Collection Policy
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COLLECTION POLICY

Since HOAs are entirely dependent upon the regular and timely payment of assessments by all homeowners, California courts recognize the need to collect those assessments:

These statutory provisions reflect the Legislature's recognition of the importance of assessments to the proper functioning of condominiums in this state. Because homeowners associations would cease to exist without regular payment of assessment fees, the Legislature has created procedures for associations to quickly and efficiently seek relief against a nonpaying owner. (Park Place Estates Homeowners Association v. Naber (1994) 29 Cal.App.4th 427, 432.)

Collection Policy Required. The Davis-Stirling Act requires that associations adopt and then annually distribute their collection policies:

A statement describing the association's policies and practices in enforcing lien rights or other legal remedies for default in payment of its assessments against its members shall be annually delivered to the members not less than 30 days nor more than 90 days immediately preceding the beginning of the association's fiscal year. (Civ. Code §5310.)

Failure to Adopt Policy. Although the statute requires a collection policy, it does not provide a penalty for failing to do so. However, if an association without a collection policy tried to collect late fees against delinquent members and foreclose on units, it would likely lose a legal challenge.

Court Decision. In an unpublished decision involving the collection of delinquent assessments, the Court of Appeals noted that before an association can record a lien on a property to collect delinquent assessments it must, among other things, notify the owner in writing of the association's collection practices. In the Gurich case, the delinquent owner testified that she had not received the association's collection policy. The court found that the board could not provide sufficient evidence that it had sent her the policy. Accordingly, the lower court's award to the association of $41,818.29 plus fees and costs of $15,451.25 was reversed. In addition, the association had to pay the delinquent owner's costs on appeal. (T.D. Service v. Gurich.)

Distribute Annually. Associations must disclose their policies and practices in enforcing lien rights and other legal remedies for collecting delinquent assessments such as money judgments and suspension of privileges. Their policy must be annually delivered to the members not less than 30 days nor more than 90 days immediately preceding the beginning of the association's fiscal year. (Civ. Code §5310; §5730.)

Necessary Elements. The policy must include the association's policy for payment plans, imposing late charges and interest, the owner's right to dispute the delinquency, their right to internal dispute resolution and their right to request alternative dispute resolution. (Civ. Code §5660.)

Fee Schedule Details. As part of an association's assessment collection policy, a detailed list of late fees, interest, collection and management fees can be included in the collection policy but is not required. According to Civil Code §5310(a)(6) and (a)(7) associations must distribute information on collection policies and procedures to the membership. Section (a)(6) specifically requires distribution of the "Notice Assessments and Foreclosure" set forth in Civil Code §5730.

This notice requirement is somewhat general in nature but does review many of the specific code sections controlling collection of delinquent assessments. Section (a)(7) requires distribution of "A statement describing the association's policies and practices in enforcing lien rights or other legal remedies for default in the payment of assessments."

However, this latter section does not specify how detailed a description must be. Collection policies can vary from one page to ten pages or more. A specific listing of the exact amount of fees and costs is not required. Too much detail can make it difficult to comply 100% with the policy. These two sections are not to be confused with Civil Code §5310(a)(8) and §5850 which require distribution of a specific schedule of monetary penalties (fines).

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

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