What do you do when one of the homeowners in your Homeowner Associations (“HOA”) refuses to pay his or her dues?
As many of you are aware, most HOA governing documents allow for HOAs to collect annual and special assessments from its homeowners for the care and maintenance of common areas. Most governing documents go so far as to allow HOAs to proceed personally against a homeowner who has failed to pay his dues and even to cause a lien to be placed on the homeowner’s property for all assessments, interest, costs, and reasonable attorney’s fees necessary to obtain the lien.
Although most governing documents allow for HOAs to take such actions, to actually do so, HOAs must take the following steps:
- Record a Notice of Claim of Lien with the county recorder’s office and mail a copy of such Notice to the delinquent homeowner through certified or registered mail. The Notice must provide a legal description of the condominium, the recorded owner’s name, the amount of the claim, and the name and address of the claimant, in this case, the HOA.
- The HOA is then obligated to give the delinquent homeowner 30 days to correct the delinquency.
If the delinquent homeowner corrects the delinquency within 30 days, then the HOA must record a Release of Claim with the County Recorder’s office.
If, however, after the 30 day period has passed and the delinquent owner has failed to pay the back-owed dues, then the HOA has several options.
(a) If the back-owed dues are less than $1,800.00, or the homeowner is delinquent for less than 12 months, then the HOA can only proceed against the delinquent homeowner personally in small claims court or by recording a lien against the property. If the HOA decides to record a lien against the property, it cannot foreclose on the property until the delinquency reaches $1,800.00 or the delinquency lasts for more than 12 months [California Code of Civil Procedure §1367.4(b)]. If the HOA decides to record a lien against the property, then it must offer the delinquent homeowner an opportunity to participate in dispute resolution through mediation or arbitration. If the homeowner chooses not to participate in dispute resolution, or if such dispute resolution is unsuccessful, then the homeowner may proceed by filing a lawsuit in the appropriate small claims courthouse.
(b) If the back-owed dues are for more than $1,800.00, or the homeowner is delinquent for more than 12 months, then the HOA can proceed against the delinquent homeowner personally or by collecting the debt through a non-judicial foreclosure of the property.
In order to file a small claims lawsuit in California, the HOA would need to:
- Complete form SC-100, “Plaintiff’s Claim and ORDER to Go to Small Claims Court;” and file it with the court;
- Pay the appropriate filing fee;
- Give the court-stamped copy of all 5 pages of the Plaintiff’s Claim and ORDER to Go to Small Claims Court to someone over the age of 18 and who is not a party to the lawsuit (in this case, not a part of the HOA) to serve the delinquent homeowner with the lawsuit; and
- The person who served the delinquent homeowner would have to complete and file form SC-104 “Proof of Service” with the court at least five
- days before the trial.
After the appropriate paperwork is completed, filed with the court, and served upon the delinquent homeowner, one of three things may happen. First, delinquent homeowner could cure the delinquency, in which case there would be no trial. Second, the delinquent homeowner could fail to respond to the lawsuit and not show up for the trial; if that happens, the judge would grant the HOA a default judgment. Or third, the delinquent homeowner could appear at the small claims trial, at which point the HOA would present its evidence to the judge as to his failure to pay his HOA dues, in which case the judge would most likely enter judgment in the HOA’s favor.
Once the HOA obtains the judgment, then the HOA could either pursue collection of the judgment against the delinquent owner immediately or it could choose to wait until either the back-due assessments, exclusive of costs, fees, attorney’s fees, interest, etc., are over $1,800.00 or 12 months have passed since the delinquency began.
If the HOA decides to seek collection of the judgment against the homeowner immediately, then an investigator could obtain the delinquent homeowner’s financial information so that it could begin seizing enough assets to satisfy the HOA’s judgment.
Alternatively, the HOA could wait until the delinquency is over $1,800.00 or over 12 months old, to then proceed to non-judicial foreclosure of the delinquent homeowner’s condominium. To do so, the HOA’s Board would have to decide by majority vote to proceed and then notify the delinquent homeowner of its decision. The HOA would then have to file a Notice of Default with the County Recorder’s office, wait ninety days, and then file a Notice of Sale. The HOA would then be able to sell the condominium twenty-one days after the Notice of Sale, provided there are interested buyers. Just be aware that if the HOA decides to initiate a non-judicial foreclosure on the property, it would be responsible for satisfying the primary lien on the property, if any.
While the process for obtaining a judgment against a delinquent homeowner or recording a lien against a delinquent homeowner’s property may seem daunting, the Palm Desert Law Group can make the process as easy as possible for you. Please contact our office today if your HOA needs assistance bringing a delinquent homeowner current on his or her dues or if you would like to foreclose on a delinquent homeowner’s real property.