Lila Chee (“Chee”) is a 71-year-old resident owner of a condominium at the Marina Seagate condominium complex. She was allegedly injured when a Jack Russell Terrier owned by Olga Kiymaz, at the time a tenant in the condominium next door, ran out of Kiymaz’s unit, unrestrained by a leash. The dog jumped on Chee, allegedly causing her to fall and sustain numerous injuries. Kiymaz rented the condominium from unit owner Jerome Brown. Chee filed a second amended complaint against Brown, the Marina Seagate Homeowners Association (“Association”), and others. Chee brought Brown and the Association (and Brown’s property managers who rented the unit to Kiymaz) into the lawsuit after Kiymaz filed for bankruptcy and was dismissed from the action.

If you are asking what this has to do with California community associations, then you need to read on. California community associations have the ability to secure a delinquent homeowners assessment obligation by recording an assessment lien.

With an increasing number of delinquent homeowners resorting to bankruptcy protection, it is more important than ever that California community associations move quickly with the assessment collection process and record a lien. Keep in mind that the lien cannot be recorded until 30 days after the pre-lien letter with all the required language and attachments (association collection policy, statement of account, etc.) has been sent out to the owner(s) in compliance with the California Civil Code. Click here for more information on what is required for the pre-lien letter.

Unfortunately, many associations are taking too long to take action to collect the assessments that are unpaid and many of them find out too late (after the owner has filed bankruptcy) that as an unsecured creditor, they are likely not going to collect any of the delinquent assessments that were owed.

California law provides associations with the ability to record an assessment lien, and we encourage all association managers and board members to take advantage of the protections built into the law. For more information on recording an assessment lien, please contact Tracy Neal at trn@alslien.com.

The Wall Street Journal Article suggests that "[t]he homeowner association delinquency rate can serve as a leading indicator of sorts because homeowners usually stop paying dues before they stop paying their mortgage." Click here to read the article in the WSJ.

The “perfect storm” is the unprecedented sub-prime crisis coupled with a stock market collapse, accompanied by a significant increase in unemployment. Several commentators have reported that we would see different waves of foreclosures, and that is exactly what ALS has been experiencing. Starting in September of 2008, ALS experienced the first wave of the “sub-prime” owner defaults, assessment delinquencies and resulting lender foreclosures.

The website HOALeader.com (created to provide support and information to board members and other HOA leaders) recently conducted a survey of HOA leaders on how they were dealing with the problem. Comments from HOA leaders regarding their fears and feelings of helplessness on how this is impacting their communities is interesting; they show that owners are concerned as to how their neighbors’ foreclosures are going to impact the amount of assessments they pay. Follow this link to read the article.

Many of us complain we have so many calls or e-mails to deal with; we complain because there is so much work to do. Some board members complain about the homeowners, about all the delinquencies, about the high cost of insurance, etc., and the list goes on.

How about this: instead of complaining, why not say (or feel) how grateful we are for what we have. If you are employed, stop complaining because 10% of Californians are out of work. If you still have some money in the bank or invested in stocks, stop complaining because some people invested their money in Ponzi schemes.

We all need to stop complaining and look at the bright side of things. Please read the article attached - it's humbling.

Each year, the Orange County Chapter of CAI recognizes an outstanding individual who has been instrumental in the success of the Chapter. The Chapter’s most prestigious award is named after May Russell, a former Irvine Company Executive who helped form CAI and was its first president (CAI started in Orange County). Recipients of this Award were first announced in 1988 at the Chapter’s very first awards dinner. The Award is presented to an individual who has proved exemplary leadership and demonstrated the ideals and objectives of CAI through active participation at the local, regional and/or national level.

Congratulations to Sandra Gottlieb!

In this case, the homeowner requested that the association seal a hole in the slab which had been made as part of the original construction for pipes to pass-through from one unit to the other. There was no question that the hole should be filled in, as it constituted a fire danger. Somehow, the board incorrectly concluded that this hole was the homeowner’s responsibility to deal with, and the homeowner disagreed and sued the Association. The work would have cost the association approximately $2,500 (for that unit); instead, the case cost the Association hundreds of thousands of dollars for attorneys' fees and costs. The Court of Appeals decision (click here) provides an excellent discussion on a homeowner's versus the condominium association's repair responsibilities and the director's duty of care as well. The Court’s discussion on this issue follows:

RealtyTrac® (realtytrac.com), the leading online marketplace for foreclosure properties, released its 2008 U.S. Foreclosure Market Report™, which shows a total of 3,157,806 foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 2,330,483 U.S. properties during the year, an 81 percent increase in total properties from 2007 and a 225 percent increase in total properties from 2006. The report also shows that 1.84 percent of all U.S. housing units (one in 54) received at least one foreclosure filing during the year, up from 1.03 percent in 2007.

Foreclosure filings were reported on 303,410 U.S. properties in December, up 17 percent from the previous month and up nearly 41 percent from December 2007. Despite the spike in December, foreclosure activity for the fourth quarter was down nearly 4 percent from the previous quarter but still up nearly 40 percent from the fourth quarter of 2007.

Nevada is ranked #1 in foreclosure filings per household and California is now ranked #4 on a per household rate.

James J. Saccacio, chief executive officer of RealtyTrac, had the following to say regarding December foreclosure activity: “State legislation that slowed down the onset of new foreclosure activity clearly had an effect on fourth quarter numbers overall, but that effect appears to have worn off by December. The big jump in December foreclosure activity was somewhat surprising given the moratoria enacted by both Freddie Mac and Fannie Mae, along with programs from some of the major lenders and loan servicers aimed at delaying foreclosure actions against distressed homeowners. Clearly the foreclosure prevention programs implemented to-date have not had any real success in slowing down this foreclosure tsunami. And the recent California law, much like its predecessors in Massachusetts and Maryland, appears to have done little more than delay the inevitable foreclosure proceedings for thousands of homeowners.”

RealtyTrac believes the foreclosure numbers will go higher due to the 7% of loans that are now delinquent (per the Mortgage Bankers Association as of November) and due to the fact that more than half of the homeowners who received a loan modification in the first half of 2008 are already delinquent on their loans (per the U.S. Office of Thrift Supervision). In addition to the above reasons, more than 500,000 jobs have been lost over November and December.

Click here for more of the article and charts showing U.S. Foreclosure Market Data by state and to see how the top 100 Metropolitan Statistical Areas (MSAs) are fairing with foreclosures (for 2008).

This information means that California Community Associations should anticipate another year of delinquent owners abandoning their property with associations and the other members having to absorb this uncollectible bad debt.

This new law has created a lot of controversy as many California community associations debate whether compliance is required or not, as this is a federal and not state law. Perhaps the real issues here are the potential risk of injury to children and others that use the pool or spa and potential exposure to the Association. As this new law impacts community associations, it is a big issue. It was the subject of a January 20, 2009 article in the Wall Street Journal. It has been reported that some boards of directors at community associations are delaying the appropriate retrofits because they believe that no one is really going to penalize their association for not taking the appropriate action. While it is true that no governmental authorities are (at least as of going to cite or penalize an association for not complying with the new law, and while it is likely that most associations' insurance carriers will defend and indemnify associations from injury claims, those insurance carriers will not indemnify the association or the individual board members if they are sued for intentional wrongdoing (knowing of the danger and the new law and intentionally deciding not to take action). As the Wall Street Journal article points out (quoting an official with State Farm insurance): (community associations that keep their pools open and do not retrofit) "will probably have a more difficult time proving they are not liable."

Our advice: retrofit as soon as possible and in the meantime, either close (empty?) the pool. It may be appropriate to post notices and disclose the issue and potential danger to the owners and residents. And just so we are clear, posting notices and disclosing the situation may not necessarily insulate the board or the association for potential liability if the pool remains open. Be careful out there!

On December 4, 2008, Sandra Gottlieb (and other members of her panel) was awarded the coveted Speaker of the Year Honors by the Sacramento Chapter of Community Associations Institute (CAI) for her role in a panel program “Managing Foreclosures”.

This is what the Sacramento Chapter had to say about Sandra Gottlieb (the panel) and this award:

With over 105 in attendance, the Managing Foreclosures luncheon drew the largest attendance of the year. Thank you to Sandra, Susan (Oliver) and Rolf (Crocker) for your dedication to the continued education for this Chapter.

They went on to say the following regarding Sandra Gottlieb:

Sandra is truly a dynamic speaker. Sandra, as well as the panel, turned a difficult subject into a valuable and informative seminar. Her knowledge and expertise in the industry is without measure. Her insight, experience and personality reflect her dedication to CAI and the HOA industry. Sandra really knows what it takes to survive in this ever-changing industry.