) In the discretion of the court, an additional amount to that
4described in subparagraph (A) equal to the amount owed for the
5period from the date the complaint is filed until satisfaction of the
6judgment, which total amount may include accruing unpaid
7assessments and any reasonable late charges, fees and costs of
8collection, attorney’s fees, and interest, up to the jurisdictional
9limits of the small claims court.

10(2) By recording a lien on the owner’s separate interest upon
11which the association may not foreclose until the amount of the
12delinquent assessments secured by the lien, exclusive of any
13accelerated assessments, late charges, fees and costs of collection,
14attorney’s fees, or interest, equals or exceeds one thousand eight
15hundred dollars ($1,800) or the assessments secured by the lien
16are more than 12 months delinquent. An association that chooses
17to record a lien under these provisions, prior to recording the lien,
18shall offer the owner and, if so requested by the owner, participate
19in dispute resolution as set forth in Article 2 (commencing with
20Section 5900) of Chapter 10.

21(3) Any other manner provided by law, except for judicial or
22nonjudicial foreclosure.

23(c) The limitation on foreclosure of assessment liens for amounts
24under the stated minimum in this section does not apply tobegin delete anyend delete
25begin insert eitherend insert of the following:

26(1) Assessments secured by a lien that are more than 12 months
27delinquent.

28(2) Assessments owed by owners of separate interests in
29time-share estates, as defined in subdivision (x) of Section 11212
30of the Business and Professions Code.

begin delete

31(3) Assessments owed by the developer.

end delete
32begin insert

begin insertSEC. 10.end insert  

end insert

begin insertSection 5730 of the end insertbegin insertCivil Codeend insertbegin insert is amended to read:end insert

33

5730.  

(a) The annual policy statement, prepared pursuant to
34Section 5310, shall include the following notice, in at least 12-point
35type:


37“NOTICE ASSESSMENTS AND FORECLOSURE


39This notice outlines some of the rights and responsibilities of
40owners of property in common interest developments and the
P10   1associations that manage them. Please refer to the sections of the
2Civil Code indicated for further information. A portion of the
3information in this notice applies only to liens recorded on or after
4January 1, 2003. You may wish to consult a lawyer if you dispute
5an assessment.


7ASSESSMENTS AND FORECLOSURE

8Assessments become delinquent 15 days after they are due,
9unless the governing documents provide for a longer time. The
10failure to pay association assessments may result in the loss of an
11owner’s property through foreclosure. Foreclosure may occur
12either as a result of a court action, known as judicial foreclosure,
13or without court action, often referred to as nonjudicial foreclosure.
14For liens recorded on and after January 1, 2006, an association
15may not use judicial or nonjudicial foreclosure to enforce that lien
16if the amount of the delinquent assessments or dues, exclusive of
17any accelerated assessments, late charges, fees, attorney’s fees,
18interest, and costs of collection, is less than one thousand eight
19hundred dollars ($1,800). For delinquent assessments or dues in
20excess of one thousand eight hundred dollars ($1,800) or more
21than 12 months delinquent, an association may use judicial or
22 nonjudicial foreclosure subject to the conditions set forth in Article
233 (commencing with Section 5700) of Chapter 8 of Part 5 of
24Division 4 of the Civil Code. When using judicial or nonjudicial
25foreclosure, the association records a lien on the owner’s property.
26The owner’s property may be sold to satisfy the lien if the amounts
27secured by the lien are not paid. (Sections 5700 through 5720 of
28the Civil Code, inclusive)

29In a judicial or nonjudicial foreclosure, the association may
30recover assessments, reasonable costs of collection, reasonable
31attorney’s fees, late charges, and interest. The association may not
32use nonjudicial foreclosure to collect fines or penalties, except for
33costs to repair common area damaged by a member or a member’s
34guests, if the governing documents provide for this. (Section 5725
35of the Civil Code)

36The association must comply with thebegin insert notice and disclosureend insert
37 requirements of Article 2 (commencing with Section 5650) of
38Chapter 8 of Part 5 of Division 4 of the Civil Code when collecting
39delinquent assessments. If the association fails to follow these
40requirements, it may not recordbegin delete aend deletebegin insert an assessmentend insert lien on the owner’s
P11   1property until it has satisfied those requirements. Any additional
2costs that result from satisfying the requirements are the
3responsibility of the association. (Section 5675 of the Civil Code)

4At least 30 days prior to recording a lien on an owner’s separate
5interest, the association must provide the owner of record with
6certain documents by certified mail, including a description of its
7collection and lien enforcement procedures and the method of
8calculating the amount. It must also provide an itemized statement
9of the charges owed by the owner. An owner has a right to review
10the association’sbegin insert and the agent’send insert records to verify the debt. (Section
115660 of the Civil Code)

12If a lien is recorded against an owner’s property in error, the
13person who recorded the lien is required to record a lien release
14within 21 days, and to provide an owner certain documents in this
15regard. (Section 5685 of the Civil Code)

16The collection practices of the association may be governed by
17state and federal laws regarding fair debt collection. Penalties can
18be imposed for debt collection practices that violate these laws.


20PAYMENTS

21When an owner makes a payment, the owner may request a
22receipt, and the association is required to provide it. On the receipt,
23the association must indicate the date of payment and the person
24who received it. The association must inform owners of a mailing
25address for overnight payments. (Section 5655 of the Civil Code)

26An owner may, but is not obligated to, pay under protest any
27disputed charge or sum levied by the association, including, but
28not limited to, an assessment, fine, penalty, late fee, collection
29cost, or monetary penalty imposed as a disciplinary measure, and
30by so doing, specifically reserve the right to contest the disputed
31charge or sum in court or otherwise.

32An owner may dispute an assessment debt by submitting a
33written request for dispute resolution to the association as set forth
34in Article 2 (commencing with Section 5900) of Chapter 10 of
35Part 5 of Division 4 of the Civil Code. In addition, an association
36may notbegin delete initiate a foreclosure without participating inend deletebegin insert record an
37assessment lien without first offering to participate with the owner
38in the association’s internal dispute resolution or procedures orend insert

39 alternative dispute resolution with a neutral third party as set forth
40in Article 3 (commencing with Section 5925) of Chapter 10 of
P12   1Part 5 of Division 4 of the Civil Code, if so requested by the owner.
2Binding arbitration shall not be available if the association intends
3to initiate a judicial foreclosure.

4An owner is not liable for charges, interest, and costs of
5collection, if it is established that the assessment was paid properly
6on time. (Section 5685 of the Civil Code)


8MEETINGS AND PAYMENT PLANS

9An owner of a separate interest that is not a time-share interest
10may request the association to consider a payment plan to satisfy
11a delinquent assessment. The association must inform owners of
12the standards for payment plans, if any exists. (Section 5665 of
13the Civil Code)

14The board must meet with an owner who makes a proper written
15request for a meeting to discuss a payment plan when the owner
16has received a notice of a delinquent assessment. These payment
17plans must conform with the payment plan standards of the
18association, if they exist. (Section 5665 of the Civil Code)”


begin insertend insert
begin insert

20
Nothing in this section restricts the right of an owner, with or
21without a payment plan in place, from making a payment in any
22amount at any time directly to the association toward an overdue
23assessment pursuant to Section 5655.

end insert

25(b) An association distributing the notice required by this section
26to an owner of an interest that is described in Section 11212 of the
27Business and Professions Code that is not otherwise exempt from
28this section pursuant to subdivision (a) of Section 11211.7 of the
29Business and Professions Code may delete from the notice
30described in subdivision (a) the portion regarding meetings and
31payment plans.

begin delete
32

SECTION 1.  

It is the intent of the Legislature to enact
33legislation to address issues relating to notice to unit owners in
34common interest developments who are delinquent in the payment
35of association assessments.

end delete


O

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