NEW COLLECTION LAW

REQUIRES BOARD INVOLVEMENT

By Adrian J. Adams, Esq., Adams & Kessler LLP

Boards are required to levy assessments sufficient to perform their obligations under the governing documents. Civ. 1366(a)  Once they are levied, the assessments must be collected. Prior to January 1, 2006, boards could routinely delegate assessment collection to their management companies. Effective January 1, boards are now required to be actively involved in the collection process.

New Procedures. As part of the collection procedures, boards must include with pre-lien letters (by certified mail) a notice of an owner's right to "meet and confer" with the board. Civ. 1367.1(a)(4) If the owner's delinquency is not resolved, additional rules apply. For delinquencies less than $1,800,

*           associations may collect the assessment, late fees, interest, and all costs of collection by filing a small claims action. Civ. 1367.4(b)(1)

*           associations are allowed to record a lien but may not start foreclosure until the amount is at least $1,800 or the delinquency is at least 12 months old. Civ. 1367.4(b)(2)

When delinquencies are $1,800 or more, boards are allowed to record a lien together with an itemized statement of the owner's delinquent account. A copy of the recorded lien must be sent to the owner by certified mail within 10 days of recording.

Before Recording a Lien. Boards must authorize the recording of a lien by a majority vote at an open meeting. The vote must be recorded in the minutes of the meeting. The minutes may not disclose the name of the delinquent owner and can only refer to the address by its lot/tract number or the assessor's parcel number. Civ. 1367.1(a)

Before Initiating Foreclosure. Boards must again meet and confer with the delinquent owner if the owner makes a proper written request. Foreclosure cannot commence until the board authorizes it in an open meeting and records the decision in the minutes. Notice of the board's decision must be personally served on the owner if the owner resides in the unit or by first class mail at the most current address in the association's records provided by the owner. Civ. 1367.4(c)

Judicial vs. Nonjudicial Foreclosure. To minimize challenges to association collections and foreclosures, we are now recommending judicial foreclosures as thepreferred collection procedure. Serving the owner with a court summons and complaint eliminates any claim that the owner failed to receive notice. It speeds the collection process and, at the end of the process, the association has a judgment not only for foreclosure but one that is collectible in a variety of other ways (e.g., wage garnishment, bank levy or even lottery winnings).

Adrian J. Adams, Esq., is a Managing Partner of the law firm of Adams & Kessler LLP