BILL ANALYSIS
AB 2016
Page 1
Date of Hearing: April 5, 2010
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Mike Eng, Chair
AB 2016 (Torres) - As Introduced: February 17, 2010
SUBJECT : Common interest developments: requests for notices of
default.
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 :
1)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.
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
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
AB 2016
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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. [Civ. 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. [Civ. 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. [Civ. 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. [Civ. Code 2924b
(a), 2924b (b) (1).]
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
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.
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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, Statues 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.
REGISTERED SUPPORT / OPPOSITION :
Support
AB 2016
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The Community Associations Institute (CAI)
Opposition
None on file.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081