AB2289 – Assessment Collection Procedures

AB 2289- ASSESSMENT COLLECTION PROCEDURE FOR HOMEOWNERS ASSOCIATIONS

AB2289 was enacted on September 29, 2002 , which in essence modifies specific sections contained in the Davis-Stirling Act. The following discusses the effect of AB2289 on associations collection procedures for delinquent assessments.

I. YEAR END DISCLOSURE REQUIREMENTS

AB2289 clearly requires that all associations distribute a written notice to all homeowners during the 60-day period immediately preceding the beginning of the association s fiscal year. The notice must be printed in at least a 12-point font. The notice must be entitled NOTICE – ASSESSMENTS AND FORECLOSURES and must contain the exact same language contained in the newly enacted legislation. Please be advised that our office has the exact language required and we can provide same upon request. In order to proceed forward with non-judicial foreclosures after January 1, 2003, an association must distribute the notice prior to that date, regardless of the beginning of the association s fiscal year.

II. PRE-LIEN NOTICE REQUIREMENTS

All associations are now required to send all delinquent homeowners a pre-lien letter to notify them regarding the association s intent to record a lien, at least 30 days prior to actually recording the lien. Before AB 2289, the Civil Code simply required associations to send a prelien letter prior to the recording of a lien, however no statutory time period was mandated. Pursuant to AB 2289, the new pre-lien letter must include the following:
(a) the association s collection policy which describes the association s general policy regarding collection of delinquent assessments and the enforcement policy adopted by the association.
(b) the following statement printed it 14-point font, boldfaced or in capital letters:
IMPORTANT NOTICE: IF YOUR SEPARATE INTEREST IS PLACED IN FORECLOSURE BECAUSE YOU ARE BEHIND IN YOUR ASSESSMENTS, IT MAY BE SOLD WITHOUT COURT ACTION.
(c) a detailed accounting of all charges owed by the delinquent homeowners. Including assessments, late charges, interest, costs of collection and reasonable attorney s fees.
(d) a statement that if it is determined that the homeowner paid the assessments on time, that the owner will not be held responsible for payment of late charges, interest and costs of collection.
(e) a statement offering the homeowner the option of requesting a meeting with the Board of Directors, in executive session to discuss the possibility of a payment schedule.
(f) An address where payments can be sent via overnight delivery.

III. RECEIPTS

Association must provide a receipt for any payments, upon the request of a homeowner, which states the date a payment was received and person who received such payment. In order to simplify this requirement, management companies should start keeping track of payments, i.e., a payment log, recording the pertinent information for each payment received from each individual homeowner.

IV. LATE CHARGES AND INTEREST

The new legislation has modified the amount of late charges and interest that an association is allowed to charge as follows:
(a) late charges- a late charge not exceeding 10 percent of the delinquent assessment or $10 dollars, which ever is greater, unless the declarations specifies a late charge in a smaller amount, in which case any late charge imposed shall not exceed the amount specified in the declarations. Although this language does not change, according to the new legislation assessments are deemed delinquent after 15 days, unless the declarations specifies that the assessments became delinquent at some later date, in which case the later date applies. Before AB2289, assessments were delinquent on the 15th day, notwithstanding any provisions on the declarations to the contrary.
(b) interest- interest in all sums imposed in accordance with this section, including delinquent assessments, reasonable fees and costs of collection, and reasonable attorney s fees, at an annual interest rate not to exceed 12 percent, commencing 30 days after the assessment becomes due, unless the declaration specifies the recovery of interest at a rate of a lesser amount, in which case the lesser rate of interest shall apply. Prior to this legislation, the Civil Code, allowed associations to charge 12 percent interest regardless of any provision in the declaration to the contrary.

V. RESPONSE TO OWNER DISPUTES

If an owner disputes the amount owed in writing within 15 days from the date that the pre-lien letter is postmarked, the association has an obligation to respond in writing to that dispute within 15 days that the homeowner s letter is postmarked. Therefore, it may be wise for all management companies to save the envelopes they receive containing letters of dispute. In addition, please be advised that if a homeowner did in fact pay their assessments on time, the association must waive all late charges, interest and collection fees incurred with the lien and the association must release the lien previously recorded, and provided a conformed copy of same to homeowner within 21 days after the error is discovered. The actual release must state that the lien was recorded in error.

VI. PAYMENT PLANS

If the association has adopted a payment plan standard, any payment plan accepted by the association must comply with same. Associations may not want to adopt a written policy for accepting payment plans, because this may just increase the margin of error if such procedures are not followed exactly. An association may simply want to state in their collection policy that payment plan requests are encouraged and that the Board will consider each individual request on a cases-by-case basis.
The new legislation requires that if an owner does request to meet with the board to discuss a payment plan in writing within 15 of the date the pre-lien letter is postmarked the Board or a committee of the board must meet with the requesting owner in executive session within 45 days of the date the owners request is postmarked.

VII. RELEASE OF LIENS

Once an owner brings his account current or it is determined that a lien was recorded in error, the association has an obligation to record a release of lien and provide notice of same to the homeowner with 21 days of receipt of full payment or discovery of the error. If the lien was recorded in error the release must so state.

VIII. PENALTY TO ASSOCIATION FOR NONCOMPLIANCE WITH REQUIREMENTS OF COLLECTION IN THE DAVIS-STIRLING ACT

If an association fails to follow the Davis-Stirling Act in regards to collection of delinquent assessments, the association is required to re-commence collection proceedings starting from the pre-lien stage, and waive all costs of collection incurred with the previous collection attempt.