Following is a guest post by John R. MacDowell, Esq. of Fiore, Racobs and Powers, a professional law corporation. Mr. MacDowell is a delegate for the Orange County Chapter and currently serves on the CAI-CLAC PR Committee.
HOW DO YOU KNOW WHEN THE BANK HAS FORECLOSED?
Associations rely on assessments. In most cases, they are an Association’s only source of revenue. Yet the lack of equity in homes restricts an Association’s ability to recover unpaid assessments. Often, an Association can expect to receive payments only after the lender has foreclosed and taken title. Only then is an owner in place with the financial resources to pay.
But how does an Association know when title has transferred to the lender? Senate Bill 1511, which became law January 1, 2009 (and is now a part of the California Civil Code at Section 2924b(f)) allows Associations to receive notice when the bank takes over. Under this law, an Association may record a notice, requiring that a lender mail a copy of any trustee’s deed upon sale involving a unit or lot in the Association.
The notice must contain three things:
1. There must be a legal description, or the assessor’s parcel number, of all separate interests in the project. This may be complicated in large Associations, but would only need to be done once. Moreover, the information will be useful in other contexts.
2. The notice must include the name and address of the Association. Of course, this will be the address of the managing agent, if there is one.
3. The notice must also include a statement that the Association is an Association created for the purpose of managing a common interest development, as defined in Civil Code Section 1351(a) (part of the Davis-Stirling Act).
The request will not be effective as to any property currently in default; Associations must record their requests before a notice of default is filed.
After it records its request, the Association will receive a copy of any trustee’s deed on sale, reflecting a transfer to a lender, within 15 days of the date the deed is recorded. After that, the Association will know where to send the assessment bills.
When the law was first enacted, some County Recorders required Associations to file a separate notice for each separate interest, based on their interpretation of the statute. This made the procedure impractical for all but the smallest Associations. To remedy this, CAI-CLAC sponsored clarifying legislation, AB 2016, which allowed Associations to record just one notice, for all lots or units in the project. AB 2016 became law January 1, 2011.
The law does not solve all problems arising out of foreclosures. Often, banks don’t take title to property, and leave the defaulting homeowner on title. However, SB 1511 is a useful tool, and provides a relatively simple way to solve one assessment collection problem.