HOA Law Blog

When it comes to enforcing obligations secured by California real estate, California is a “single action” or “one-action” state. Civil Procedure Code Section 726(a) provides in part that “[t]here can be but one form of action for the recovery of any debt or the enforcement of any right secured by a mortgage upon real property.” This “one-action” rule applies when a California community association secures, as it should, the delinquent owner’s assessment obligation by recording a lien and then exercises its remedies to recover that debt. The purpose of the one-action rule is to protect the delinquent owner from being harassed by a lot of different actions filed against it by the association.
 

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As we make our way through the “Great Recession”, we find that many owners are still upside down in their units/homes, owing more to their lender than the current potential sales price. In many cases, the owners cannot afford to pay the bank and are looking to get out from ownership of their home or unit. Many owners are trying to do short sales, where they take an offer to buy their property for less than the loan amount and try to obtain their lender’s agreement to take less than the amount that is owed on their loan/trust deed. We are getting calls from community association managers and board members who are asking what to do when faced with the prospect of a short sale, where the owner is also asking their association to discount the amount that is owed for delinquent assessments, late fees, interest, collection fees and costs.
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When property is sold through non-judicial foreclosure on an assessment lien, buyers (third parties or the association) take ownership subject to a 90-day right of redemption, which allows the foreclosed owner to recover the property if the owner pays the delinquency and any fees and costs (Civil Code §1367.4(c)(4); Code of Civil Proc. §729.035).

This right of redemption is unusual in that it does not apply to non-judicial foreclosure on trust deeds; it was added to the law for community associations several years ago to help owners so they do not lose their homes because they did not pay their associations assessments or fees. Owners rarely take advantage of this right.
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We are seeing many associations deferring common area maintenance and repair because they are afraid to increase their regular assessments or levy special assessments because they are concerned that the owners cannot pay any more money. In many cases, associations are experiencing 20% to 30% (or more) delinquencies. This is but one additional consequence from the Great Recession. What boards and their association management need to understand is that their buildings were not designed to last forever, and their useful lives are reduced when maintenance and repair is deferred. More importantly, deferred maintenance usually results in a higher cost of repair later.

We were therefore not surprised by an article in the Santa Cruz Sentinel that reported on a 50-year-old condominium building that was yellow tagged by the city after the owners noticed the roof was sagging. Eight residents were required to temporarily relocate while repairs (including shoring) were made to the sagging roof.

While we understand that many associations are having hard times and difficulty collecting assessments, deferring maintenance is not a good idea, as it will not only increase the cost of repair later when the problem is more serious and there is damage to the structure of the buildings and the interior of units, but it will also lead to lawsuits from owners who have suffered damage to their units or a diminution in the value of their property.