BILL ANALYSIS �
AB 2273
Page 1
Date of Hearing: May 8, 2012
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 2273 (Wieckowski) - As Amended: April 26, 2012
As Proposed to Be Amended
SUBJECT : COMMON INTEREST DEVELOPMENTS: REQUIRED DOCUMENTS
KEY ISSUE : IN ORDER TO ENSURE THAT A HOMEOWNERS' ASSOCIATION
KNOWS WHO THE NEW OWNER IS WHEN A UNIT IN A COMMON INTEREST
DEVELOPMENT IS FORECLOSED UPON, SHOULD THE MORTGAGEE OR TRUSTEE
BE REQUIRED TO MAIL A COPY OF THE DEED WITHIN 15 BUSINESS DAYS
OF THE SALE AND RECORD THE DEED NO LATER THAN 30 DAYS AFTER THE
DATE OF SALE?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This bill seeks to assist homeowners' associations with problems
they reportedly face in collecting unpaid assessments upon a
separate interest in a CID that has recently changed ownership
through foreclosure. As proposed to be amended, the bill simply
requires the mortgagee or trustee to mail to the HOA a copy of
any trustee's deed upon sale of the separate interest, and to do
so within 15 business days following the date of the trustee's
sale. The bill also requires, in any case, the sale to be
recorded no later than 30 days after the date of the sale in the
recorder's office of the county where the property is located.
The bill is sponsored and supported by the California Conference
of Bar Associations and homeowner's associations, whose
individual members have provided the Committee with hundreds of
letters of support. It is believed but not known for certain at
the time of this analysis that the proposed amendments, taken
together, substantially address concerns raised by the bankers,
trustees, and title companies and are sufficient to remove their
opposition to the bill. If that is the case, then the bill
would have no other known opposition.
SUMMARY : Streamlines the process for the mortgagee or trustee
for a separate interest in a CID to provide information about
the new owner to the HOA necessary for the purpose of invoicing
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HOA assessments. Specifically, this bill :
1)Requires the sale of a property in a CID, executed under the
power of sale contained in a deed of trust or mortgage, to be
recorded within 30 days after the date of the sale in the
recorder's office of the county where the property is located,
except that failure to comply shall not affect the validity of
a sale in favor of a bona fide purchaser.
2)Requires a mortgagee, trustee, or other person authorized to
record a notice of default regarding a separate interest in a
CID to mail to the association a copy of any trustee's deed
upon sale of the separate interest, and to do so within 15
business days following the date of the trustee's sale,
provided that the HOA has filed a proper request, as
specified, with the county recorder.
EXISTING LAW :
1)Pursuant to 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. (Civil Code Section 1350 et seq. All further
references are to this code unless otherwise stated.)
2)Authorizes an HOA to record a lien on an owner's separate
interest in the CID for any delinquent assessments owed by the
owner, including delinquent assessment, any costs of
collection, late charges, and interest. Provides 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. (Section
1367.)
3)Allows an HOA to record a request that a mortgagee, trustee,
or other person authorized to record a notice of default
regarding any separate interest governed by the HOA, mail to
the association a copy of any trustee's deed upon sale
concerning the separate interest. (Section 2924b, subd.(f).)
4)Requires the above request to 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. Further provides that
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subsequent requests of a HOA shall supersede prior requests,
and a request shall be recorded before the filing of a notice
of default. (Section 2924b, subd.(f).)
5)Requires the mortgagee or trustee to mail the requested
information to the HOA within 15 business days following the
date the trustee's deed is recorded. (Section 2924b,
subd.(f).)
COMMENTS : This bill seeks to assist homeowners associations
with problems they reportedly face in collecting unpaid
assessments upon a separate interest in a CID that has recently
changed ownership through foreclosure. As proposed to be
amended, the bill simply requires the mortgagee or trustee to
mail to the HOA a copy of any trustee's deed upon sale of the
separate interest, and to do so within 15 business days
following the date of the trustee's sale. The bill also
requires, in any case, the sale to be recorded no later than 30
days after the date of the sale in the recorder's office of the
county where the property is located.
Stated Need for the Bill . The bill is co-sponsored by the
California Conference of Bar Associations (CCBA) and the
Community Associations Institute (CAI), a group representing
HOAs. According to CCBA, "even prior to the current housing
crisis, it has been a struggle for homeowners associations in
CIDs to keep track of new owners within the development. All
too often, in the current market, a beneficiary under a deed of
trust will acquire title to a separate interest through
foreclosure, or under a deed in lieu, and will provide no notice
to the HOA whose interest is of record that the beneficiary has
acquired title. Following foreclosure the acquiring beneficiary
may fail to maintain the property or comply with the HOA's
Covenants, Conditions, and Restrictions (CC&Rs)."
According to CAI, homeowner associations are funded solely
through the assessments paid by owners in the CID, and it is
unfair for lenders who own units through foreclosure to avoid
their fair share of HOA assessments when common benefits from
maintenance and upkeep continue to flow to the foreclosed
separate interests even while unpaid. Foreclosing lenders are
not required to record a trustee deed when taking a property
back as a credit bidder, which contributes to the difficulty the
HOA faces in determining who to hold responsible for the
assessments. According to a February 2012 survey of 125 of its
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member HOAs, CAI reports that 73% of delayed foreclosure
recordations were delayed more than 60 days, and that 76% of the
time, it takes over 60 days before the foreclosing party starts
paying any assessments. When a foreclosing lender fails to
record a deed after the sale, the HOA does not know from whom to
collect assessments. As a result, in its survey CAI reports
that its member HOAs have been forced to increase the
assessments on existing homeowners to cover the loss 63% of the
time, as well as to defer maintenance expenses 55% of the time.
As proposed to be amended, the bill seeks to speed up the time
frame for identifying the new owner to the HOA. Under existing
law, provided that the HOA has filed a proper request with the
county recorder, as specified, the mortgagee or trustee is
required to mail the requested information (i.e. a copy of the
trustee's deed) to the HOA within 15 business days following the
date the trustee's deed is recorded. As proposed to be amended,
this bill instead requires the same mailing of the requested
information to occur within 15 business days following the date
of the trustee's sale itself-an earlier point in time that is no
longer conditioned upon recordation of the deed.
This proposed amendment seeks to streamline the existing process
for the mortgagee or trustee to provide this information in a
timely manner to the HOA, a process which was established with
the participation of HOAs, banks, and other stakeholders through
discussions over SB 1511 (Ducheny) of 2008. Since SB 1511
became law, HOAs have reported continued difficulties in
obtaining the information they need to invoice the new owner its
fair share of assessments, and this proposed amendment is
intended to address the negative impact to HOAs that reportedly
arises from excessive delays in recording the deed.
As proposed to be amended, the bill also requires in every case
the sale to be recorded no later than 30 days after the date of
the sale, but without liability for any liens for unpaid
assessments on the foreclosed property. This is intended to
ensure that the HOA may obtain that information about the new
owner from the record of the deed no later than 30 days after
the sale, even in cases where the 15-day requirement was not
complied with. This amendment proposed by the author is
intended to address concerns about potential unintended
consequences arising from holding the foreclosing lender
responsible for any lien for assessments unpaid by the
foreclosed former owner of the CID separate interest.
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It is believed but not known for certain at the time of this
analysis that the proposed amendments, taken together,
substantially address the concerns raised by the bankers,
trustees, and title companies and are sufficient to remove their
opposition to the bill.
Previous Legislation : SB 1511 (Ducheny), Ch. 527, Stats. 2008,
requires a mortgagee, trustee, or other person authorized to
record a notice of default regarding a separate interest in a
CID to mail to the association a copy of any trustee's deed upon
sale of the separate interest, and to do so within 15 business
days following the date of the trustee's sale, provided that the
HOA has filed a proper request, as specified, with the county
recorder.
ARGUMENTS IN SUPPORT : The Congress of California Seniors (CCS)
supports the bill, writing that it "supports efforts to protect
senior members of HOAs from the negative effects that follow
property title changes within the HOA that are not recorded in a
timely manner." CCS further contends that "the results of
lenders' failure to record or provide notice of the sale
transfer are: (1) HOA assessments are not paid; (2) HOA
maintenance is crippled; (3) Remaining homeowners are forced to
pay higher assessments to make up for the lenders' unpaid fair
share portion, thus jeopardizing their own personal finances;
(4) Entire neighborhoods can turn into blight; and (5) County
assessors are (unable) to bill for property tax, depriving
municipalities of much needed revenue."
REGISTERED SUPPORT / OPPOSITION :
Support
Community Associations Institute (co-sponsor)
Conference of California Bar Associations (co-sponsor)
Associa Equity Management
Congress of California Seniors
Executive Council of Homeowners (ECHO)
Southwest California Legislative Council
Hundreds of letters from HOA boards of directors and individual
members of HOAs across California
Opposition (to the previous version of the bill)
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California Bankers Association
California Land Title Association
California Mortgage Bankers Association
United Trustees Association
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334