Partial Payments
Required to Accept Partial Payments. Previously, the industry standard was to reject partial payments once foreclosure had been initiated. It ensured full payment of the delinquency and any collection costs incurred by the association. That changed in 2014 in Huntington Continental v. Miner. The court ruled that associations must accept partial payments from owners in the lien or foreclosure stages of collection. If the payment reduces the delinquent assessments to less than $1,800, the association cannot foreclose (judicially or non-judicially). (Civ. Code § 5720.)
NOTE: This does not apply to (1) assessments secured by a lien that is more than 12 months delinquent; (2) assessments owed by owners of separate interests in timeshare estates, as defined in subdivision (x) of Section 11212 of the Business and Professions Code or (3) assessments owed by the developer. (Civ. Code § 5720(c).)
Liens Remain in Place. Although this decision may impact some pending and future collection actions, it is also important to note what the court did not say. The court did not say that assessments liens must be released after receipt of a partial payment or that associations are required to accept payment plans.
Payment Priority. Any payments made by the owner shall be applied to assessments first, not fees and costs. (Civ. Code § 5655.)
Payment Plans
Associations must provide owners with the association’s standards for payment plans (if any exist). In addition, boards must consider payment plan requests by delinquent owners. (Civ. Code §§ 5665(a), 5730(a).)
Notice of Payment Plan Standards. Associations must provide members with its standards for payment plans if any exist. (Civ. Code § 5730(a); Civ. Code § 5665(a).) An association's obligation to inform owners of the association’s standards for payment plans must also be disclosed as part of the association’s “annual statement of collection procedures,” which is a component of the association’s annual policy statement.
Request to Meet With the Board. Whether or not an association has written standards for payment plans, owners may submit a written request to meet with the board to discuss a payment plan for delinquent assessments. The board "shall" meet with owners in executive session. The meeting must occur within 45 days of the postmark of the request if the request is mailed within 15 days of the date of the postmark of the notice unless there is no regularly scheduled board meeting within that period, in which case the board may designate a committee of one or more members to meet with the owner. (Civ. Code § 5665(b).)
Approval is Discretionary. Boards are not required to grant payment plans; they are only required to consider them. Boards may approve payment plans for some but not others. For example, it may grant a payment plan for an owner with a temporary hardship but decline a payment plan for an owner who does not have a hardship.
Liens Not Affected. Payment plans do not impede an association's ability to record a lien to secure payment of delinquent assessments. Additional late fees shall not accrue during the payment plan period if the owner complies with the payment plan terms. In the event of a default on any payment plan, the association may resume its efforts to collect the delinquent assessments from the time before entering into the payment plan.
Default on Payment Plan. If an owner defaults on the payment plan, the association may resume its assessment collection efforts from the point in time before entering into the payment plan. (Civ. Code § 5665(e).)
Payment Plans Not Subject to Inspection. Payment plans are not “association records” which are subject to inspection by an association’s members. (Civ. Code § 5215(a)(5)(B).)
Timeshares. Payment plan requirements do not apply to timeshares. (Civ. Code § 5730.)
Priority of Payments
Any payments made by an owner must first be applied to the assessments owed. Only after the assessments owed are paid in full may payments be applied to the fees and costs of collection, attorney's fees, late charges, or interest. (Civ. Code § 5655(a).)
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