Assessment, Collection and Foreclosure

Homeowner associations (“HOA”) have, for better or worse gotten into the assessment, collection and foreclosure business. The Davis Stirling Act, titled under California Civil Code Sections 5600 – 5740 (See Chapter 8) has organized the assessment, collection and foreclosure process for HOAs. Within this newly redrafted section of law, an association or their attorney/lawyer can quickly check the rules on establishment and imposition of assessments, assessment payment and delinquency and assessment collection.

Common Questions

When can you foreclose on assessments?

“An association that seeks to collect delinquent regular or special assessments of an amount less than one thousand eight hundred dollars ($1,800), 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 non-judicial foreclosure.”  California Civil Code Section 5720.  This $1800 minimum in assessment liens does not apply to: (1) Assessments secured by a lien that are more than 12 months delinquent; (2) Assessments owed by owners of separate interests in time-share estates, as defined in Business and Professions Code Section 11212(x) (3) Assessments owed by the developer.

Who is responsible for assessments when bankruptcy is filed?

A Chapter 7 bankruptcy discharges all back assessments prior to the filing of bankruptcy, but, all the fees or assessments that become due to the association after the filing of bankruptcy protection are not discharged; there is a federal law written to address this specific situation. 11 USC 523(a) (16).  *Note: this is a separate concept from foreclosure that may or may not happen at the same time.

Who is responsible for assessments after a foreclosure?

If a foreclosure is filed, most if not all CCRs (check your CCRs to be sure) state delinquent assessments do not survive foreclosure (banks are not interested in making loans in any other circumstances otherwise they would remain on the hook for all the old assessments every time they foreclose), but fees and assessments that become due after the foreclosure auction date will need to be paid by whomever owns the property. Check for fees that accrue after foreclosure if you are buying into a common interest development, and, make sure all parties agree who is paying them off. If you were the previous owner, keep in mind the fees may be wiped off the real property so that it can be sold, but this does not mean they are still not something you owe personally. If you are a member of the board, you can still collect these fees as it was the legislature’s intent is to prevent the remaining members who paid their fees from getting stuck with the bill. Assembly Bill 2273, effective January 1, 2013 in California, has come to the rescue of the boards that were having a hard time tracking down who owns the foreclosed property. As of January 1, 2013, the new owner will have 30 days to provide written notice of their mailing address, among other things.