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Do ‘No-Cost’ HOA Collection Companies ‘Wield Unchecked Power’?

Published on: March 12, 2014 | by Steven J. Tinnelly, Esq.

In 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).

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.

‘Foreclosure Face-Off’ Article Published in ‘OC View’ Magazine

Published on: March 6, 2014 | by Steven J. Tinnelly, Esq.

Be 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.

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 Legislative & Case Law Update (2014) Now Available!

Published on: January 16, 2014 | by Steven J. Tinnelly, Esq.

hoa update 2014 Our “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.

Redemption Rights after HOA Nonjudicial Foreclosure

Published on: December 6, 2013 | by Steven J. Tinnelly, Esq.

*New Case Law

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…

Legislative & Case Law Update (2013) Now Available!

Published on: January 7, 2013 | by Steven J. Tinnelly, Esq.

hoa laws Our 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.

Can a HOA Member Inspect HOA Lease Agreements?

Published on: November 29, 2012 | by Steven J. Tinnelly, Esq.

*Asked & Answered hoa law firm

Asked – As a HOA member, do I have the right to see a copy of a lease agreement pertaining to a home that was acquired by my HOA through foreclosure of an assessment lien?

Answered – Yes, you may request to see a copy of the lease agreement. Under Civil Code §1365.2(a)(1)(D),a HOA member is entitled to inspect certain “Association records” for any “proper purpose reasonably related” to her interests as a member of the Association. “Association records” include “[e]xecuted contracts not otherwise privileged under law.” 1365.2(a)(1)(D).

The term “privileged” in Civil Code §1365.2(a)(1)(D) essentially pertains to confidential or sensitive information, as well as records/communications which are protected by attorney-client privilege. A standard lease agreement between a HOA and a renter is generally not a “privileged” contract and is therefore subject to inspection as an “Association record.”

The lease agreement may, however, include confidential information such as social security numbers. The HOA Board of Directors and/or management should ensure that such confidential information is adequately redacted from the lease agreement prior to providing it to a member for inspection. A HOA that has questions or concerns regarding the disclosure of HOA lease agreements and the information contained therein should consult with the HOA’s legal counsel.

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

Assessment Collections Fees in “No-Cost” Collections Contracts

Published on: October 22, 2012 | by Steven J. Tinnelly, Esq.

*New Case Law hoa law firm

The United States Bankruptcy Court in California recently ruled in a case that may impact the terms under which Homeowners Associations (“HOAs”) contract with collections companies to pursue delinquent assessments.

In In re Antonio Cisneros, the debtor, Cisneros, owned two properties within the HOA and had fallen behind on his assessment payments. Cisneros ultimately filed Chapter 13 bankruptcy in order to save his properties and cure his assessment arrears. The HOA had contracted with a collections company to recover the delinquencies from Cisneros. That contract specifically stated that if the collections company was “unable to collect fees or costs from the delinquent Owner or other responsible party, [then the] Association shall not be responsible for such fees or costs.” (Emphasis added.) Accordingly, under the terms of the contract, the HOA was under no true obligation to pay the fees or costs incurred by the collections company. That contractual provision was what the Bankruptcy Court relied upon in disallowing the collections company’s claims to recover its roughly $14,000 in collections fees and costs from Cisneros…

AB 2273: Resecuring HOA Assessment Streams from Foreclosed Properties

Published on: October 17, 2012 | by Steven J. Tinnelly, Esq.

*New Legislation

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:

It requires the foreclosing party to record a sale within 30 days of the sale to help the HOA identify new owners; and
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.

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.

Bankrupt Owners in Your Community

Published on: February 13, 2012 | by Steven J. Tinnelly, Esq.

*New Resource

Community associations (“associations”) often deal with owners overburdened by debt and unable to pay their assessments. These owners may file for bankruptcy to seek financial relief. How does this affect an association? What must an association be aware of? How can an association protect its interests? This blog post addresses these questions while providing a basic outline of the three (3) types of bankruptcies that can affect an association: Chapter 7, Chapter 11, and Chapter 13.

This information can also be found in our new resource entitled “Bankrupt Owners in Your Community”, available for download from our library.

New Data & Analytics Firm Seeks to “Bridge the Gap” Between the Mortgage Industry and HOAs

Published on: June 1, 2011 | by Steven J. Tinnelly, Esq.

A new subsidiary of a national asset management firm has been founded to help resolve some of the problems experienced by Homeowners Associations (“HOAs”) and the mortgage industry in the resale of foreclosed and defaulting residential properties. A press release by the newly formed company, Sperlonga Data and Analytics, states that HOA claims for unpaid dues “frequently create problems and delays” in the sale process. Sperlonga believes that these delays cause “hundreds of millions of dollars in losses for the mortgage industry annually, largely because parties have no means to contact one another.”

Sperlonga seeks to help facilitate contact with HOAs, lenders and other lien holders. Their goal is to resolve outstanding HOA obligations before they can negatively impact the resale process. “After hearing again and again of homeowners’ associations creating issues at closing for parties wanting to buy and sell assets, it became evident that this problem was costing the industry tremendous amounts of time and money…With no single source of reliable association data or standardization in place to manage this process, we saw an immediate opportunity to deliver a solution with real value for all parties.” (Sperlonga’s chairman and CEO).

Sperlonga will provide a “centralized repository” for HOAs to submit their demands for unpaid assessments. These demands will then be directed by Sperlonga to the appropriate party for payment–usually a bank or other financial institution.

It is great to see the attention being given to the difficulties experienced by HOAs attempting to collect on unpaid assessment obligations and how HOAs are suffering from significant foreclosures and vacancies. Any efforts made by service providers and those in the mortgage industry to provide a more efficient resale process for distressed properties will certainly help HOAs and their communities.