Small Claims Collection
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SMALL CLAIMS COLLECTION

Associations are allowed to simultaneously file a lien on a property for delinquent assessments and sue for a money judgment, but must ultimately select a remedy. Once an association obtains a money judgment against a delinquent owner, any existing assessment lien on the property is automatically extinguished and must be replaced with a judgment lien if the association wants to preserve its rights. (Diamond Heights v. Financial Freedom.)

PROS: Collecting delinquent assessments via small claims court is inexpensive; they are easy to win; the owner may pay voluntarily or soon after judgment entered; judgment affects the credit rating of the owner; a judgment lien can attach to any and all real property owned by the judgment debtor; and fines can be included in the claim.

CONS: Winning does not equal collecting; the delinquent owner remains in possession of property and may accrue future delinquencies, ad infinitum; decisions may be somewhat arbitrary and there is no appeal; and a personal judgment is dischargeable in a Chapter 7 bankruptcy filing.

$5,000 Limitation for HOAs. Although owners can sue associations for claims up to $10,000 (Code Civ. Proc. §116.221), associations are limited to $5,000. (Code Civ. Proc. §116.220.) There are additional limitations on assessment collections that apply to foreclosures that do not apply to small claims actions.

An association that seeks to collect delinquent . . . assessments of an amount less than . . . $1,800 . . . may not collect that debt through judicial or nonjudicial foreclosure, but may . . . collect . . . that debt . . . in small claims court . . . (Civ. Code §5720(b).)

In other words, the $1,800 limitation applies to foreclosures NOT small claims actions. The statute clarifies the point by stating that "The amount that may be recovered . . . for delinquent assessments may not exceed the jurisdictional limits of the small claims court." (Civ. Code §5720(b)(1).)

$2,500 Twice Per Year. Associations cannot file more than two small claims actions per calendar year in which the amount demanded exceeds $2,500. (Code Civ. Proc. §116.231(a).)

Procedure. See small claims collection procedures.

Appeal. A delinquent owner may appeal an adverse judgment but the association (as plaintiff) cannot. (Code Civ. Proc. §116.710.) If the court rules against the association, its claim is wiped out. It cannot appeal and it cannot switch to a different means of collection per the single action rule. On the other hand, if the association obtains a judgment against the delinquent owner, he/she can appeal the decision into superior court. In superior court, both parties are allowed to be represented by an attorney. Even if the association prevails a second time, it cannot collect all of its attorneys' fees. Fees are limited to $150. (Code Civ. Proc. §116.780(c).)

Collecting the Judgment. If the association receives a personal money judgment, the board can levy against the owner's bank account, sell personal property (vehicles, boats), garnish the owner's wages, levy any rental income he/she may have, and record a judgment lien against his/her real property.

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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