Assessments, regular and special, are frequently at the forefront of the Board of Directors’ agenda, especially in these trying economic times. This article highlights three recent
developments in the law: (1) a new tool enhancing the association’s ability to monitor foreclosure sales by other lien holders; (2) the legislature’s attempt to provide special consideration for low
and moderate income owners; and (3) required reporting on the association’s reserve funding plan.
Monitoring Foreclosures
Senate Bill 1511 was enacted into law on September 28, 2008, amending the foreclosure law to allow associations that manage common interest developments to automatically receive a copy of the trustee’s deed upon the sale of a separate interest governed by the association. Section 2924b previously enabled anyone to record a request for a copy of the notice of default and the notice of sale recorded under a trust deed or mortgage, requiring the person or entity recording the notice to mail a copy to the requesting party. Section 2924b now authorizes an association to record a request that requires anyone who records a notice of default, regarding any separate interest governed by the association, to mail to the association a copy of any trustee’s deed from the sale within 15 business days after it is recorded; provided that the request is recorded before the recording of a notice of default. However, failure to do so does not affect the title to the separate interest.
Early versions of SB1511 rendered the new owner liable for unpaid regular assessments that became due within 180 days before the foreclosure sale. This liability would have applied only to new owners who are not a natural person (e.g., banks, corporations, limited liability companies, and partnerships) and to only the regular assessments, not special assessments and not attorney’s fees or other costs of collection. However, the provision for unpaid assessments did not survive in the final version of the bill.
Low And Moderate Income Owners
During the last legislative session, Assembly Bill 952, which did not become law because the governor vetoed it, attempted to provide more lenient treatment of members with “low” and “moderate” income. The Davis-Stirling Common Interest Development Act currently requires the owners’ approval for the Board to increase the regular assessment by more than 20 percent and to impose a special assessment that exceeds 5 percent of the association’s budgeted gross expenses. Civ. Code § 1366(b). AB 952 originally sought to impose an additional requirement that the owners of units provided to low and moderate income purchasers separately approve. The bill also mandated a payment plan for such owners who requested one and prohibited the association from charging interest or late fees if the assessment is fully paid within 12 months.
The requirement for separate approval by low and moderate income owners was deleted in the later generations of the AB 952, but the bill evolved into an attempt to enhance the requirements for payment plans in general. Currently, the Board is required to meet with an owner who requests a meeting to discuss a payment plan if the owner makes the request within 15 days after receiving the notice of the association’s intent to record a lien for delinquent assessments. Civ. Code § 1367.1(c)(3). AB 952 attempted to increase the time for the owner’s request from 15 to 60 days and require associations to have standards for payment plans and to grant one reasonably consistent with the owner’s ability to make the payments. The bill also would have authorized the association to restrict the duration of payment plans to no more than 3 years and to charge a reasonable administrative fee.
Although the governor vetoed the bill, pressure on the legislature to renew the effort might intensify as the economy’s current woes linger, and the number of foreclosures increases.
Reserve Funding Plan
Civil Code section 1365.5(e) requires that the Board annually review the reserve account requirements for the estimated funds needed to repair, replace, or restore the major components within the
next 30 years. The Board must also adopt a reserve funding plan, including anticipated changes in special or regular assessments, indicating how the association will meet that need. Effective January
1, 2009, the financial documents distributed annually to the members must include a summary of the adopted reserve funding plan, along with a notice that the full reserve study plan is available on
request. Civ. Code § 1365(b).
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