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Articles Posted in Assessments

hoa-assessment-collection-house.jpgIn October of 2012, we blogged about a United States Bankruptcy Court case that addressed the proper interpretation and effect of Civil Code Section 5650 allowing for a HOA to recover delinquent assessments, along with “reasonable costs incurred in collecting the delinquent assessment, including reasonable attorney’s fees.” In sum, the Court ruled that the delinquent homeowner was not liable for the fees and costs imposed by the HOA’s collection company that was operating on a contingency basis. Because the HOA was not responsible to pay the collection company’s fees directly, those fees were not costs “incurred” by the HOA which the HOA was legally entitled to recover from the delinquent homeowner. We then predicted that the case may affect the terms under which collection companies contract with HOAs, especially those companies that operate on a contingency (“no-cost”) basis.

Another case currently being litigated in Northern California is addressing this same issue. Though the case is still pending, a recent order issued by the United States District Court, N.D., California illustrates the how the courts may be trending with regard to the fees and costs imposed by collection companies that contract with HOAs on a contingency basis:

“Although no California appellate court has directly addressed whether, as here, a third-party vendor acting on behalf of a HOA can lawfully charge a delinquent homeowner fees not incurred by the HOA, the aforementioned authorities prompt a conclusion that [the collection company’s] right to impose debt collection fees against [the homeowner] extends no further than the [HOA’s] right to do the same….[the collection company’s] fees apparently are neither incurred nor paid by the HOAs that contract for the company’s ‘no-cost’ services. If California law nonetheless entitled [the collection company] to impose the fees of its choosing against homeowners…the company would wield unchecked power to extract a cascade of fees and costs from a HOA’s delinquent members.” (Emphasis added).

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There has been a string of recent court cases illustrating how now, more than ever, HOAs and collection companies are being scrutinized for their collection procedures. HOA Boards and managers should be cognizant of the legal requirements with regard to assessment collection, and how deviations from those requirements may expose the HOA to liability.
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.

hoa-foreclosure-article.jpgBe sure to check out Steve Tinnelly’s latest article he authored for the “OC View,” an educational bi-monthly magazine published by the Orange County Regional Chapter of the Community Associations Institute (CAI).

The article, entitled “Foreclosure Face-Off,” compares and contrasts the two foreclosure processes available to California HOAs in their assessment collection efforts (non-judicial and judicial foreclosure). It discusses the primary advantages and disadvantages associated with each process, and how they may be impacted by economic factors and issues unique to each delinquency. Our firm is privileged to have the opportunity to work with CAI and to contribute to its educational efforts. For more information on CAI, we encourage you to visit its website at caionline.org.

hoa laws

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 (“Alterra”). Alterra’s service offering includes both foreclosure processes, and an array of ancillary services developed to resolve delinquent matters as quickly and efficiently as possible. For more information on Alterra, visit its website at alterracollections.com.

hoa update 2014Our “Annual Legislative & Case Law Update” newsletter for the year 2014 is now available in our library!

The Legislative & Case Law Update provides an overview of the new legislation and case law impacting California Homeowners Associations (“HOAs”) as we head into 2014. The new legislation includes, among other items, the re-organization of the Davis-Stirling Act (now in effect), and a bill that clarifies contractor licensing requirements for HOA managers. The new case law includes rulings that may impact HOA election rules, membership rights to attend Board meetings, use of HOA media outlets during election campaigns, insurance defense coverage, attorney’s fees recovery in HOA disputes, and assessment collection procedures.

Click here to read our Annual Legislative & Case Law Update (2014)

Have questions on any of the new legislation or case law? Click here to send us a question online.

*New Case Lawredemption-rights.jpg

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…

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*New Case Lawhoa foreclosure

The California Civil Code requires community associations (“HOAs”) to levy regular and special assessments as necessary to perform the HOA’s obligations under its governing documents. However, when a homeowner fails to pay those assessments, HOAs are often left with no alternative other than to pursue the owner in accordance with the collection methods sanctioned under the HOA’s governing documents and the Civil Code. Because those methods could result in the foreclosure of the delinquent homeowner’s property, it is paramount that HOAs strictly comply with the statutory procedures and requirements applicable to assessment collection (i.e., transmittal of notices, dispute resolution procedures, votes to initiate foreclosure, etc.).

The recent case of Diamond v. Casa Del Valle Homeowners Association 2013 DJDAR 9176, which has been certified for publication, illustrates how failing to comply with those procedures and requirements can result not only in the invalidation of a HOA’s assessment lien, but also an award of attorney’s fees and costs to the delinquent homeowner…

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piggy bank reserve studies hoa reserve accounts.png*New Library Article

“Always be prepared.” That simple phrase sums up the importance of funding and properly maintaining a reserve account. Accidents and surprise maintenance issues will inevitably pop up. When they do, the HOA that has been properly funding and managing its reserve account will be prepared to do what is necessary to protect the interests of the HOA and its members.

Our HOA lawyers have published a new article entitled “Association Reserve Accounts and Reserve Studies.” It covers the basics of reserve accounts and reserve studies, their importance, and the relevant obligations of a HOA and its Board. The article is available for download from our library.

*Asked & Answeredhoa_budget_attorney_financial_association.jpg

Asked: Are there any negative consequences or liability that can result from our Board’s failure to distribute the HOA’s annual budget?

Answered: Yes. California Civil Code Section 1365 requires a homeowners association (“HOA”) board of directors to prepare and distribute an annual pro forma operating budget to the HOA’s membership. Failure to comply with this requirement may hinder the board’s ability to take certain actions, such as increasing assessments or levying special assessments.

Under California Civil Code Section 1366, a HOA may increase annual assessments by twenty percent (20%), and impose special assessments of up to five percent (5%) of budgeted gross expenses, without the need to obtain membership approval. However, this power may only be exercised by the board if the annual budget required by Section 1365 has been distributed to the membership thirty (30) to ninety (90) days before the start of the fiscal year. Accordingly, where a HOA fails to comply with its financial disclosure obligations, regular assessment increases and special assessments will need to be submitted to the membership for approval. This will require the HOA to conduct a costly and potentially ineffective election and, should the membership fail to approve the assessment increase, the HOA may be forced to delay desperately needed repairs or forego other necessary services when needed.

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The Civil Code’s various disclosure requirements can be difficult for any volunteer board to fully understand and satisfy. It is therefore important for HOAs to utilize the services of competent industry professionals, managers and financial planners to ensure that the interests of the HOA and the membership are not jeopardized as a result of statutory noncompliance.

Content provided by TLG attorney Kai MacDonald.

To submit questions to the HOA attorneys at Tinnelly Law Group, click here.

hoa lawsOur annual “Legislative & Case Law Update” newsletter for the year 2013 is now available in our library!

The Legislative & Case Law Update provides an overview of the new legislation and case law impacting California Homeowners Associations (“HOAs”) as we head into 2013. The new legislation includes, among other items, bills that impact Bank foreclosures, the re-organization of the Davis-Stirling Act, EV Charging Stations and fees charged by HOAs in producing certain records. The new case law includes rulings that may impact the architectural restrictions placed on the installation of solar panels, arbitration provisions for construction defect disputes, “no-cost” HOA collections contracts, election disputes and defamation claims. The Legislative & Case Law Update also addresses some new Fannie Mae and FHA regulations impacting condominium insurance and certification requirements.

Click here to read our Legislative & Case Law Update (2013)

Have questions on any of the new legislation or case law? Click here to send us a question online.

hoa law firm*New Library Article

AB 805, effective January 1, 2014, will make existing California law pertaining to Homeowners Associations (“HOAs”) more logical and user-friendly. The bill’s primary effect is (1) to renumber and reorganize the Davis-Stirling Common Interest Development Act (“the Act”), and (2) to make various minor changes to the substantive content the Act. Other than renumbering of the Act from Sections 1350-1378 of the Civil Code to Sections 4000-6150, the bill reorganizes the Act in a more logical manner. It also standardizes terminology, eliminates outdated references to other authorities, groups provisions pertaining to the same subject matter, and reorganizes longer sections into more convenient subparts. While most of the Act’s content will remain the same, this blog post provides an overview of what substantive changes will go into effect as of January 1, 2014.

Our HOA lawyers have also published this information in our new library article entitled “The Basics of AB 805,” available for download from our library.

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*New Legislationbank-owned.jpg

Homeowners Association (“HOA”) Boards and industry professionals are keenly aware of the financial impact that the economic downturn has had on HOAs throughout California, especially with foreclosures. The difficulty in identifying/contacting the bank who foreclosed on a property, as well as delays in the recording of certain property transfer documents, has hampered the ability of HOAs to quickly reestablish the assessment revenue stream from the new owner of the foreclosed property (often, the bank).

Fortunately, AB 2273 was recently signed into law to add new Section 2924.1 to the Civil Code and amend current Section 2924(b) of the Civil Code. AB 2273 serves two important functions:

  1. It requires the foreclosing party to record a sale within 30 days of the sale to help the HOA identify new owners; and
  2. It shortens the time for HOAs to be notified by the foreclosing party of the change in ownership: 15 days from the date of sale. However, this only applies if the HOA has recorded a “Request for Notice” prior to the property receiving a Notice of Default.
california hoa

AB 2273 is another step toward helping HOAs reduce the financial impact the economic downturn is having on their budgets. It also underscores how important it is for a HOA to record a blanket “Request for Notice” pursuant to Section 2924(b). HOA Boards and Managers that are dealing with defaulting properties should contact their HOA attorney to ensure that all appropriate steps are taken to help the HOA quickly reestablish the assessment stream from a foreclosed property.

To read the text of AB2273, click here.

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