BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 2016 (Torres)
As Introduced
Hearing Date: June 15, 2010
Fiscal: No
Urgency: No
BCP:jd
SUBJECT
Common Interest Developments: Requests for Notices of Default
DESCRIPTION
This bill seeks to allow a homeowners association in a common
interest development to record a single request for a copy of a
trustee's deed upon the sale of any separate interest within the
association at foreclosure.
BACKGROUND
California, as well as the nation, is facing an unprecedented
threat to the economy and housing market due to increasing
numbers of foreclosures caused by mortgage payment defaults.
When a foreclosure occurs in a common interest development
(CID), and a struggling homeowner stops paying their association
dues, the association must continue to function despite that
loss of funds. If that property is sold in a foreclosure sale,
it is in the best interest of the association to begin
collecting dues from the new owner of that home as soon as
possible.
Under the Davis-Stirling Common Interest Development Act, CIDs
are to be managed by a homeowners association that is authorized
to levy regular and special assessments to cover operating
expenses and to fulfill their obligations to members of the
association. After sale or transfer of ownership, the
subsequent owner is responsible for paying assessments from the
time they become the legal owner of the property.
In order to assist associations in collecting assessments from
(more)
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subsequent purchasers of foreclosed properties, SB 1511
(Ducheny, Chapter 527, Statutes of 2008) allowed an association
to request that the person authorized to record the notice of
default (usually a trustee) mail the association the trustee's
deed upon sale. The deed both informs the association that the
property was sold, and includes information about the new owner
of the property so that the association may begin collection of
dues.
To address issues encountered by associations using the
provisions of SB 1511, this bill seeks to clarify that a
homeowners association may record a single request for a copy of
notices of a trustee's deed with regards to all separate
interests within the association.
CHANGES TO EXISTING LAW
Existing law , the Davis-Stirling Common Interest Development
Act, defines and regulates common interest developments (CIDs),
including the ability of the association to levy regular and
special assessments sufficient to perform its obligations.
(Civ. Code Sec. 1350 et seq.)
Existing law regulates the non-judicial foreclosure of
properties pursuant to the power of sale contained within a
mortgage contract. To commence the process, existing law
requires the trustee, mortgagee, or beneficiary to record a
Notice of Default and requires three months to lapse before
setting a date for sale of the property. (Civ. Code Secs. 2924,
2924f.) Existing law 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 Secs. 2924b(a), 2924b(b)(1).)
Existing law permits an association to record a request that the
mortgagee, trustee, or other person authorized to record a
notice of default mail the association a copy of the trustee's
deed upon sale of a separate interest within the association at
foreclosure. The request must include a legal description or
the assessor's parcel number of the separate interests, the name
and address of the association, and a statement that it is a
homeowners' association. (Civ. Code Sec. 2924b(f).)
Existing law requires the above request to be recorded before
the filing of a notice of default, and requires the mortgagee,
trustee, or other authorized person to mail the requested
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information to the association within 15 business days following
the date the trustee's deed is recorded. (Civ. Code Sec.
2924b(f).)
Existing law requires specified information to be included in
any document that effects or evidences a transfer or encumbrance
of an interest in real property or that releases or terminates
any interest, right, or encumbrance. (Gov. Code Sec. 27288.1.)
This bill would state that a request filed by an association
pursuant to the above provisions does not, for purposes of
Government Code Section 27288.1, constitute a request for a
document that either effects or evidences a transfer or
encumbrance of an interest in real property or that releases or
terminates any interest, right, or encumbrance of an interest in
real property.
COMMENT
1. Stated need for the bill
According to the author:
AB 2016 clarifies the process established by SB 1511, by
allowing HOAs to record one notice against all the
properties in their HOA as a group. The county assessors
have interpreted SB 1511 to require that an association
record a document on each individual home, versus on the
entire association in one action. This is expensive and
time consuming for an HOA. AB 2016 corrects this
misunderstanding.
2. Filing of a single request that applies to multiple
properties
SB 1511 (Ducheny, 2008) permitted an association to request that
the person authorized to record a notice of default mail the
association the trustee's deed upon sale in foreclosure. The
association can then begin collecting assessments from the
subsequent owner based upon the contact information contained
within the deed. In response to difficulties faced with several
county recorders, AB 2016 seeks to clarify that an association
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may file a single request that covers all properties within the
association by enacting two separate changes. Although the
filing of a single request is already contemplated by existing
statutory language, several changes are required in order to
address the concerns of the county recorders who are refusing to
record such a request.
First, AB 2016 provides that the ability for an association to
file a request applies notwithstanding the general provision
under existing law which permits any person to request a copy of
a notice of default or notice of sale. Since those requests for
a notice of default or notice of sale only apply to one specific
parcel (not multiple parcels) - the addition of
"notwithstanding" to the SB 1511 language would clearly separate
those two different types of requests. Those two provisions are
already in two separate subdivisions and the proposed addition
appears to be more technical than substantive.
Second, AB 2016 clarifies that for purposes of Section 27288.1
of the Government Code, those requests do not constitute a
document that effects or evidences a transfer or encumbrance of
an interest in real property, or, that releases or terminates
any interest, right, or encumbrance of an interest in real
property. If a request were construed to have those effects,
Section 27288.1 would require additional property-specific
information to be included in the request - that inclusion would
preclude the recording of one notice for multiple properties.
While a trustee's deed would technically be evidence of a
transfer of an interest in real property, the initial request
for that deed should not be seen to effect or evidence a
transfer, or release or terminate an interest. That document is
a simple request and should have no effect on title.
As drafted, AB 2016 provides that those requests do not
constitute a "request" for a document that has the
above-specified effects. Since the requirements of Government
Code Section 27288.1 apply to the document actually filed - not
the document requested - the inclusion of the word "request" may
cause further confusion. The following amendment is suggested
to strike that second reference to "request."
Suggested amendment:
On page 7, line 29, strike "a request for"
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3. Consistent with the intent of SB 1511
Although not specifically discussed when this Committee heard SB
1511, the enacted language permitted the association to request
"a copy of any trustee's deed upon sale concerning a separate
interest" and specified that "[t]he request shall include a
legal description or the assessor's parcel number of the
separate interests." (Civ. Code Sec. 2924b(f).) The word "any"
and the use of the plural "interests" arguably served to codify
the intent of the sponsor that an association may record a
single request for all properties within the CID. From a policy
standpoint, the recording of those single requests would serve
to effectuate the original intent of the sponsor and allow
associations to minimize their recording costs.
It should also be noted that those requests would still include
a legal description or assessor's parcel number for each of the
affected properties. The most significant effect of clarifying
the recording of a single notice would be to allow the
association to record a request that applies to multiple
properties without incurring the substantial fees that would
have been required if each request was filed individually.
Support : Executive Council of Homeowners (ECHO)
Opposition : None Known
HISTORY
Source : Community Association Institute
Related Pending Legislation : None Known
Prior Legislation : SB 1511 (Ducheny, Chapter 527, Statutes of
2008) (See Background.)
Prior Vote :
Assembly Banking and Finance (Ayes 12, Noes 0)
Assembly Judiciary (Ayes 10, Noes 0)
Assembly Floor (Ayes 75, Noes 0)
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