Existing law, the Davis-Stirling Common Interest Development Act, defines and regulates common interest developments, which are managed by homeowners associations.

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 notices from the association.

Existing law, the Davis-Stirling Common Interest Development Act, defines and regulates common interest developments, which are managed by homeowners associations.

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 notices from the association.

Existing law, the Davis-Stirling Common Interest Development Act, defines and regulates common interest developments, which are managed by a homeowners association. associations.

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 notices from the association.

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. developments, which are managed by a homeowners association.

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 owners 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. from the association.

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.

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 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.

 UNFINISHED BUSINESS  

Bill No: SB 918

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 6-0, 5/3/16

AYES: Jackson, Moorlach, Anderson, Leno, Monning, Wieckowski

NO VOTE RECORDED: Hertzberg

SENATE FLOOR: 37-0, 5/23/16

AYES: Allen, Anderson, Bates, Beall, Berryhill, Block, Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Moorlach, Morrell, Nguyen, Nielsen, Pan, Roth, Stone, Vidak, Wieckowski

NO VOTE RECORDED: Pavley, Runner, Wolk

ASSEMBLY FLOOR: 73-5, 8/18/16 - See last page for vote

SUBJECT:

SOURCE: United Trustee Association

DIGEST: This bill requires the owner of a separate interest and the homeowner association in a common interest development to annually verify the address or addresses to which notices from the association are to be delivered.

Assembly Amendments recast the above provision to clarify that address verification is to be completed at least 30 days prior to sending certain required disclosures.

ANALYSIS:

Existing law:

1. Defines and regulates residential common interest developments (CIDs), including the ability of a CID’s homeowner association to levy regular and special assessments sufficient to perform its obligations. (Civ. Code Sec. 4000 et seq.) Existing law provides that an assessment, and any late charges, reasonable fees and costs of collection, reasonable attorney’s fees, if any, and interest, shall be a debt of the owner of the separate interest. (Civ. Code Sec. 5650.)
2. Requires an association to send the owner of record a notice by certified mail at least 30 days prior to recording a lien to collect the debt. That notice must include a general description of the collection and lien enforcement procedures, an itemized statement of charges, the right to inspect the association’s records, and the right to dispute the debt, as specified. (Civ. Code Sec. 5660.)
3. Authorizes an association to record a lien against an owner’s separate interest in the amount of any delinquent assessment, plus any costs of collection, late charges, and interest assessed, as specified. Existing law requires a copy of a recorded notice of delinquent assessment to be mailed by certified mail to the owner of the separate interest no later than 10 calendar days after recordation. (Civ. Code Sec. 5675.)
4. Authorizes an association that seeks to collect delinquent assessments of an amount of $1,800, or more, or assessments that are delinquent by more than 12 months and secured by a lien, to use judicial or non-judicial foreclosure, subject to specified requirements. (Civ. Code Sec. 5720.)
5. Requires a decision to initiate foreclosure to be made only by the board of directors of the association, and, if the board votes to foreclose on the separate interest, requires the board to provide notice by personal service in accordance with the manner of service of summons. (Civ. Code Sec. 5705.) Existing law similarly requires any Notice of Default (the first step in the nonjudicial foreclosure process) to be served by the association on the owner’s legal representative in accordance with the manner of the service of summons. (Civ. Code Sec. 5710.)

This bill:

1. Requires an owner of a separate interest to, on an annual basis, provide written notice to the association of all of the following:

• The address or addresses to which notices from the association are to be delivered;
• An alternate or secondary address to which notices from the association are to be delivered;
• The name and address of an owner’s 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; and
• Whether the separate interest is owner-occupied, is rented out, if the parcel is developed but vacant, or if the parcel is undeveloped land.

1. Requires an association to solicit annual notices of each owner and, at least 30 days prior to making certain required disclosures, enter the data into its books and records.
2. Specifies that if an owner fails to provide the information specified in the above provision, the property address shall be deemed to be the mailing address to which notices are to be delivered.

Background

In California, CIDs are governed by the Davis-Stirling Common Interest Development Act (Davis-Stirling Act). Owners of separate property in CIDs have an undivided interest in the common property of the development and are subject to the CID’s covenants, conditions, and restrictions. Residential CIDs are also governed by a homeowner association, which is run by volunteer directors that may or may not have prior experience managing an association. The Court of Appeal, Fourth Appellate District, previously observed that:

[t]he homeowners associations function almost “as a second municipal government, regulating many aspects of [the homeowners’] daily lives.”

“[U]pon analysis of the association’s functions, one clearly sees the association as a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government. As a ‘mini-government,’ the association provides to its members, in almost every case, utility services, road maintenance, street and common area lighting, and refuse removal. In many cases, it also provides security services and various forms of communication within the community. There is, moreover, a clear analogy to the municipal police and public safety functions. . . .” In short, homeowners associations, via their enforcement of the CC&R’s, provide many beneficial and desirable services that permit a common interest development to flourish. (Villa Milano Homeowners Ass’n v. Il Davorge (2000) 84 Cal.App.4th 819, 836 [citations omitted].)

The Davis-Stirling Act permits an association to foreclose upon a separate interest in a CID in certain circumstances if the owner fails to pay his or her assessments to the association. Foreclosures in California are generally non-judicial, meaning that they are accomplished without court involvement. Following a decision by the homeowner association to foreclose, the association records a Notice of Default, which generally occurs after three or more months of delinquency. The foreclosing entity must then generally wait at least three months before noticing the sale of the property, which must be posted, published, and filed with the county recorder.

This bill requires the owner of a separate interest and a homeowner association to annually verify the address or addresses to which notices from the association are to be delivered.

Comments

The author writes:

Although associations have other remedies for collection of delinquent assessments, such as judicial foreclosures in superior courts, and court actions to collect assessments (small claims, limited jurisdiction or general jurisdiction, depending upon the amount of the delinquency), existing law is silent on non-judicial foreclosure remedies available to associations if they are unable to effect personal service of required documents on unit owners. In a typical civil action, if service cannot be effected on a defendant after the exercise of reasonable diligence, a plaintiff may obtain from a judge an order to publish a summons in a newspaper of general jurisdiction. In the Davis-Stirling non-judicial foreclosure context, however, there is no “case” on which to request an order to publish the notice of default. In discussions with advocates for unit owners within common interest developments, it became clear that current law lacks provisions clearly requiring unit owners to advise associations of mailing addresses to receive required documents, and that other rights and responsibilities as between owners and associations should be clarified.

Related/Prior Legislation

SB 290 (Vidak, 2015) would have allowed the board of directors of an association formed under the Davis-Stirling Act to provide notice by personal service or by substitute service 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 bill died in the Senate Judiciary Committee.

SB 1026 (Vidak, 2014) would have permitted associations subject to the Commercial and Industrial Common Interest Development Act and the Davis-Stirling Act to serve an owner with a Notice of Default, the first step in the non-judicial foreclosure process, for failure to pay required assessments through posting, mailing, and publishing the notices, as specified, when those notices cannot be personally served after reasonable diligence, as specified. The bill died in the Senate Judiciary Committee.

SB 1244 (Harman, 2012) would have allowed an owner in a CID to be served certain notices in the non-judicial foreclosure process by both posting and mailing the notices, as specified, when those notices cannot be personally served after reasonable diligence. The bill died in the Senate Judiciary Committee.

SB 137 (Ducheny, Chapter 452, Statutes of 2005), among other things, permits an association of a CID seeking to collect delinquent regular or special assessments of $1,800 or more, or any assessments that are more than 12 months delinquent, to use foreclosure subject to specified conditions. These conditions include requiring the board of directors of an association to make the decision to foreclose upon an assessment lien at an executive meeting of the board, by a majority vote, at least 30 days prior to any public sale, to record the results of the vote, and to provide notice of the decision to foreclose.

AB 1317 (Speier, Chapter 1101, Statutes of 1996) imposed specified requirements with respect to the collection of debts based on assessments of owners by a CID, and removed a requirement that an association, prior to a sale by a trustee, make at least one bona fide attempt to serve the owner with a notice of sale by trustee.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/18/16)

United Trustee Association (source)

OPPOSITION: (Verified 8/18/16)

Center for California Homeowner Association Law

Community Associations Institute

Congresswoman Jackie Speier

Sun City Palm Desert Community Association

ASSEMBLY FLOOR: 73-5, 8/18/16

AYES: Achadjian, Alejo, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Waldron, Weber, Wilk, Williams, Wood, Rendon

NOES: Brough, Chávez, Gatto, Obernolte, Wagner

NO VOTE RECORDED: Travis Allen, Roger Hernández

Prepared by:

8/19/16 19:25:09

**** END ****

SENATE THIRD READING

STR Bill Id:

Author:()

As Amended Ver:

Majority vote

SENATE VOTE: 37-0

SUMMARY: Requires the owner of a separate interest and the homeowner association (HOA) in a common interest development (CID) to annually verify the mailing address or addresses to which notices from the HOA are to be delivered. Specifically, this bill:

1. Requires an owner of a separate interest to, on an annual basis, provide written notice to the association of all of the following:
2. The mailing address or addresses to which notices from the HOA are to be delivered;
3. An alternate or secondary address to which notices from the HOA are to be delivered;
4. The name and address of an owner's 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; and
5. Whether the separate interest is owner-occupied, is rented out, if the parcel is developed but vacant, or if the parcel is undeveloped land.
6. Requires an HOA to 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.
7. Specifies that if an owner fails to provide the information specified in the above provision, the property address shall be deemed to be the mailing address to which notices are to be delivered.

FISCAL EFFECT: None

COMMENTS:

Background: There are over 50,220 CIDs in the state that comprise over 4.8 million housing units, or approximately one quarter of the state's housing stock. CIDs include condominiums, community apartment projects, housing cooperatives, and planned unit developments. They are characterized by a separate ownership of dwelling space coupled with an undivided interest in a common property, restricted by covenants and conditions that limit the use of the common area and separate ownership interests, and the management of common property and enforcement of restrictions by a HOA. CIDs are governed by the Davis Stirling Act (the Act) as well as the governing documents of the HOA, including bylaws, declaration, and operating rules.

This bill requires the owner of a separate interest and a HOA to annually verify the mailing address or addresses to which notices from the association are to be delivered.

Purpose of this bill: According to the author, "currently HOA unit owners are supposed to provide the association with the best known mailing address for the association to mail required disclosures and other documents that current law requires to be shared with unit owners. There may be a situation where mailing address previously provided, if any was ever provided, may not be current and the owner is not receiving any of the required documents."

Previous Legislation:

SB 290 (Vidak) of 2015, would have allowed the board of directors of an association formed under the Davis-Stirling Act to provide notice by personal service or by substitute service 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 bill died in the Senate Judiciary Committee.

SB 1026 (Vidak) of 2014, would have permitted associations subject to the Commercial and Industrial Common Interest Development Act and the Davis-Stirling Act to serve an owner with a Notice of Default, the first step in the non-judicial foreclosure process, for failure to pay required assessments through posting, mailing, and publishing the notices, as specified, when those notices cannot be personally served after reasonable diligence, as specified. The bill died in the Senate Judiciary Committee.

SB 1244 (Harman) of 2012, would have allowed an owner in a CID to be served certain notices in the non-judicial foreclosure process by both posting and mailing the notices, as specified, when those notices cannot be personally served after reasonable diligence. The bill died in the Senate Judiciary Committee.

SB 137 (Ducheny), Chapter 452, Statutes of 2005, among other things, permits an association of a CID seeking to collect delinquent regular or special assessments of $1,800 or more, or any assessments that are more than 12 months delinquent, to use foreclosure subject to specified conditions. These conditions include requiring the board of directors of an association to make the decision to foreclose upon an assessment lien at an executive meeting of the board, by a majority vote, at least 30 days prior to any public sale, to record the results of the vote, and to provide notice of the decision to foreclose.

AB 1317 (Speier), Chapter 1101, Statutes of 1996, imposed specified requirements with respect to the collection of debts based on assessments of owners by a CID, and removed a requirement that an association, prior to a sale by a trustee, make at least one bona fide attempt to serve the owner with a notice of sale by trustee.

Analysis Prepared by: Lisa Engel / H. & C.D. / (961) 319-2085 FN: 0003861

Date of Hearing: June 29, 2016

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

SBPCA Bill Id:SB 918

Author:(Vidak) – As Amended Ver:June 16, 2016

SENATE VOTE: 37-0

SUBJECT: Common interest developments

SUMMARY: Requires the owner of a separate interest and the homeowner association (HOA) in a common interest development (CID) to annually verify the mailing address or addresses to which notices from the HOA are to be delivered. Specifically, this bill:

1. Requires an owner of a separate interest to, on an annual basis, provide written notice to the association of all of the following:
2. The mailing address or addresses to which notices from the HOA are to be delivered;
3. An alternate or secondary address to which notices from the HOA are to be delivered;
4. The name and address of an owner’s 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; and
5. Whether the separate interest is owner-occupied, is rented out, if the parcel is developed but vacant, or if the parcel is undeveloped land.
6. Requires an HOA to 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.
7. Specifies that if an owner fails to provide the information specified in the above provision, the property address shall be deemed to be the mailing address to which notices are to be delivered.

EXISTING LAW:

1. Defines and regulates residential CIDs, including the ability of a CID’s HOA to levy regular and special assessments sufficient to perform its obligations.
2. Requires an association to send the owner of record a notice by certified mail at least 30 days prior to recording a lien to collect the debt. That notice must include a general description of the collection and lien enforcement procedures, an itemized statement of charges, the right to inspect the association’s records, and the right to dispute the debt, as specified.
3. Authorizes an association to record a lien against an owner’s separate interest in the amount of any delinquent assessment, plus any costs of collection, late charges, and interest assessed, as specified. Existing law requires a copy of a recorded notice of delinquent assessment to be mailed by certified mail to the owner of the separate interest no later than 10 calendar days after recordation.
4. Authorizes an association that seeks to collect delinquent assessments of an amount of $1,800, or more, or assessments that are delinquent by more than 12 months and secured by a lien, to use judicial or non-judicial foreclosure, subject to specified requirements.
5. Requires a decision to initiate foreclosure to be made only by the board of directors of the association, and, if the board votes to foreclose on the separate interest, requires the board to provide notice by personal service in accordance with the manner of service of summons. (Civ. Code Sec. 5705.) Existing law similarly requires any Notice of Default (the first step in the nonjudicial foreclosure process) to be served by the association on the owner’s legal representative in accordance with the manner of the service of summons.

FISCAL EFFECT: None

COMMENTS:

Background: There are over 50,220 CIDs in the state that comprise over 4.8 million housing units, or approximately one quarter of the state's housing stock. CIDs include condominiums, community apartment projects, housing cooperatives, and planned unit developments. They are characterized by a separate ownership of dwelling space coupled with an undivided interest in a common property, restricted by covenants and conditions that limit the use of the common area and separate ownership interests, and the management of common property and enforcement of restrictions by a HOA. CIDs are governed by the Davis Stirling Act (the Act) as well as the governing documents of the HOA, including bylaws, declaration, and operating rules.

This bill requires the owner of a separate interest and a HOA to annually verify the mailing address or addresses to which notices from the association are to be delivered.

Purpose of this bill: According to the author, "currently HOA unit owners are supposed to provide the association with the best known mailing address for the association to mail required disclosures and other documents that current law requires to be shared with unit owners. There may be a situation where mailing address previously provided, if any was ever provided, may not be current and the owner is not receiving any of the required documents."

Previous Legislation:

SB 290 (Vidak, 2015) would have allowed the board of directors of an association formed under the Davis-Stirling Act to provide notice by personal service or by substitute service 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 bill died in the Senate Judiciary Committee.

SB 1026 (Vidak, 2014) would have permitted associations subject to the Commercial and Industrial Common Interest Development Act and the Davis-Stirling Act to serve an owner with a Notice of Default, the first step in the non-judicial foreclosure process, for failure to pay required assessments through posting, mailing, and publishing the notices, as specified, when those notices cannot be personally served after reasonable diligence, as specified. The bill died in the Senate Judiciary Committee.

SB 1244 (Harman, 2012) would have allowed an owner in a CID to be served certain notices in the non-judicial foreclosure process by both posting and mailing the notices, as specified, when those notices cannot be personally served after reasonable diligence. The bill died in the Senate Judiciary Committee.

SB 137 (Ducheny, Chapter 452, Statutes of 2005), among other things, permits an association of a CID seeking to collect delinquent regular or special assessments of $1,800 or more, or any assessments that are more than 12 months delinquent, to use foreclosure subject to specified conditions. These conditions include requiring the board of directors of an association to make the decision to foreclose upon an assessment lien at an executive meeting of the board, by a majority vote, at least 30 days prior to any public sale, to record the results of the vote, and to provide notice of the decision to foreclose.

AB 1317 (Speier, Chapter 1101, Statutes of 1996) imposed specified requirements with respect to the collection of debts based on assessments of owners by a CID, and removed a requirement that an association, prior to a sale by a trustee, make at least one bona fide attempt to serve the owner with a notice of sale by trustee.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

None on file

Analysis Prepared by: Lisa Engel / H. & C.D. / (961) 319-2085

 THIRD READING  

Bill No: SB 918

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 6-0, 5/3/16

AYES: Jackson, Moorlach, Anderson, Leno, Monning, Wieckowski

NO VOTE RECORDED: Hertzberg

SUBJECT:

SOURCE: United Trustee Association

DIGEST: This bill requires the owner of a separate interest and the homeowner association in a common interest development to annually verify the mailing address or addresses to which notices from the association are to be delivered.

ANALYSIS:

Existing law:

1. Defines and regulates residential common interest developments (CIDs), including the ability of a CID’s homeowner association to levy regular and special assessments sufficient to perform its obligations. (Civ. Code Sec. 4000 et seq.) Existing law provides that an assessment, and any late charges, reasonable fees and costs of collection, reasonable attorney’s fees, if any, and interest, shall be a debt of the owner of the separate interest. (Civ. Code Sec. 5650.)
2. Requires an association to send the owner of record a notice by certified mail at least 30 days prior to recording a lien to collect the debt. That notice must include a general description of the collection and lien enforcement procedures, an itemized statement of charges, the right to inspect the association’s records, and the right to dispute the debt, as specified. (Civ. Code Sec. 5660.)
3. Authorizes an association to record a lien against an owner’s separate interest in the amount of any delinquent assessment, plus any costs of collection, late charges, and interest assessed, as specified. Existing law requires a copy of a recorded notice of delinquent assessment to be mailed by certified mail to the owner of the separate interest no later than 10 calendar days after recordation. (Civ. Code Sec. 5675.)
4. Authorizes an association that seeks to collect delinquent assessments of an amount of $1,800, or more, or assessments that are delinquent by more than 12 months and secured by a lien, to use judicial or non-judicial foreclosure, subject to specified requirements. (Civ. Code Sec. 5720.)
5. Requires a decision to initiate foreclosure to be made only by the board of directors of the association, and, if the board votes to foreclose on the separate interest, requires the board to provide notice by personal service in accordance with the manner of service of summons. (Civ. Code Sec. 5705.) Existing law similarly requires any Notice of Default (the first step in the nonjudicial foreclosure process) to be served by the association on the owner’s legal representative in accordance with the manner of the service of summons. (Civ. Code Sec. 5710.)

This bill:

1. Requires an owner of a separate interest to, on an annual basis, provide written notice to the association of all of the following:

• The mailing address or addresses to which notices from the association are to be delivered;
• An alternate or secondary address to which notices from the association are to be delivered;
• The name and address of an owner’s 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; and
• Whether the separate interest is owner-occupied, is rented out, if the parcel is developed but vacant, or if the parcel is undeveloped land.

1. Requires an association to 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.
2. Specifies that if an owner fails to provide the information specified in the above provision, the property address shall be deemed to be the mailing address to which notices are to be delivered.

Background

In California, CIDs are governed by the Davis-Stirling Common Interest Development Act (Davis-Stirling Act). Owners of separate property in CIDs have an undivided interest in the common property of the development and are subject to the CID’s covenants, conditions, and restrictions. Residential CIDs are also governed by a homeowner association, which is run by volunteer directors that may or may not have prior experience managing an association. The Court of Appeal, Fourth Appellate District, previously observed that:

[t]he homeowners associations function almost “as a second municipal government, regulating many aspects of [the homeowners’] daily lives.”

“[U]pon analysis of the association’s functions, one clearly sees the association as a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government. As a ‘mini-government,’ the association provides to its members, in almost every case, utility services, road maintenance, street and common area lighting, and refuse removal. In many cases, it also provides security services and various forms of communication within the community. There is, moreover, a clear analogy to the municipal police and public safety functions. . . .” In short, homeowners associations, via their enforcement of the CC&R’s, provide many beneficial and desirable services that permit a common interest development to flourish. (Villa Milano Homeowners Ass’n v. Il Davorge (2000) 84 Cal.App.4th 819, 836 [citations omitted].)

The Davis-Stirling Act permits an association to foreclose upon a separate interest in a CID in certain circumstances if the owner fails to pay his or her assessments to the association. Foreclosures in California are generally non-judicial, meaning that they are accomplished without court involvement. Following a decision by the homeowner association to foreclose, the association records a Notice of Default, which generally occurs after three or more months of delinquency. The foreclosing entity must then generally wait at least three months before noticing the sale of the property, which must be posted, published, and filed with the county recorder.

This bill requires the owner of a separate interest and a homeowner association to annually verify the mailing address or addresses to which notices from the association are to be delivered.

Amendments taken in the Senate Judiciary Committee removed provisions that would have modified existing requirements that certain notices be personally served during the non-judicial foreclosure process. It is unclear whether the removal of these provisions will address concerns raised by opposition stakeholders regarding the proposed modifications to the personal service requirements.

Comments

The author writes:

Although associations have other remedies for collection of delinquent assessments, such as judicial foreclosures in superior courts, and court actions to collect assessments (small claims, limited jurisdiction or general jurisdiction, depending upon the amount of the delinquency), existing law is silent on non-judicial foreclosure remedies available to associations if they are unable to effect personal service of required documents on unit owners. In a typical civil action, if service cannot be effected on a defendant after the exercise of reasonable diligence, a plaintiff may obtain from a judge an order to publish a summons in a newspaper of general jurisdiction. In the Davis-Stirling non-judicial foreclosure context, however, there is no “case” on which to request an order to publish the notice of default. In discussions with advocates for unit owners within common interest developments, it became clear that current law lacks provisions clearly requiring unit owners to advise associations of mailing addresses to receive required documents, and that other rights and responsibilities as between owners and associations should be clarified.

Related/Prior Legislation

SB 290 (Vidak, 2015) would have allowed the board of directors of an association formed under the Davis-Stirling Act to provide notice by personal service or by substitute service 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 bill died in the Senate Judiciary Committee.

SB 1026 (Vidak, 2014) would have permitted associations subject to the Commercial and Industrial Common Interest Development Act and the Davis-Stirling Act to serve an owner with a Notice of Default, the first step in the non-judicial foreclosure process, for failure to pay required assessments through posting, mailing, and publishing the notices, as specified, when those notices cannot be personally served after reasonable diligence, as specified. The bill died in the Senate Judiciary Committee.

SB 1244 (Harman, 2012) would have allowed an owner in a CID to be served certain notices in the non-judicial foreclosure process by both posting and mailing the notices, as specified, when those notices cannot be personally served after reasonable diligence. The bill died in the Senate Judiciary Committee.

SB 137 (Ducheny, Chapter 452, Statutes of 2005), among other things, permits an association of a CID seeking to collect delinquent regular or special assessments of $1,800 or more, or any assessments that are more than 12 months delinquent, to use foreclosure subject to specified conditions. These conditions include requiring the board of directors of an association to make the decision to foreclose upon an assessment lien at an executive meeting of the board, by a majority vote, at least 30 days prior to any public sale, to record the results of the vote, and to provide notice of the decision to foreclose.

AB 1317 (Speier, Chapter 1101, Statutes of 1996) imposed specified requirements with respect to the collection of debts based on assessments of owners by a CID, and removed a requirement that an association, prior to a sale by a trustee, make at least one bona fide attempt to serve the owner with a notice of sale by trustee.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 5/11/16)

United Trustee Association (source)

OPPOSITION: (Verified 5/11/16)

Center for California Homeowner Association Law

Community Associations Institute

Congresswoman Jackie Speier

Sun City Palm Desert Community Association

Prepared by: Tobias Halvarson / JUD. / (916) 651-4113

5/11/16 16:06:35

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015-2016 Regular Session

Bill No: SB 918 (Author:Vidak)

Version: April 7, 2016

Hearing Date: May 3, 2016

Fiscal: No

Urgency: No

Consultant: TH

SUBJECT

Common Interest Developments

DESCRIPTION

Existing law requires a homeowner association in a residential common interest development to personally serve the owner of a separate interest with a notice when the association votes to foreclose on an individual’s separate interest, and requires similar personal service of a Notice of Default when initiating the non-judicial foreclosure process.

This bill would, instead, allow the owner of a separate interest to be served by mailing these notices when the notices cannot be personally served after reasonable diligence, as specified. This bill would require an association and its agents to jointly subscribe a statement of compliance with the personal service requirement, and record that statement with the county recorder where the subject property is located, prior to serving notices by mailing. This bill would also require the owner of a separate interest and a homeowner association to annually verify the mailing address or addresses to which notices from the association are to be delivered.

(This analysis reflects author’s amendments to be offered in Committee.)

BACKGROUND

In California, residential common interest developments (CIDs) are governed by the Davis-Stirling Common Interest Development Act (Davis-Stirling Act). Owners of separate property in CIDs have an undivided interest in the common property of the development and are subject to the CID’s covenants, conditions, and restrictions. Residential CIDs are also governed by a homeowners association, which is run by volunteer directors that may or may not have prior experience managing an association. The Court of Appeal, Fourth Appellate District, previously observed that:

[t]he homeowners associations function almost “as a second municipal government, regulating many aspects of [the homeowners’] daily lives.”

“[U]pon analysis of the association’s functions, one clearly sees the association as a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government. As a ‘mini-government,’ the association provides to its members, in almost every case, utility services, road maintenance, street and common area lighting, and refuse removal. In many cases, it also provides security services and various forms of communication within the community. There is, moreover, a clear analogy to the municipal police and public safety functions. . . .” In short, homeowners associations, via their enforcement of the CC&R’s, provide many beneficial and desirable services that permit a common interest development to flourish. (Villa Milano Homeowners Ass’n v. Il Davorge (2000) 84 Cal.App.4th 819, 836 [citations omitted].)

The Davis-Stirling Act permits an association to foreclose upon a separate interest in a CID in certain circumstances if the owner fails to pay his or her assessments to the association. Foreclosures in California are generally non-judicial, meaning that they are accomplished without court involvement. Following a decision by the homeowner association to foreclose, the association records a Notice of Default, which generally occurs after three or more months of delinquency. The foreclosing entity must then generally wait at least three months before noticing the sale of the property, which must be posted, published, and filed with the county recorder.

Under existing law, an association must personally serve required notices during the non-judicial foreclosure process. This bill would modify that requirement by allowing the association to mail required notices to an owner’s last known address if personal service cannot be effected after reasonable diligence. This bill would require an association and its agents to jointly subscribe a statement of compliance with the personal service requirement, and record that statement with the county recorder. This bill would also require the owner of a separate interest and a homeowner association to annually verify the mailing address or addresses to which notices from the association are to be delivered.

CHANGES TO EXISTING LAW

Existing law, the Davis-Stirling Common Interest Development Act, defines and regulates residential common interest developments (CIDs), including the ability of the association to levy regular and special assessments sufficient to perform its obligations. (Civ. Code Sec. 4000 et seq.) Existing law provides that an assessment, and any late charges, reasonable fees and costs of collection, reasonable attorney’s fees, if any, and interest, shall be a debt of the owner of the separate interest. (Civ. Code Sec. 5650.)

Existing law requires an association to send the owner of record a notice by certified mail at least 30 days prior to recording a lien to collect the debt. That notice must include a general description of the collection and lien enforcement procedures, an itemized statement of charges, the right to inspect the association’s records, and the right to dispute the debt, as specified. (Civ. Code Sec. 5660.)

Existing law requires an association’s decision to record a lien for delinquent assessments to be made only by the board of directors, approved by a majority vote of the directors in an open meeting, with the vote recorded in the minutes of that meeting. (Civ. Code Sec. 5673.)

Existing law authorizes an association to record a lien against an owner’s separate interest in the amount of any delinquent assessment, plus any costs of collection, late charges, and interest assessed, as specified. Existing law requires a copy of a recorded notice of delinquent assessment to be mailed by certified mail to the owner of the separate interest no later than 10 calendar days after recordation. (Civ. Code Sec. 5675.)

Existing law authorizes an association that seeks to collect delinquent assessments of an amount of $1,800, or more, or assessments that are delinquent by more than 12 months and secured by a lien, to use judicial or non-judicial foreclosure, subject to specified requirements. (Civ. Code Sec. 5720.)

Existing law requires a decision to initiate foreclosure to be made only by the board of directors of the association, and, if the board votes to foreclose on the separate interest, requires the board to provide notice by personal service in accordance with the manner of service of summons. (Civ. Code Sec. 5705.) Existing law similarly requires any Notice of Default (the first step in the nonjudicial foreclosure process) to be served by the association on the owner’s legal representative in accordance with the manner of the service of summons. (Civ. Code Sec. 5710.)

This bill requires that an owner of a separate interest to, on an annual basis, provide written notice to the association of all of the following:

• the mailing address or addresses to which notices from the association are to be delivered;
• an alternate or secondary address where notices from the association are to be delivered;
• the name and address of an owner’s 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; and
• whether the separate interest is owner-occupied, is rented out, if the parcel is developed but vacant, or if the parcel is undeveloped land.

This bill requires an association to 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. This bill specifies that if an owner fails to provide the information specified in the above provision, the property address shall be deemed to be the mailing address to which notices are to be delivered.

This bill provides that to effect personal service of the board of director’s vote and of its intention to enforce a lien for nonpayment of assessment, the association and its agent shall rely on the data provided annually by the owner of a separate interest pursuant to the above provisions.

This bill specifies that if the association or its agents have attempted personal service, in accordance with the specified manner of service of summons, 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, then both the association and its agents shall jointly subscribe a statement of compliance with the personal service requirement.

This bill specifies that this statement of compliance shall be recorded with the county recorder where the subject property is located, and that the statement shall include all of the following data:

• the physical address of subject property;
• the names of owners of the separate interest as they appear on the deed of title;
• the addresses where official notices are to be sent as shown on the association’s membership books;
• 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 of compliance;
• the names of, and contact information for, the persons attempting service; and
• the dates and times of attempted service.

This bill specifies that 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, and in the absence of contrary written notification by the owner to the association, the address of the owner’s separate interest shall be deemed to be the owner’s mailing address.

COMMENT

1. Stated need for the bill

According to the author:

Although associations have other remedies for collection of delinquent assessments, such as judicial foreclosures in superior courts, and court actions to collect assessments (small claims, limited jurisdiction or general jurisdiction, depending upon the amount of the delinquency), existing law is silent on non-judicial foreclosure remedies available to associations if they are unable to effect personal service of required documents on unit owners. In a typical civil action, if service cannot be effected on a defendant after the exercise of reasonable diligence, a plaintiff may obtain from a judge an order to publish a summons in a newspaper of general jurisdiction. In the Davis-Stirling non-judicial foreclosure context, however, there is no “case” on which to request an order to publish the notice of default. The primary purpose of SB 918 is to provide a remedy in the non-judicial foreclosure context to associations which are unable to effect personal service on unit owners after the exercise of reasonable diligence. In discussions with advocates for unit owners within common interest developments, it also became clear that current law lacks provisions clearly requiring unit owners to advise associations of mailing addresses to receive required documents, and that other rights and responsibilities as between owners and associations should be clarified.

1. Personal service of notices

This bill would create an exception to the requirement that specified foreclosure and pre-foreclosure notices must be personally served in common interest developments. Those personal service requirements were enacted by SB 137 (Ducheny, Ch. 452, Stats. 2005), which sought to address concerns that homeowner associations were foreclosing on homes for delinquent assessments that were very small in comparison to the debts that would justify foreclosure in other instances, often with inadequate notice.

The two service requirements modified by this bill are as follows: First, existing law requires notice by personal service if an association votes to foreclose on an owner’s separate interest. Second, existing law requires a notice of default (the first step in the nonjudicial foreclosure process) to be served by the association on the owner’s legal representative. Both of those notices must be served in accordance with the manner for service of summons in a civil lawsuit as specified in Section 415.10 of the Code of Civil Procedure.

Describing the difficulties that arise when a homeowner cannot be personally served, the sponsor, United Trustees Association, asserts:

The ultimate remedy for the enforcement of delinquent assessments is non-judicial foreclosure of the unit owner’s interest. Unlike traditional mortgages, the law presently requires personal service on unit owners of two different documents relating to foreclosure: the notice of intention to foreclose adopted by CID boards, and the notice of default to actually begin the foreclosure process.

What present law lacks, however, is any remedy if personal service cannot be effected on the unit owner. The owner may have died, moved to an undisclosed location, been on an extended vacation, or simply be evading service of process. When this occurs in a traditional legal case, the law provides a remedy. Here, however, there is no “case,” so the remedy provided by the law is unavailable.

SB 918 addresses the problem in a balanced and fair way, by creating a new requirement on associations to annually solicit an actual address for unit owners to receive critical documents, and a requirement on unit owners to annually provide such an address. The bill also permits the recordation of a notice of compliance with the personal service requirement showing that service had been attempted at least three different times, on different days, on weekends and weekdays, and at different times.

It is important that all reasonable efforts be undertaken to insure that unit owners are aware of the gravity of the situation when CID assessments are not paid. To this end, current law goes even further than the law relating to unpaid mortgage obligations. But when, after due diligence, personal service cannot be effected on owners, it is also important that the law provide a remedy. SB 918 corrects this defect in the law.

To address the problem of being unable to effect personal service in these circumstances, this bill would authorize an association and its agents to jointly subscribe a statement of compliance indicating their efforts to comply with personal service requirements, and to record that statement of compliance with the county recorder for the county within which the subject property is located.

Congresswoman Jackie Speier, in opposition, contends that this bill “would undermine the current requirement in law that a resident who occupies his/her unit be personally served with the notice of foreclosure,” stating that “[i]f this provision were enacted into law it would be a serious threat to the property interest of homeowners throughout California.” Congresswoman Speier writes:

In 1996, I authored AB 1317, a bill to clarify many of the procedures in the act of foreclosure. Around 1995, then-Sea Ranch homeowner Patrick Mahaffay fell behind in his $80 per month dues to the homeowners association. While he made a few payments to the association, he still owed $567 when his home was foreclosed upon by Sea Ranch and sold for $2,403. The home’s value was $300,000 to $350,000 at the time of its sale.

Mahaffay was not personally served with the notice of foreclosure . . . the association likely had the notice of intent to foreclose taped to his front door. Sea Ranch is notoriously windy and taping a notice to the door of a home likely resulted in the notice blowing away.

I am always amazed when a change to existing law would re-create the very problem that the current law was designed to end. SB 918 would now change a clear statute – which was not created by AB 1317 but which is certainly in the spirit of my legislation – by dumbing down the personal service requirement set forth in Civil Code Section 5705(d). Whereas the current requirement is to personally serve a homeowner who resides at an address, the proposed new requirement would be to make three attempts to do so. I want to make clear: It apparently took only one botched attempt to deny Patrick Mahaffay his $300,000 home in pursuit of a $567 debt. Personal service means personal service. Anything less is open to gross abuse.

Considering the serious concerns that led to the enactment of the existing personal service requirement, from a policy standpoint, it appears appropriate to continue to ensure that homeowners do receive personal service of these notices whenever possible. Alternatively, that service requirement should arguably not be abused so as to allow a homeowner to avoid foreclosure indefinitely by continuing to evade attempts at personal service.

This bill would authorize a form of “substitute service” for owners of separate interests who, after reasonable diligence as specified, cannot be personally served with notices from the association. In order to take advantage of this substitute service, the association or its agents would have to attempt personal service 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. Should personal service prove ineffective, the association and its agents would then have to jointly subscribe a statement of compliance with the personal service requirement, detailing when service was attempted and by who, which would be recorded against the subject property by the county recorder.

It should be noted that the proposed method of substitute service lacks certain requirements that the Legislature has required in other substitute service provisions that are not subject to judicial oversight. Should the Committee wish to bolster the proposed substitute service process, it may consider requiring that relevant notices be posted on the subject property, that notice be published for certain durations at certain intervals in newspapers of general circulation, or that notice by mail be attempted using address data from the County Assessor’s records concerning the subject property. Alternately, the Committee may wish to consider adding a minimum default period beyond that in existing law which must be satisfied before substitute service may be used, similar to the 5-year default period in existing law for property that is tax defaulted.

It should also be noted that when associations and trustees are unable to effect personal service in the course of the non-judicial foreclosure process, those entities could elect to pursue judicial foreclosure and petition a judge for an order authorizing substitute service under Code of Civil Procedure Section 415.50.

1. Annual verification of addresses

This bill would additionally require both owners of separate interests and associations to annually verify the mailing address to which official notices and communications from the association are to be sent. According to the author, “[i]n discussions with advocates for unit owners within common interest developments, it [has become] clear that current law lacks provisions clearly requiring unit owners to advise associations of mailing addresses to receive required documents.” Having a procedure to annually verify the mailing address of owners of separate interests could help reduce some of the difficulties past owners have experienced with regard to receiving critical notices from a homeowner association, including notices regarding delinquent assessments. However, according to the Sun City Palm Desert Community Association, writing in opposition, this verification tool “would add a costly component to an already mandatory list of requirements” for associations to follow.

1. Author’s amendments

The author offers the following amendments to narrow the scope of the bill to only those provisions addressing: (1) the duty of an owner of a separate interest and of a homeowner association to annually verify the mailing address or addresses to which notices from the association are to be delivered; and (2) the preparation and recording of a statement of due diligence regarding attempts to affect personal service of notices from the association.

Amendments:

Commencing with page 2, strike sections 2 through 6

Commencing with page 7, strike sections 8 through 10

Support: None Known

Opposition: Center for California Homeowner Association Law; Community Associations Institute; Congresswoman Jackie Speier; Sun City Palm Desert Community Association

HISTORY

Source: United Trustee Association

Related Pending Legislation: None Known

Prior Legislation:

SB 290 (Vidak, 2015) would have allowed the board of directors of an association formed under the Davis-Stirling Common Interest Development Act to provide notice by personal service or by substitute service 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. This bill died in the Senate Judiciary Committee.

SB 1026 (Vidak, 2014) would have permitted associations subject to the Commercial and Industrial Common Interest Development Act and the Davis-Stirling Common Interest Development Act to serve an owner with a Notice of Default, the first step in the non-judicial foreclosure process, for failure to pay required assessments through posting, mailing, and publishing the notices, as specified, when those notices cannot be personally served after reasonable diligence, as specified. This bill died in the Senate Judiciary Committee.

SB 1244 (Harman, 2012) would have allowed an owner in a common interest development to be served certain notices in the non-judicial foreclosure process by both posting and mailing the notices, as specified, when those notices cannot be personally served after reasonable diligence. This bill died in the Senate Judiciary Committee.

SB 137 (Ducheny, Ch. 452, Stats. 2005), among other things, permits an association of a common interest development seeking to collect delinquent regular or special assessments of $1,800 or more, or any assessments that are more than 12 months delinquent, to use foreclosure subject to specified conditions. These conditions include requiring the board of directors of an association to make the decision to foreclose upon an assessment lien at an executive meeting of the board, by a majority vote, at least 30 days prior to any public sale, to record the results of the vote, and to provide notice of the decision to foreclose.

AB 1317 (Speier, Ch. 1101, Stats. 1996) imposed specified requirements with respect to the collection of debts based on assessments of owners by a common interest development, and removed a requirement that an association, prior to a

sale by a trustee, make at least one bona fide attempt to serve the owner with a notice of sale by trustee.

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