Homeowners’ Association (HOA) Liens in California
Homeowners frequently purchase homes that are part of a homeowners’ association (HOA). Members of an HOA can enjoy many benefits, however, they come at a cost. Homeowners are required to pay HOA fees, or “assessments” according to the HOA’s Declaration of Covenants, Conditions and Restrictions (CC&Rs) and California Civil Code Sections 5600 and 5650. Accordingly, the HOA has the authority to file a lien or foreclose on a property if a homeowner fails to pay their Assessments.
What Payments do I Owe the HOA on a Lien?
Assessments, late charges, interest and collection costs, including any attorneys’ fees, are the personal obligation of the owner of the property at the time the assessment or other sums are imposed (Civil Code Section 5650).
Assessments. Assessments are dues that a homeowner must pay to the HOA on a regular basis. The HOA may also impose Special Assessments, which can be used to pay for repairs and improvements to the Common Areas in the community. Regular Assessments and Special Assessments are delinquent after fifteen (15) days, unless the HOA’s CCRs or governing documents state otherwise.
Late Fees. Assessments which are not received by the due date are considered late or “delinquent” and shall be subject to a late charge that in the amount either ten dollars ($10.00) or 10% of the assessment.
Interest. HOAs can charge interest up to a rate of twelve percent (12%) per annum. Interest is assessed against any outstanding balance, including delinquent assessments, late charges and cost of collection, which may include attorneys’ fees.
Costs of Collection and Attorney’s Fees. If a homeowner fails to pay his or her assessments, the HOA can turn the matter over to a collections agency or a law firm. The fees paid to the collections agency or lawyers are considered costs of collection, and all become debt that the homeowner must pay.
Exception: HOA Liens Cannot be Used to Collect on Disciplinary Actions and Violation Fines.
Many HOA’s fine homeowners for violations of the governing documents. Even simple things like failing to paint your house or mow your lawn can cause the HOA to fine you repeatedly. Although HOAs are in their legal right to enforce disciplinary action such as charging fines against a homeowner, HOAs cannot lien the cost of fines and violations on your property. For example, even if you had $1,800.00 in fines for not putting away your trash cans or other menial offensive violation, the HOA could not lien your Property for that amount.
According to California Civil Code Section 5725(b):
A monetary penalty imposed by the association as a disciplinary measure for failure of a member to comply with the governing documents . . . may not be characterized nor treated in the governing documents as an assessment that may become a lien against the member’s separate interest enforceable by the sale of the interest under Sections 2924, 2924b, and 2924c.
This means that an HOA cannot foreclose on a property for disciplinary or violation fines and fees.
When Can an HOA Foreclose on a Lien?
$1,800.00 Minimum Amount Required. For an HOA to foreclose on a property, there is a minimum required amount of $1,800.00 in delinquent regular or special assessments. For an HOA to begin foreclosure proceedings, the debt claimed must be: (a) $1,800 or more and (b) be comprised of regular or special assessments (not disciplinary fines and violation fees). That means that if an HOA is attempting to collect less than $1,800.00, they may not do so via foreclosure.
Can an HOA Record a Lien in California?
The HOA may record a lien against a property for any amount of assessments when they become delinquent. Therefore, an HOA can record a lien when the amount owed is less than $1,800, but they cannot proceed to initiate a foreclosure action until the amount owed reaches at least $1,800.00. (Civil Code Section 5720(b)(2)).
The HOA may also proceed to record a lien if the debt is delinquent twelve (12) months or more. However, if the HOA wants to proceed to record a lien under Civil Code Section 5720(b)(2), the homeowner has the option to first undergo dispute resolution. The HOA must offer dispute resolution, and if the homeowner accepts, the HOA must participate.
How else can an HOA Collect Debt from a Homeowner?
Small Claims. If the HOA does not have the appropriate amount to initiate foreclosure, the HOA can file a lawsuit in small claims court (Civil Code Section 5720(b)(1)).
Civil Court Action. Finally, according to Civil Code Section 5720(b)(3), HOAs have to right to collect debt in “any other manner provided by law”. This allows an HOA to sue a homeowner in civil court for the amount. However, most HOAs do not pursue debt in this manner due to the lengthy nature of pursuing a civil court action, and the additional court costs involved.
Ways to Defend Against an HOA Foreclosure, Lien or Debt Collection.
HOAs in California are governed by the Davis-Stirling Act, and must carefully follow the procedural laws to enforce assessment collections. However, recovering delinquent assessments from a homeowner is considered a form of debt collection, and HOAs must also follow federal law. Accordingly, HOAs are also required to follow the rules and requirements of the federal Fair Debt Collection Practices Act (“FDCPA”). There are a multitude of procedural requirements that a HOA must follow to collect debt, and for an action to lien or foreclose to be valid. If the HOA fails to comply with these procedures, the homeowner may have the right to invalidate the HOA’s action and overcome the lien or foreclosure outright.
Contact an Experienced HOA Lien and HOA Foreclosure Attorney in California
HOA and debt collections are specific, complicated areas of law. For you to achieve the most favorable outcome in your case, it is recommended that you reach out to a real estate attorney with years of experience as an HOA lawyer who can assist you through the entire legal process. For a free consultation with the attorneys at Talkov Law, contact (844) 4-TALKOV (825568) or info(at)talkovlaw.com.