Partial Payments
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PARTIAL PAYMENTS

Previously, the industry standard was to reject partial payments once foreclosure had been initiated. Doing so ensured full payment of the delinquency as well as any collection costs incurred by the association. That changed in October 2014 in Huntington Continental v. Miner.

Court Ruling. The court in that case ruled that homeowners associations are required to accept partial payments from owners who are in the lien or foreclosure stages of collection and, if the amount of the payment reduces the delinquent assessments to less than $1,800, the association cannot foreclose (judicially or non-judicially) unless, after receipt of the partial payment, there remain overdue assessments that are more than 12 months delinquent.

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. The court did not say that associations are required to accept payment plans.

Payment Priority, Fees & Costs. The court also reiterated that any payments made by the owner shall be applied to assessments first. (Civil Code §5655.) The court did not say that the order of application of payments could not be waived by the owner in a payment plan. Nor did the court say that owners who reduce their balances can avoid payment of foreclosure fees and costs.

Conclusion. So long as an owner is not misled into believing that partial payment cures the owner's default, it does not stop a foreclosure unless the balance of assessments due falls below $1,800.

Recommendation: Association collection policies should include a provision addressing partial payments. In addition, every billing service, attorney and foreclosure trustee should send a 'partial payment letter' that acknowledges receipt of collection payments but states that acceptance of the payment does NOT cure the owner's default and the collection process will continue until payment in full, including all collection fees and costs, is received.

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