CA A.B. 2273 - HOA Assessments and Foreclosed Property

Homeowners Associations (HOA) have been financially impacted during the current economic downturn, especially with the foreclosures that have been occuring throughout the state.  When a foreclosure occurs, the former owner's responsibility to pay HOA assessments stops and the new owner (usually the bank) must begin paying the current assessments from the time of foreclosure.  Until now, it has been very difficult for HOAs to determine the status of foreclosure sales and who the foreclosing party was in order to reestablish their assessments from the new owner.  This has changed now that Assembly Bill 2273 has passed which amends Section 2924b of the Civil Code and adds Section 2924.1. 

The newly passed bill will accomplish two things:

1. The foreclosing parties will be required to record a sale within 30 days of the sale and

2. The length of time has been shortened for foreclosing parties to notify the association that they are the new owners, as long as the HOA has recorded a "Request for Notice" prior to the property receiving a Notice of Default.  If a "Request for Notice" has been filed, the foreclosing party must notify the HOA within 15 days after the sale.

Although AB 2273 is a step towards helping HOA reduce the financial impact the economy is having on their budgets, it is important that the HOA record the "Request for Notice" when a home in the association is being foreclosed upon.  HOA boards should contact their attorneys when properties are being foreclosed upon to ensure that the appropriate steps are taken to protect the HOA's interests.

AB 2273 will be effective on January 1, 2013.  For more information about AB 2273 please go here.

Congratulations to the new Board of Directors

The Orange County chapter of CAI's election results have been announced!  The newly elected members to the Board of Directors will be serving a 3 year term beginning January 1, 2013.

Congratulations to:

Community Association Volunteer Leader - Darse Crandall of Leisure World - Mutual 15, Seal Beach;

Community Manager - Farrah Esquer of Cardinal Property Management, Inc.;

Business Partner - Denise Eger, Esq. of Hickey & Petchul, PC; and

At Large Memers - Shanne Ho of Seabrezze Management Co. and Terri Hamilton of Sunwest Bank.

We look forward to working with you in the new year!

HOA Questions - Foreclosures and Associations

Question: What happens when a homeowner's association board forecloses upon and becomes the owner of a home due to unpaid assessments?

Answer: When an association forecloses upon a home to recover the amount owed to them due to delinquent assessments the home is either bought by a buyer and the association is able to recoup their assessments or, if there is no buyer, the title of the home is then transferred to the association.  When the title transfers, the association is now the owner of the property and the lien the association had on the home is extinguished.  The lien is extinguished because of California’s Code of Civil Procedure §726(a) which states that there can only be one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property or an estate. Then, to offset the delinquent assessment that are owed, after the 90 day redemption period has ended, the association has the right to evict the previous owner if they are still occupying the house and can then rent out the home.

To submit questions to The Judge Law Firm please email kfletcher@thejudgefirm.com.

Federal Housing Administration Condo Update

The Community Association Institute (CAI) has reported that the Federal Housing Administration (FHA) has just released a revision of its condominium guidelines and the FHA has made temporary adjustments to its condominium standards in response to the current market conditions.

CAI's preliminary analysis of the FHA's policy changes are as follows:

1. Delinquencies - no more than 15 percent of units may be more than 60 days delinquent.  The previous threshold was a 30 day delinquency.

2. Employee dishonesty insurance - all new and established condominium projects with more than 20 units shall obtain and maintain employee dishonesty insurance coverage and must cover all officers, directors, and employees of the association.

3. Project certification - individuals submitting a condominium project for approval must certify that (a) all information in the request is accurate, (b) they have reviewed the project application and it meets all State and local laws and current FHA condominium approval requirements, and (c) they have no knowledge of circumstances or conditions that may have an adverse impact on the project.

4. Commercial space limitations - FHA will consider condominium projects with commercial space of between 25 and 35 percent for projects through the HRAP process only.  Mixed-use condominiums with commercial space of up to 50 percent will be considered, but requires substantial documentation.

For a further review of the updated FHA guidelines, please click here.

The Davis-Stirling Act Is Going To Be Reorganized

On August 17, the Davis-Stirling Reorganization Bill (Assembly Bills 805 and 806) was signed into law.  Assembly Bill 805 will relocate the Davis-Stirling Act to a different part of the California Civil Code and Assembly Bill 806 will update the many references to the Act in other parts of the statutes to reflect the new statute numbers.

The purpose of this Bill is to reorganize and clarify the law governing common interest developments.  There will also be a few changes made to the laws governing common interest developments, such as governing document amendments, granting exclusive use of common areas to members, board member conflicts of interest, and obtaining reimbursement for common area damages.  The new Assembly Bills will not go into affect until January 1, 2014, to allow time for homeowners, Board members, and industry professionals to become acquainted with the reorganization.

The Judge Law Firm looks forward to assisting our clients and management companies in 2013 with undertanding the changes and how the changes will impact their communities.

To learn more about the changes to The Davis-Stirling Act, please go here.