Articles Posted in Assessment Collection

CAI_LOGO_225Earlier this month, CAI released a Statement of Moratorium on Foreclosure Actions urging community associations to immediately suspend all foreclosure activity and not begin new foreclosure actions until June 1. We question how well thought out this position is as it is not all that realistic for California community associations.

Do not get this wrong. We at SwedelsonGottlieb are well aware of the impact that COVID-19 has had on our world and the fact that over 10,000,000 people filed for unemployment nationwide (so far). We recognize that community association boards are going to need to be sensitive to the fact that many owners may be temporarily (hopefully) unemployed and not able to timely pay their assessments.

As CAI said in its introduction to the Statement of Moratorium, the collection of community association assessments is a very serious and important responsibility of a governing board. Failing to collect assessments may impair a community association’s ability to pays its bills, provide essential services, acquire financing for continued operations, and may impact the ability of a potential purchaser to obtain a mortgage or impact existing owners refinancing of their loans.

By Sandra Gottlieb and Alyssa Klausner, Community Association Attorneys at SwedelsonGottlieb

Chapter 13 Bankruptcy and California Community AssociationsAs many of you likely know, when a homeowner files a Chapter 7 bankruptcy, they may be able to “discharge” their obligation to pay the pre-bankruptcy petition debts including the assessments they owe their community association. And you likely know that when an owner files a Chapter 13 bankruptcy, they are looking for a way to reorganize and not discharge their debts. And we all understood, or at least thought we understood that the assessments that became due after the owner filed bankruptcy, the post-petition assessments, would not be discharged.

A new case in the 9th Circuit,  Goudelock v. Sixty-01 Association of Apartment Owners, changes this understanding. The Court in that case held that post-petition assessments that become due after a debtor has filed for Chapter 13 bankruptcy are also dischargeable under Federal bankruptcy law (11 USC Section 1328 (a)).  In the Goudelock case, the debtor/delinquent owner surrendered the property in her Chapter 13 Plan, and the lender subsequently foreclosed on the property. The association then sought to determine that the delinquent post-petition assessments from the date the debtor filed for bankruptcy until the date the lender foreclosed on the property were not dischargeable.  While the bankruptcy court ruled in favor of the association, the Court of Appeal reversed the bankruptcy court holding that post-petition assessments arise from the pre-petition debt and therefore the debtor’s personal obligation to pay said debt (both the pre-petition and post-petition assessments) is eliminated when the debtor is granted discharge in his/her/its bankruptcy case.

equitable_foreclosure_-_Google_Search-300x180By Brian Moreno, Senior Associate at SwedelsonGottlieb, Community Association Attorneys

In the assessment collection arena, there have been a number of pro-homeowner court decisions that affect a community association’s ability to collect unpaid HOA/Condo assessments. First, courts have held that associations must accept partial payments, which has allowed homeowners to attempt to avoid foreclosure by paying only delinquent assessments reducing the assessment balance below the $1,800 (or 12-month) threshold. Second, courts have held that an association must strictly comply with the Davis-Stirling Act with regard to imposing an assessment lien against a delinquent owner’s property and foreclosing that lien. These rulings create additional challenges for an association attempting to collect delinquent assessments.

Consequently, in recent years, community associations have attempted to adjust their collection policies and procedures in response to these court decisions; however, owners are continuing to take advantage of these new laws for purposes of challenging assessment liens and tendering partial payments to reduce their assessment balance, leaving attorney fees, costs, interest and trustees fees unpaid. Homeowners are becoming more savvy in challenging assessment liens and obstructing the association’s attempts to foreclose.

Given this, what are an association’s options if a seemingly defective lien has been recorded? What if an owner pays only assessments in an attempt to avoid paying the collection fees? What are the association’s options?

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By David Swedelson, Partner, Swedelson Gottlieb, California Community Association Attorneys

B99318139Z.1_20151027165337_000_GI0KKHP2.1-0.jpegI was alerted to a news story out of Detroit where legendary singer Aretha Franklin is being sued for her failure to pay more than $11,563 to the Hills of Lone Pine Association.

Interesting quotes from Ms. Franklin: “It is my property. I don’t live there and feel I have (been) overcharged for years,” Franklin said. “My attorney has been discussing this with them. And I have paid what I felt was credible and legitimate.” She has been “overcharged for years.” She has paid what she “felt was credible and legitimate.” Seriously?! She sounds like many of the delinquent owners we have had to deal with over the years.

By Sandra Gottlieb and Cyrus Koochek, SwedelsonGottlieb, Community Association Attorneys

screen-capture-15.pngMany California condominium and homeowner associations end up with units and homes after foreclosing on assessment liens with no third-party bidders at the foreclosure sales. With increased equity, we are seeing more third-party bidders at sales. But that still leaves a lot of associations in the position of being landlords. And many boards do not know the first thing about being a landlord.

This summer, firm partner Sandra Gottlieb and associate Cyrus Koochek wrote an article that was published in CACM’s Law Journal entitled “Successfully Maneuvering Through Post Foreclosure Evictions and Rentals”. Their article provides guidelines for dealing with issues such as compliance with legal requirements, preparing for tenants, lease terms and rent skimming laws. Follow this link to read their informative article, especially if your association owns or may be in the process of taking ownership of any unit or home.

By David Swedelson, Partner, SwedelsonGottlieb, Community Association Attorneys

superlien.jpgThe Nevada Supreme Court recently ruled that a super priority lien held by a Nevada homeowners association can extinguish a first deed of trust on a property. The Court stated: “With limited exceptions, this lien is ‘prior to all – other liens and encumbrances’ on the homeowner’s property, even a first deed of trust recorded before the dues became delinquent”

The Las Vegas Review-Journal reports that this decision will create a windfall for some real estate investors in Las Vegas who picked up properties for pennies on the dollar.
I have previously written an article that addressed assessment super priority liens. 19 states have them. Unfortunately, we do not have super liens in California.
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By David Swedelson, Partner at SwedelsonGottlieb, Community Association Attorneys

madguy.pngI recently read a newspaper article about Justin Bieber and the problems he is allegedly creating for his homeowners association in Calabasas, California. Homeowners are apparently unhappy that he is racing his Ferrari around the association’s streets, and they threatened to withhold payment of their assessments unless and until their board did something about the situation. That would be a mistake for those owners or any owner who has a dispute with their association, because they simply do not have the right to withhold payment of their assessments as leverage to get their association to do what they want.

Owners often make this threat. Usually, it is when they have suffered damage in their unit, or they want maintenance done and they think that the association has not responded as quickly or as well as they would like, or with the answers they want. These owners think they are tenants, and the association is their landlord, and that gives them the right to withhold the only income the association receives to pay for maintenance, utilities, insurance, management-and the list goes on. That belief is wrong and has gotten some owners into trouble.
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By SwedelsonGottlieb, Community Association Attorneys

convert_256.jpgAt some point, just about every community association will have a delinquent owner who files for bankruptcy. And while a bankruptcy filing is often interpreted as meaning that the debt has become uncollectable, it does not necessarily mean the end of the road for creditors, especially homeowners associations. There are special provisions for homeowners associations in the Bankruptcy Code that may help an association, assuming the association has recorded a lien, and collection of the delinquent assessments may still be possible. Having an attorney who is familiar with bankruptcy law involved at the outset of the case can drastically improve an association’s chances of recovering the money it is owed. Some bankruptcies are quick and easy. Some are not. Some start out looking like they will be quick and easy, and then things change. This article is about the ones that change when a delinquent homeowner’s bankruptcy is converted from one type of bankruptcy to another.
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By SwedelsonGottlieb, Community Association Attorneys

chapter7.pngAs you likely know, there are different types of bankruptcies that an individual can file. Typically, we see delinquent owners file either a Chapter 13 bankruptcy seeking to readjust their debts, or a Chapter 7 bankruptcy where the owner is seeking to liquidate their assets and eliminate their unsecured debts. This article will deal exclusively with Chapter 7 bankruptcies.

Chapter 7 bankruptcies are generally the simplest of all bankruptcy cases, but that doesn’t mean that there aren’t important distinctions to be made on a case-by-case basis which could affect a creditor’s claim. The most common and most important distinction to be made in a Chapter 7 bankruptcy is whether it is an “Asset” case or a “No Asset” case. To understand what this means, you need to know a little bit about how a Chapter 7 bankruptcy works.
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By Sandra Gottlieb, SwedelsonGottlieb, Community Association Attorneys

foreclosure.jpgThere has been some confusion as to whether a community association’s trustee, after a nonjudicial foreclosure sale (for the collection of delinquent assessments), may record a trustee’s deed upon sale prior to the expiration of the 90-day right of redemption required by California Civil Code Section 1367.4 and California Code of Civil Procedure Section 729.035. A plain reading of California law provides no explicit answer.

Some contend that it would not make sense to record a trustee’s deed upon sale prior to the expiration of the 90-day right of redemption because title to the property cannot transfer until the right of redemption period passes. Others would simply point to the law and ask why the legislature would not explicitly provide for this requirement, like it has with many other nuances pertaining to the right of redemption for nonjudicial foreclosures.

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