HOA Delinquent Assessments & Foreclosure — California Civil Code §§ 5650–5740

Most California condominium and planned-development associations are governed by the Davis-Stirling Common Interest Development Act (Civil Code §§ 4000–6150). Its collection provisions, §§ 5650–5740, say what an association may add to an unpaid assessment, what it must send before recording a lien, who must decide to record the lien and to foreclose, and when foreclosure is off the table.

The short answer to "can an HOA foreclose on my house in California?" is sometimes, but only after specific steps and only above a statutory floor. An association that seeks to collect delinquent regular or special assessments of less than $1,800 may not use judicial or nonjudicial foreclosure (§ 5720(b)), and the statute's own notice warns that a nonjudicial foreclosure can proceed "without court action" (§ 5660(a)).

A regular or special assessment, along with any late charges, reasonable fees and costs of collection, reasonable attorney's fees and interest allowed by the statute, is a debt of the owner at the time it is levied (§ 5650(a)). Assessments are delinquent 15 days after they become due, unless the declaration provides a longer period, in which case the longer period applies (§ 5650(b)).

Once an assessment is delinquent, the association may recover three things (§ 5650(b)): reasonable collection costs, including reasonable attorney's fees; a late charge not exceeding 10 percent of the delinquent assessment or ten dollars ($10), whichever is greater, unless the declaration specifies a smaller late charge, in which case that smaller amount is the limit; and interest at an annual rate not to exceed 12 percent, commencing 30 days after the assessment becomes due, unless the declaration specifies a lesser rate. The interest may be charged on all sums imposed under the section, including the assessment, collection costs and attorney's fees (§ 5650(b)(3)). Associations are exempt from the interest-rate limits of Article XV of the California Constitution, subject to the limits in § 5650 (§ 5650(c)).

When an owner pays toward the debt, the payment first goes to the assessments owed; only after the assessments are paid in full is it applied to collection fees and costs, attorney's fees, late charges or interest (§ 5655(a)). An owner may request a receipt showing the date of payment and who received it (§ 5655(b)), and the association must provide a mailing address for overnight payment in its annual policy statement (§ 5655(c)). If the owner disputes a charge and the amount is within the small claims court's jurisdictional limits, the owner may pay the disputed amount and all other amounts levied under protest and file in small claims court, in addition to pursuing dispute resolution — and this does not impede the association's ability to collect delinquent assessments under the statute (§ 5658(a), (b)).

At least 30 days before recording a lien for a debt that is past due under § 5650, the association must notify the owner of record in writing by certified mail (§ 5660). The notice must include a general description of the association's collection and lien enforcement procedures and how the amount is calculated, a statement of the right to inspect association records, and a specific warning, in 14-point boldface if printed or capital letters if typed, that a separate interest placed in foreclosure for unpaid assessments "may be sold without court action" (§ 5660(a)). It must also include an itemized statement of the charges owed (§ 5660(b)), a statement that the owner is not liable for the charges, interest and costs of collection if the assessment was paid on time (§ 5660(c)), the right to request a meeting with the board (§ 5660(d)), the right to dispute the debt through the association's "meet and confer" program (§ 5660(e)), and the right to request alternative dispute resolution with a neutral third party before foreclosure — except that binding arbitration is not available if the association intends a judicial foreclosure (§ 5660(f)).

An owner may submit a written request to meet with the board to discuss a payment plan; the association must provide its payment-plan standards, if any exist (§ 5665(a)). That right does not extend to certain owners of the time-share-type interests described in Business and Professions Code § 11212 that are not otherwise exempt (§ 5665(a)). The board must meet with the owner in executive session within 45 days of the postmark of the request, if the request is mailed within 15 days of the postmark of the notice — and if there is no regularly scheduled board meeting in that period, the board may designate a committee of one or more directors (§ 5665(b); § 4935(c)). A payment plan may incorporate assessments that accrue during the plan, and additional late fees may not accrue while the owner complies with the plan (§ 5665(c)). A plan does not prevent the association from recording a lien, and if the owner defaults the association may resume collection from the point before the plan began (§ 5665(d), (e)).

Before recording a lien, the association must also offer the owner — and, if the owner asks, participate in — dispute resolution under its "meet and confer" program (§ 5670). An association that does not follow these procedures must restart the notice process before recording a lien, and the cost of restarting falls on the association, not the owner (§ 5690).

For liens recorded on or after January 1, 2006, the decision to record a lien for delinquent assessments must be made only by the board; it cannot be delegated to an agent. The board approves it by a majority vote of the directors in an open meeting and records the vote in the minutes (§ 5673).

The assessment, plus collection costs, late charges and interest allowed by § 5650(b), becomes a lien on the owner's separate interest from the time the association records a notice of delinquent assessment with the county recorder (§ 5675(a)). The notice must state the amount, a legal description of the separate interest and the name of the record owner (§ 5675(a)); the itemized statement of charges must be recorded with it (§ 5675(b)); to allow nonjudicial foreclosure it must name the trustee authorized to enforce the lien by sale (§ 5675(c)); and it must be signed by the person designated in the declaration or by the association, or by the president if no one is designated (§ 5675(d)). A copy must be mailed by certified mail to every person shown as an owner in the association's records no later than 10 calendar days after recordation (§ 5675(e)). The lien is prior to other liens recorded after the notice of delinquent assessment, though the declaration may provide for subordination (§ 5680).

Within 21 days of payment of the sums in the notice, the association must record a lien release or notice of rescission and give the owner a copy (§ 5685(a)). If a lien was recorded in error, the party who recorded it must record a release within 21 calendar days and give the owner a declaration that the filing was in error (§ 5685(b)), and the association must promptly reverse the late charges, fees, interest, attorney's fees and collection, notice and recording costs and pay the costs of any related dispute resolution (§ 5685(c)).

Except as otherwise provided in the article, after 30 days following recording of the lien it may be enforced in any manner permitted by law, including a sale by the court, by the trustee named in the notice, or by a substituted trustee (§ 5700(a)). The statute does not bar a lawsuit against the owner for the sums secured by the lien, or the association taking a deed in lieu of foreclosure (§ 5700(b)).

The floor: an association seeking to collect delinquent regular or special assessments of less than $1,800 — not counting accelerated assessments, late charges, fees and costs of collection, attorney's fees or interest — may not collect that debt through judicial or nonjudicial foreclosure. It may instead sue in small claims court, record a lien that it may not foreclose until the delinquent assessments secured by the lien equal or exceed $1,800 or are more than 12 months delinquent, or use any other manner provided by law except foreclosure (§ 5720(b)). The limitation does not apply to assessments secured by a lien that are more than 12 months delinquent, to assessments owed by owners of time-share estates, or to assessments owed by the developer (§ 5720(c)). Section 5720 applies to debts for assessments that arise on and after January 1, 2006 (§ 5720(a)).

Before initiating foreclosure, the association must offer the owner dispute resolution — its "meet and confer" program or alternative dispute resolution — and participate if the owner asks; the owner chooses which, except that binding arbitration is not available if the association intends a judicial foreclosure (§ 5705(b)). The decision to initiate foreclosure of a validly recorded lien must be made only by the board, cannot be delegated to an agent, and must be approved by a majority vote of the directors in an executive session (§ 5705(c); § 4935(d)). The vote is recorded in the minutes of the next board meeting open to all members, identifying the matter by parcel number rather than the owner's name, and the vote must take place at least 30 days before any public sale (§ 5705(c)). If the board votes to foreclose, it must give notice by personal service (in the manner of service of summons) to an owner who occupies the property, or by first-class mail to an owner who does not (§ 5705(d)).

A trustee sale follows the general deed-of-trust procedures in Civil Code §§ 2924, 2924b and 2924c, with a notice of default served on the owner or the owner's designated legal representative in addition (§ 5710(a), (b)). A nonjudicial foreclosure by an association is subject to a right of redemption: the redemption period ends 90 days after the sale, and the notice of sale must state that the property is being sold subject to that right (§ 5715(b)). Section 5715 applies to debts for assessments that arise on and after January 1, 2006 (§ 5715(a)).

A monetary penalty imposed as discipline for violating the governing documents, other than late payments, may not be treated in the governing documents as an assessment that can become a lien enforceable by sale (§ 5725(b)). A monetary charge reimbursing the association for repairing common-area damage caused by a member, a guest or a tenant is different: it may become a lien enforceable by sale if the governing documents provide that authority (§ 5725(a)).

The association's annual policy statement must include the "Notice Assessments and Foreclosure" described in § 5730, which summarizes these rules for owners (§ 5730(a)). An association may not voluntarily assign or pledge its right to collect assessments or to enforce or foreclose a lien to a third party, except to a chartered or licensed financial institution or lender as security for a loan to the association (§ 5735(a)); it may still assign a former member's unpaid obligations for collection (§ 5735(b)). The article generally applies to a lien created on or after January 1, 2003; a lien created before then is governed by the law in effect when it was created (§ 5740).

This page is general information, not legal advice. Read the enacted text linked below and your association's own governing documents, and talk to a lawyer about a specific situation.