Under the Davis-Stirling Common Interest Development Act the amount of any unpaid association assessment, plus the reasonable costs of collection, late charges, and interest, constitutes a debt of the owner. After complying with notice requirements an association may record a lien for delinquent assessments against the property of an owner. The lien may then be enforced through the nonjudicial foreclosure process applicable to powers of sale in mortgages and deeds of trust.
The association’s right to utilize nonjudicial foreclosure as a means to collect assessments, pursuant to Civil Code section 1367.4, is limited to those situations where delinquent assessments are $1,800 or more, except when assessments secured by the lien are more than 12 months delinquent.
Conditions are also imposed: 1) prior to initiating foreclosure the association must offer the owner certain enumerated forms of alternate dispute resolution and, if requested by the owner, participate in the requested ADR process; 2) the decision to initiate foreclosure must be made by the association’s board of directors in an open vote; and, 3) the board must provide the owner notice of its decision. [See, Civil Code sections 1367.1 and 1367.4 for exact particulars. For a summary of all notice and procedural requirements consult this post: Davis-Stirling: Foreclosure Notice Requirements are Strictly Construed.]
Additionally, an owner in a common interest development whose property is nonjudicially foreclosed by the association is provided the right to redeem the property within 90 days after the sale. The redemption process is governed by Code of Civil Procedure sections 729.035-729.090. This right of redemption is unique in nonjudicial foreclosure actions and is applicable only to the foreclosure by the association of separate interests in common interest developments. The unique redemption requirements mandate that the trustee deliver a certificate of sale to the purchaser and record a duplicate of the certificate in the office of the county recorder.
Pursuant to section 729.050, the trustee must also promptly notify the debtor of its redemption rights: “If property is sold subject to the right of redemption, promptly after the sale the levying officer or trustee who conducted the sale shall serve notice of the right of redemption on the judgment debtor. Service shall be made personally or by mail. The notice of the right of redemption shall indicate the applicable redemption period.”
Sections 729.060-729.090 describe how the debtor may redeem the property following the foreclosure sale. Section 729.060 (a) requires that the person seeking to redeem the property deposit the redemption price with the levying officer before the redemption period expires. Subdivision (b) defines the redemption price as the total of the following amounts: (1) The purchase price at the sale; (2) The amount of any assessments or taxes and reasonable amounts for fire insurance, maintenance, upkeep, and repair of improvements on the property; (3) Any amount paid by the purchaser on a prior obligation secured by the property to the extent that the payment was necessary for the protection of the purchaser’s interest; (4) Interest on the amounts described in paragraphs (1), (2), and (3). Subdivision (c) authorizes an offset to the redeeming party for any rents and profits from the property paid to the purchaser, or the value of the use and occupation of the property to the purchaser.
What if the trustee fails to notify the debtor of redemption rights? In that circumstance, if the debtor has suffered prejudice, the debtor may be able to set aside the sale. For more on this issue see my post entitled: “Failure to Provide Notice of Redemption Rights May Void HOA’s Nonjudicial Foreclosure.”
I consult with clients, including owners and Boards of Directors of common interest developments, and accept cases involving assessments, liens, and foreclosures under the Davis Stirling Common Interest Development Act. For other types of cases I accept, please scroll my Home page and consult the My Practice page. If you are seeking a consult or representation, please give me a call at 818.971.9409. – Michael Daymude