FREQUENTLY ASKED QUESTIONS
1. How many months delinquent does an owner have to be before we can file a lien?
The answer to this question is normally addressed in your association’s governing documents (CC&R’s and/or Delinquency and Collection Polity). We prefer that no action be taken until an assessment is sixty days past due, or more.
2. How long does the lien and foreclosure process take?
The California Civil Code requires a minimum of thirty (30) days between the mailing of the Pre-Lien Demand and the filing of the Notice of Delinquent Assessment. The statues provide a properly completed and executed Notice of Delinquent Assessment may be foreclosed in a manner similar to and with the same effect as a Deed of Trust. Such statues further provide no foreclosure proceedings may be commenced until at least $1,800.00 of assessments are past due or assessments are more than twelve (12) months delinquent. Therefore, it depends on the past due assessments, the entire procedure takes approximately from six months to sixteen months.
This time frame assumes that no efforts will be made by the homeowner to cure the delinquencies. It has been our experience that approximately one-quarter of our accounts are paid prior to the initial lien being recorded. Thereafter, over half of the remaining accounts are cured within the first few weeks, before a foreclosure action starts. Of the remaining accounts, reinstatement success varies dramatically due to factors such as property values, mortgage foreclosures, and how aggressive an association is in connection with its collection process. We very seldom have to conduct a Trustee’s Sale.
3. How does a mortgage foreclosure affect our lien?
The Declarations of Covenants, Conditions and Restrictions (CC&R’s) for virtually all common interest developments contain some form of subordination clause with respect to mortgages. The effect of these provisions is that upon foreclosure, the mortgagee is not responsible for payment of the former owners’ assessments to the date of the mortgagee’s foreclosure sale. The former owners’ assessments can then be looked upon as an unsecured debt by the association. It is at that time that an association may want to look into civil remedies such as small claims court.
4. How does a bankruptcy affect our lien?
The filing of a bankruptcy petition by one or more property owners places an automatic stay against any collection action by a creditor without prior approval of the court. By the virtue of amendments 523(a)(16) of the United States Bankruptcy Code, post-petition assessments (i.e. assessments which accrue after the date of the bankruptcy filing) will not be discharged through the bankruptcy, so long as the property owner either occupies the property or is receiving rent.
5. What happens when an owner disputes the assessments?
An owner may dispute the assessments imposed by the association, however, some legal rights of the property owner are lost if certain procedure are not followed. The property owner, in order to preserve all of their rights, is required to pay in full to the association 1). The amount of the assessment in dispute 2). Late charges 3). Interest and 4). All fees and costs associated with the preparation and filing of the Notice of Delinquent Assessment. This payment must be accompanied by a written notice, sent by certified mail not more than thirty (30) days from the date of the Notice of Delinquent Assessment was recorded, which indicates the payment is being paid under protest.
In such an instance, the association shall inform the owner that he/she may resolve the dispute through alternative dispute resolution, civil action, or any other procedures that may be available through the association.
6. Can an owner make partial payments to cure the delinquencies over time?
Unless otherwise mandated or precluded by the association’s governing documents, the property owner may enter into a payment agreement, if the association’s board of directors deems that such an agreement would be in the best interest of the association.
California law provides that payments must be first applied to principal, and then to late charges, interest and costs of collection. Any payment agreement which results in the account being paid current will address this situation.
7. What happens if there is no equity in the property?
At some point, an association may be faced with an owner or owners who simply “walk away” from an over-encumbered property. Faced with little or even no equity situations, experience has shown that by complying with a strict delinquency policy (not allowing a property owner to become delinquent more than two or three months without commencing collection action, for example) results in surprising success. Faced with the possibility of foreclosure (and ultimately eviction), logic dictates that it is in the best interest of delinquent homeowners to bring accounts current that are only moderately delinquent, and onto which accounts only modest fees and charges have been added.
8. Can we file a lien for fines and penalties? How about damage to the common area?
California Civil Code §1367(c) states that fines imposed as a disciplinary measure, except for late payments, may not be characterized nor treated as an assessment which may become a lien subject to foreclosure. The Civil Code §1367(b), however, specifically allows a monetary penalty imposed as a means of reimbursing the association for costs incurred in the repair of damage to the common area facilities by an owner or an owner’s guests or tenants to become a foreclosable lien.
9. What is going to be charged to the Association? How about the homeowner?
Our company requires no initial deposit of fees or costs from any association it serves. With very few exceptions, the fees and costs related to our services are borne entirely by the property owner, resulting in the collection of delinquent assessments at no cost to the Association. Every effort is made by our company to keep our fees as low as possible. In the event if the association wants to halt the collection process, we will then bill the association for our services. Upon reinstatement of the account, the funds will be reimbursed.
The answer to this question is normally addressed in your association’s governing documents (CC&R’s and/or Delinquency and Collection Polity). We prefer that no action be taken until an assessment is sixty days past due, or more.
2. How long does the lien and foreclosure process take?
The California Civil Code requires a minimum of thirty (30) days between the mailing of the Pre-Lien Demand and the filing of the Notice of Delinquent Assessment. The statues provide a properly completed and executed Notice of Delinquent Assessment may be foreclosed in a manner similar to and with the same effect as a Deed of Trust. Such statues further provide no foreclosure proceedings may be commenced until at least $1,800.00 of assessments are past due or assessments are more than twelve (12) months delinquent. Therefore, it depends on the past due assessments, the entire procedure takes approximately from six months to sixteen months.
This time frame assumes that no efforts will be made by the homeowner to cure the delinquencies. It has been our experience that approximately one-quarter of our accounts are paid prior to the initial lien being recorded. Thereafter, over half of the remaining accounts are cured within the first few weeks, before a foreclosure action starts. Of the remaining accounts, reinstatement success varies dramatically due to factors such as property values, mortgage foreclosures, and how aggressive an association is in connection with its collection process. We very seldom have to conduct a Trustee’s Sale.
3. How does a mortgage foreclosure affect our lien?
The Declarations of Covenants, Conditions and Restrictions (CC&R’s) for virtually all common interest developments contain some form of subordination clause with respect to mortgages. The effect of these provisions is that upon foreclosure, the mortgagee is not responsible for payment of the former owners’ assessments to the date of the mortgagee’s foreclosure sale. The former owners’ assessments can then be looked upon as an unsecured debt by the association. It is at that time that an association may want to look into civil remedies such as small claims court.
4. How does a bankruptcy affect our lien?
The filing of a bankruptcy petition by one or more property owners places an automatic stay against any collection action by a creditor without prior approval of the court. By the virtue of amendments 523(a)(16) of the United States Bankruptcy Code, post-petition assessments (i.e. assessments which accrue after the date of the bankruptcy filing) will not be discharged through the bankruptcy, so long as the property owner either occupies the property or is receiving rent.
5. What happens when an owner disputes the assessments?
An owner may dispute the assessments imposed by the association, however, some legal rights of the property owner are lost if certain procedure are not followed. The property owner, in order to preserve all of their rights, is required to pay in full to the association 1). The amount of the assessment in dispute 2). Late charges 3). Interest and 4). All fees and costs associated with the preparation and filing of the Notice of Delinquent Assessment. This payment must be accompanied by a written notice, sent by certified mail not more than thirty (30) days from the date of the Notice of Delinquent Assessment was recorded, which indicates the payment is being paid under protest.
In such an instance, the association shall inform the owner that he/she may resolve the dispute through alternative dispute resolution, civil action, or any other procedures that may be available through the association.
6. Can an owner make partial payments to cure the delinquencies over time?
Unless otherwise mandated or precluded by the association’s governing documents, the property owner may enter into a payment agreement, if the association’s board of directors deems that such an agreement would be in the best interest of the association.
California law provides that payments must be first applied to principal, and then to late charges, interest and costs of collection. Any payment agreement which results in the account being paid current will address this situation.
7. What happens if there is no equity in the property?
At some point, an association may be faced with an owner or owners who simply “walk away” from an over-encumbered property. Faced with little or even no equity situations, experience has shown that by complying with a strict delinquency policy (not allowing a property owner to become delinquent more than two or three months without commencing collection action, for example) results in surprising success. Faced with the possibility of foreclosure (and ultimately eviction), logic dictates that it is in the best interest of delinquent homeowners to bring accounts current that are only moderately delinquent, and onto which accounts only modest fees and charges have been added.
8. Can we file a lien for fines and penalties? How about damage to the common area?
California Civil Code §1367(c) states that fines imposed as a disciplinary measure, except for late payments, may not be characterized nor treated as an assessment which may become a lien subject to foreclosure. The Civil Code §1367(b), however, specifically allows a monetary penalty imposed as a means of reimbursing the association for costs incurred in the repair of damage to the common area facilities by an owner or an owner’s guests or tenants to become a foreclosable lien.
9. What is going to be charged to the Association? How about the homeowner?
Our company requires no initial deposit of fees or costs from any association it serves. With very few exceptions, the fees and costs related to our services are borne entirely by the property owner, resulting in the collection of delinquent assessments at no cost to the Association. Every effort is made by our company to keep our fees as low as possible. In the event if the association wants to halt the collection process, we will then bill the association for our services. Upon reinstatement of the account, the funds will be reimbursed.