Redemption Rights after HOA Nonjudicial Foreclosure

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Earlier this year, we blogged about an appellate court case that underscored the necessity for a homeowners association (“HOA”) to strictly comply with the statutory procedures and requirements applicable to assessment collection. That case focused on various requirements pertaining to the transmittal of notices (i.e., assessment lien notices, notices of right to request alternative dispute resolution (“ADR”), notice of the Board’s decision to initiate foreclosure of an assessment lien, etc.) The HOA’s failure to strictly comply with those requirements ultimately resulted in the invalidation of the HOA’s assessment lien and also an award of attorney’s fees and costs to the delinquent homeowner.

The case of Multani v. Witkin & Neal et al., (2013) 216 Cal.App.4th 590, (“Multani“) similarly involved allegations of procedural defects by a HOA’s collection agent. However, the Court’s ruling in Multani is significant in that it addresses the statutory, ninety (90) day “right of redemption” afforded to a homeowner that may have lost ownership of her unit through nonjudicial foreclosure of a delinquent assessment lien…

Subject to certain limitations, California HOAs are given the power to foreclose delinquent assessment liens through nonjudicial foreclosure. Nonjudicial foreclosure is a powerful tool that generally provides for significantly lower fees and costs and a faster time to sale as compared to judicial foreclosure. However, Ca. Civil Code Section 1367.4(c)(4) makes any nonjudicial foreclosure by a HOA subject to a ninety (90) day “right of redemption.” That right allows for the delinquent (foreclosed) homeowner to “redeem” (to reinstate her ownership of) the unit within ninety (90) days following the nonjudicial foreclosure sale by paying the “redemption price” in accordance with Ca. Code of Civil Procedure Section 729.060. The redemption price typically amounts to the unit’s purchase price at the nonjudicial foreclosure sale. In the case where the nonjudicial foreclosure results in ownership of the property transferring to the HOA, the redemption price often amounts to the total amount of the homeowner’s delinquency, including the total amount of the collection fees and costs incurred by the HOA up through the completion of the nonjudicial foreclosure action.

One significant issue in Multani was the HOA’s failure to demonstrate that it had provided the foreclosed homeowner with notice of his redemption rights once the nonjudicial foreclosure sale had completed. Ca. Code of Civil Procedure Section 729.050 mandates that:

“If property is sold subject to the right of redemption, promptly after the sale the levying officer or trustee who conducted the sale shall serve notice of the right of redemption on the judgment debtor. Service shall be made personally or by mail. The notice of the right of redemption shall indicate the applicable redemption period.”

The defendants’ failure to introduce evidence “demonstrating that it mailed the Multanis a notice of right to redemption as required under Section 729.050” was a factor in the Court’s decision to reverse the trial court’s summary judgment award entered in favor of defendants and to remand the case for further proceedings.

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Multani serves as another important reminder of the need to ensure that your HOA is strictly adhering to the myriad of procedural requirements applicable to assessment collection. Even where a HOA and its collection agent/attorney have taken virtually every step that is required, one simple error could result in a protracted and costly legal dispute.

Tinnelly Law Group is proud to provide its clients with access to comprehensive, attorney-supervised assessment collection services through the use of its affiliate, Alterra Assessment Recovery.