On September 7, 2012, the Governor signed into law Assembly Bill No. 2273, adding Section 2924.1 to the California Civil Code. Now, when a mortgage lender forecloses on property in a common interest development, the transfer of title to the purchaser (the Trustee’s Deed Upon Sale in a non-judicial foreclosure) must be recorded within 30 days after the sale. Previously, there was no requirement that the deed be recorded. Consequently, the purchaser, who often is the lender itself, was able to conceal the sale from the homeowners association and, thereby, avoid responsibility for paying the assessments as the new owner. The new law helps safeguard against this practice.
Further enhancing this safeguard is a second feature of Assembly Bill No. 2273, which amended Civil Code section 2924b as it concerns homeowners associations' requests that copies of Notices of Default and Trustee's Deeds Upon Sale be mailed to the association. As before, associations may record such requests, and if an association does so before the Notice of Default is recorded, the trustee or lender must mail the Notice of Default and Trustee’s Deed to the association. However, under the old law, the deadline for mailing these documents was 15 days after the Trustee’s Deed was recorded. If the Trustee’s Deed was not recorded, whether to conceal the sale or for some other reason, there was no requirement to mail the documents, further depriving the association of another opportunity to learn of the sale. Now, section 2924b, as amended by A.B. 2273, requires that the documents be mailed within 15 days after the trustee's sale.
The failure to comply with either of these requirements – recording the Deed within 30 days or mailing the Notice of Default and Trustee’s Deed to the association within 15 days – does not invalidate the sale or affect the purchaser’s title to the foreclosed property. However, to the extent that the failure to comply with either requirement causes the association to suffer or incur a loss (e.g., inability to collect assessments), the association may have a cause of action against the trustee and/or the lender.
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