California Senate Bill SB918 Amended / Bill

 BILL NUMBER: SB 918AMENDED BILL TEXT AMENDED IN SENATE APRIL 7, 2016 INTRODUCED BY Senator Vidak JANUARY 27, 2016 An act to  amend Sections 5660, 5665, 5670, 5690, 5700, 5705, 5710, 5720, and 5730 of, and to add Section 4041 to, the Civil Code,  relating to common interest developments. LEGISLATIVE COUNSEL'S DIGEST SB 918, as amended, Vidak. Common interest developments. Existing law, the Davis-Stirling Common Interest Development Act, defines and regulates common interest developments. Existing law authorizes a homeowners association to place a lien on a property and to take specified enforcement actions to satisfy outstanding dues or assessments owed on a property in the development.  This bill would require the owners of the separate interests in a common interest development to annually provide the association with specified written information for the purpose of receiving notice of an assessment lien on their property. The bill would require the association to provide specified notice by personal service to an owner and to offer to participate in dispute resolution procedures with an owner prior to recording a notice of default against the owner's separate interest. The bill would require that specified language be included in a written notice provided to an owner prior to the recording of a notice of default by the association.   The bill would also require the association to try to personally serve the owner on at least 3 occasions, including at specified times, and to prepare a statement regarding the attempts at personal service. The bill would make conforming changes.   Existing law requires an association to provide an owner with an opportunity to meet and confer with the association prior to recording a lien for delinquent assessments.   This bill would suspend any action to enforce a lien by the association for up to 90 days when an owner requests to meet and confer.   This bill would state the intent of the Legislature to enact legislation to address issues relating to notice to unit owners in common interest developments who are delinquent in the payment of association assessments.  Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:  SECTION 1.   Section 4041 is added to the   Civil Code   , to read:   4041. (a) An owner of a separate interest shall, on an annual basis, provide written notice to the association of all of the following: (1) The mailing address or addresses to which notices from the association are to be delivered. (2) An alternate or secondary address where notices from the association are to be delivered. (3) The name and address of his or her legal representative, if any, including any person with power of attorney or other person who can be contacted in the event of the owner's extended absence from the separate interest. (4) Whether the separate interest is owner-occupied, is rented out, if the parcel is developed but vacant, or if the parcel is undeveloped land. (b) The association shall solicit these annual disclosures of each owner and enter the data into its books and records at least 30 days prior to making its own required annual disclosures to members under Section 5300. (c) If an owner fails to provide the notices as set forth in paragraphs (1) and (2) of subdivision (a), the property address shall be deemed to be the mailing address to which notices are to be delivered.   SEC. 2.   Section 5660 of the   Civil Code   is amended to read:  5660. At least 30 days prior to recording  a   an assessment  lien upon the separate interest of the owner of record to collect a debt that is past due under Section 5650, the association shall notify the owner of record in writing by certified mail of the following: (a)  A general description of the   The actual  collection and lien enforcement procedures of the association  adopted by the board, disclosed to owners under Section 5310, and in effect at the time that the notice is sent under this section  and the method of calculation of the amount, a statement that the owner of the separate interest has the right to inspect  and copy  the association records pursuant to Section 5205,  and   and the right to request a copy of the owner's own assessment account ledger, if any, in the custody of the association's agents. The association shall also notify the owner of  the following statement in 14-point boldface type, if printed, or in capital letters, if typed: "IMPORTANT NOTICE: IF YOUR SEPARATE INTEREST IS PLACED IN FORECLOSURE BECAUSE YOU ARE BEHIND IN YOUR ASSESSMENTS, IT MAY BE SOLD WITHOUT COURT ACTION." (b) An itemized statement of the charges owed by the owner, including items on the statement which indicate the amount of any delinquent assessments, the fees and reasonable costs of collection, reasonable attorney's fees, any late charges, and interest, if any.  The itemized statement shall show how and when the owner's payments were applied to the assessment debt and to collection charges by the association or by its agent.  (c) A statement that the owner shall not be liable to pay the charges, interest, and costs of collection, if it is determined the assessment was paid on time to the association.  (d) A statement that the collection practices of the association may be governed by state and federal laws regarding fair debt collection and that penalties can be imposed for debt collection practices that violate these laws.   (d)   (e)  The right to request a meeting with the board as provided in Section 5665.  (e)   (f)  The right to dispute the assessment debt by submitting a written request for dispute resolution to the association pursuant to the association's "meet and confer" program required in Article 2 (commencing with Section 5900) of Chapter 10.  (f)   (g)  The right to request alternative dispute resolution with a neutral third party pursuant to Article 3 (commencing with Section 5925) of Chapter 10 before the association may  initiate foreclosure   record the assessment lien  against the owner's separate interest, except that binding arbitration shall not be available if the association intends to initiate a judicial foreclosure.  SEC. 3.   Section 5665 of the   Civil Code   is amended to read:  5665. (a) An owner, other than an owner of any interest that is described in Section 11212 of the Business and Professions Code that is not otherwise exempt from this section pursuant to subdivision (a) of Section 11211.7 of the Business and Professions Code, may submit a written request to meet with the board to discuss a payment plan for the debt noticed pursuant to Section 5660. The association shall provide the owners the standards for payment plans, if any exists. (b) The board shall meet with the owner in executive session within 45 days of the postmark of the request, if the request is mailed within 15 days of the date of the postmark of the notice, unless there is no regularly scheduled board meeting within that period, in which case the board may designate a committee of one or more directors to meet with the owner. (c) Payment plans may incorporate any assessments that accrue during the payment plan period. Additional late fees shall not accrue during the payment plan period if the owner is in compliance with the terms of the payment plan. (d) Payment plans shall not impede an association's ability to record a lien on the owner's separate interest to secure payment of delinquent assessments. (e) In the event of a default on any payment plan, the association may resume its efforts to collect the delinquent assessments from the time prior to entering into the payment plan.  (f) Nothing in this section restricts the right of an owner, with or without a payment plan in place, from making a payment in any amount directly to the association pursuant to subdivision (a) of Section 5655. The association shall accept the payment and shall apply it per subdivision (a) of Section 5655.   SEC. 4.   Section 5670 of the   Civil Code  is amended to read:  5670.  (a)    Prior to recording a lien for delinquent assessments, an association shall offer the owner and, if so requested by the owner, participate in dispute resolution pursuant to the association's "meet and confer" program required in Article 2 (commencing with Section 5900) of Chapter 10.  (b) When an owner requests to meet and confer under this section, the association shall suspend all collection efforts for 90 days or until the meet and confer procedures have been completed, whichever is sooner. If the association fails to respond in writing within 30 days from the date of the owner's request with a good faith effort to establish a time and place to meet and confer, then any lien recorded thereafter by the association shall be void and unenforceable. If the owner fails to respond to the association's effort to establish a time and place to meet and confer within 30 days thereof, then the association may proceed with collection efforts, including the recording of a lien, without further pursuing a meet and confer procedure.   SEC. 5.   Section 5690 of the   Civil Code   is amended to read:  5690. An association that fails to comply with the procedures set forth in this article shall, prior to recording a lien, recommence the required notice  process.   process, commencing with Section 5660.  Any costs associated with recommencing the notice process shall be borne by the association and not by the owner of a separate interest.  SEC. 6.   Section 5700 of the   Civil Code   is amended to read:  5700. (a) Except as otherwise provided in this article, after the expiration of 30 days following the recording of  a   an assessment  lien created pursuant to Section 5675, the lien may be enforced in any manner permitted by law, including sale by the court, sale by the trustee designated in the notice of delinquent assessment, or sale by a trustee substituted pursuant to Section 2934a. (b) Nothing in Article 2 (commencing with Section 5650) or in subdivision (a) of Section 726 of the Code of Civil Procedure prohibits actions against the owner of a separate interest to recover sums for which a lien is created pursuant to Article 2 (commencing with Section 5650) or prohibits an association from taking a deed in lieu of foreclosure.  SEC. 7.   Section 5705 of the   Civil Code   is amended to read:  5705. (a) Notwithstanding any law or any provisions of the governing documents to the contrary, this section shall apply to debts for assessments that arise on and after January 1, 2006. (b) Prior to  initiating a foreclosure   recording a notice of default  on an owner's separate interest, the association shall offer the owner and, if so requested by the owner,  shall  participate in dispute resolution pursuant to the association's "meet and confer" program required in Article 2 (commencing with Section 5900) of Chapter 10 or alternative dispute resolution as set forth in Article 3 (commencing with Section 5925) of Chapter 10. The decision to pursue dispute resolution or a particular type of alternative dispute resolution shall be the choice of the owner, except that binding arbitration shall not be available if the association intends to initiate a judicial foreclosure. (c) The decision to  initiate foreclosure of   record a notice of default in order to enforce  a lien for delinquent assessments that has been validly recorded shall be made only by the board and  may   shall  not be delegated to an agent of the association. The board shall approve the decision by a majority vote of the directors in an executive session. The board shall record the vote in the minutes of the next meeting of the board open to all members. The board shall maintain the confidentiality of the owner or owners of the separate interest by identifying the matter in the minutes by the parcel number of the property, rather than the name of the owner or owners. A board vote to approve foreclosure of a lien shall take place at least 30 days prior to  any public sale.   recording the notice of default.  (d)  The   After   the board votes to enforce the lien but before recording the notice of default, the  board shall provide notice by personal service  of its vote and of its intention to enforce the lien  in accordance with the manner of service of summons in Article 3 (commencing with Section 415.10) of Chapter 4 of Title 5 of Part 2 of the Code of Civil Procedure to an owner of a separate interest who occupies the separate interest or to the owner's legal representative, if the board votes to foreclose upon the separate interest.  The board shall provide written notice to an owner of a separate interest who does not occupy the separate interest by first-class mail, postage prepaid, at the most current address shown on the books of the association. In the absence of written notification by the owner to the association, the address of the owner's separate interest may be treated as the owner's mailing address.   To effect personal service, the association and its agent shall rely on the data provided annually by the owner of the separate interest under Section 4041.   (e) If the association or its agents have attempted personal service, in accordance with the manner of service of summons as set forth in Article 3 (commencing with Section 415.10) of the Code of Civil Procedure three or more times, including at least one attempt after 6:00 p.m. and one attempt on a weekend or legal holiday, on an owner who occupies the separate interest and, then both the association and its agents shall jointly subscribe a statement of compliance with the personal service requirement. This statement shall be recorded with the county recorder where the subject property is located. The statement shall include all of the following data:   (1) The physical address of subject property.   (2) The names of owners of the separate interest as they appear on the deed of title.   (3) The addresses where official notices are to be sent, per Section 4041, as shown on the association's membership books.   (4) The names and titles of documents to be delivered including the board's vote as it will appear in the association minutes and a copy of the statement.  (5) The names of, and contact information for, the persons attempting service.   (6) The dates and times of attempted service.   (f) The board shall provide written notice to an owner of a separate interest who does not occupy the separate interest by first-class mail, postage prepaid, at the most current address shown on the books of the association per Section 4041. In the absence of written notification under Section 4041 by the owner to the association, the address of the owner's separate interest shall be deemed to be the owner's mailing address.   SEC. 8.   Section 5710 of the   Civil Code  is amended to read:  5710. (a) Any sale by the trustee shall be conducted in accordance with Sections 2924, 2924b, and 2924c applicable to the exercise of powers of sale in mortgages and deeds of trust. (b) In addition to the requirements of Section 2924, the association shall serve a notice of default on the person named as the owner of the separate interest in the association's records or, if that person has designated a legal representative pursuant to this subdivision, on that legal representative. Service shall be in accordance with the manner of service of summons in Article 3 (commencing with Section 415.10) of Chapter 4 of Title 5 of Part 2 of the Code of Civil Procedure.  An   If the association or its agents have attempted personal service three or more times then it may execute a statement of due diligence pursuant to Section 5705, regarding the attempts to serve the notice of default. Pursuant to paragraph (3) of subdivision (a) of Section 4041, an  owner may designate a legal representative in a writing that is mailed to the association in a manner that indicates that the association has received it. (c) The fees of a trustee may not exceed the amounts prescribed in Sections 2924c and 2924d, plus the cost of service for either of the following: (1) The notice of default pursuant to subdivision (b). (2) The decision of the board to foreclose upon the separate interest of an owner as described in subdivision (d) of Section 5705.  SEC. 9.   Section 5720 of the   Civil Code   is amended to read:  5720. (a) Notwithstanding any law or any provisions of the governing documents to the contrary, this section shall apply to debts for assessments that arise on and after January 1, 2006. (b) 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 nonjudicial foreclosure, but may attempt to collect or secure that debt in any of the following ways: (1) By a civil action in small claims court, pursuant to Chapter 5.5 (commencing with Section 116.110) of Title 1 of Part 1 of the Code of Civil Procedure. An association that chooses to proceed by an action in small claims court, and prevails, may enforce the judgment as permitted under Article 8 (commencing with Section 116.810) of Chapter 5.5 of Title 1 of Part 1 of the Code of Civil Procedure. The amount that may be recovered in small claims court to collect upon a debt for delinquent assessments may not exceed the jurisdictional limits of the small claims court and shall be the sum of the following: (A) The amount owed as of the date of filing the complaint in the small claims court proceeding. (B) In the discretion of the court, an additional amount to that described in subparagraph (A) equal to the amount owed for the period from the date the complaint is filed until satisfaction of the judgment, which total amount may include accruing unpaid assessments and any reasonable late charges, fees and costs of collection, attorney's fees, and interest, up to the jurisdictional limits of the small claims court. (2) By recording a lien on the owner's separate interest upon which the association may not foreclose until the amount of the delinquent assessments secured by the lien, exclusive of any accelerated assessments, late charges, fees and costs of collection, attorney's fees, or interest, equals or exceeds one thousand eight hundred dollars ($1,800) or the assessments secured by the lien are more than 12 months delinquent. An association that chooses to record a lien under these provisions, prior to recording the lien, shall offer the owner and, if so requested by the owner, participate in dispute resolution as set forth in Article 2 (commencing with Section 5900) of Chapter 10. (3) Any other manner provided by law, except for judicial or nonjudicial foreclosure. (c) The limitation on foreclosure of assessment liens for amounts under the stated minimum in this section does not apply to  any   either  of the following: (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 subdivision (x) of Section 11212 of the Business and Professions Code.  (3) Assessments owed by the developer.   SEC. 10.   Section 5730 of the   Civil Code   is amended to read:  5730. (a) The annual policy statement, prepared pursuant to Section 5310, shall include the following notice, in at least 12-point type: "NOTICE ASSESSMENTS AND FORECLOSURE This notice outlines some of the rights and responsibilities of owners of property in common interest developments and the associations that manage them. Please refer to the sections of the Civil Code indicated for further information. A portion of the information in this notice applies only to liens recorded on or after January 1, 2003. You may wish to consult a lawyer if you dispute an assessment. ASSESSMENTS AND FORECLOSURE Assessments become delinquent 15 days after they are due, unless the governing documents provide for a longer time. The failure to pay association assessments may result in the loss of an owner's property through foreclosure. Foreclosure may occur either as a result of a court action, known as judicial foreclosure, or without court action, often referred to as nonjudicial foreclosure. For liens recorded on and after January 1, 2006, an association may not use judicial or nonjudicial foreclosure to enforce that lien if the amount of the delinquent assessments or dues, exclusive of any accelerated assessments, late charges, fees, attorney's fees, interest, and costs of collection, is less than one thousand eight hundred dollars ($1,800). For delinquent assessments or dues in excess of one thousand eight hundred dollars ($1,800) or more than 12 months delinquent, an association may use judicial or nonjudicial foreclosure subject to the conditions set forth in Article 3 (commencing with Section 5700) of Chapter 8 of Part 5 of Division 4 of the Civil Code. When using judicial or nonjudicial foreclosure, the association records a lien on the owner's property. The owner's property may be sold to satisfy the lien if the amounts secured by the lien are not paid. (Sections 5700 through 5720 of the Civil Code, inclusive) In a judicial or nonjudicial foreclosure, the association may recover assessments, reasonable costs of collection, reasonable attorney's fees, late charges, and interest. The association may not use nonjudicial foreclosure to collect fines or penalties, except for costs to repair common area damaged by a member or a member's guests, if the governing documents provide for this. (Section 5725 of the Civil Code) The association must comply with the notice and disclosure  requirements of Article 2 (commencing with Section 5650) of Chapter 8 of Part 5 of Division 4 of the Civil Code when collecting delinquent assessments. If the association fails to follow these requirements, it may not record  a   an assessment  lien on the owner's property until it has satisfied those requirements. Any additional costs that result from satisfying the requirements are the responsibility of the association. (Section 5675 of the Civil Code) At least 30 days prior to recording a lien on an owner's separate interest, the association must provide the owner of record with certain documents by certified mail, including a description of its collection and lien enforcement procedures and the method of calculating the amount. It must also provide an itemized statement of the charges owed by the owner. An owner has a right to review the association's  and the agent's  records to verify the debt. (Section 5660 of the Civil Code) If a lien is recorded against an owner's property in error, the person who recorded the lien is required to record a lien release within 21 days, and to provide an owner certain documents in this regard. (Section 5685 of the Civil Code) The collection practices of the association may be governed by state and federal laws regarding fair debt collection. Penalties can be imposed for debt collection practices that violate these laws. PAYMENTS When an owner makes a payment, the owner may request a receipt, and the association is required to provide it. On the receipt, the association must indicate the date of payment and the person who received it. The association must inform owners of a mailing address for overnight payments. (Section 5655 of the Civil Code) An owner may, but is not obligated to, pay under protest any disputed charge or sum levied by the association, including, but not limited to, an assessment, fine, penalty, late fee, collection cost, or monetary penalty imposed as a disciplinary measure, and by so doing, specifically reserve the right to contest the disputed charge or sum in court or otherwise. An owner may dispute an assessment debt by submitting a written request for dispute resolution to the association as set forth in Article 2 (commencing with Section 5900) of Chapter 10 of Part 5 of Division 4 of the Civil Code. In addition, an association may not  initiate a foreclosure without participating in   record an assessment lien without first offering to participate with the owner in the association's internal dispute resolution or procedures or  alternative dispute resolution with a neutral third party as set forth in Article 3 (commencing with Section 5925) of Chapter 10 of Part 5 of Division 4 of the Civil Code, if so requested by the owner. Binding arbitration shall not be available if the association intends to initiate a judicial foreclosure. An owner is not liable for charges, interest, and costs of collection, if it is established that the assessment was paid properly on time. (Section 5685 of the Civil Code) MEETINGS AND PAYMENT PLANS An owner of a separate interest that is not a time-share interest may request the association to consider a payment plan to satisfy a delinquent assessment. The association must inform owners of the standards for payment plans, if any exists. (Section 5665 of the Civil Code) The board must meet with an owner who makes a proper written request for a meeting to discuss a payment plan when the owner has received a notice of a delinquent assessment. These payment plans must conform with the payment plan standards of the association, if they exist. (Section 5665 of the Civil Code)"  Nothing in this section restricts the right of an owner, with or without a payment plan in place, from making a payment in any amount at any time directly to the association toward an overdue assessment pursuant to Section 5655.  (b) An association distributing the notice required by this section to an owner of an interest that is described in Section 11212 of the Business and Professions Code that is not otherwise exempt from this section pursuant to subdivision (a) of Section 11211.7 of the Business and Professions Code may delete from the notice described in subdivision (a) the portion regarding meetings and payment plans.  SECTION 1.   It is the intent of the Legislature to enact legislation to address issues relating to notice to unit owners in common interest developments who are delinquent in the payment of association assessments.