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The Wall Street Journal recently reported that secured bank lenders to General Motors would get a full recovery on $6 billion in loans made to the auto maker, under the bankruptcy plan being finalized by the U.S. Treasury.

If you are asking what this has to do with California community associations, then you need to read on. California community associations have the ability to secure a delinquent homeowners assessment obligation by recording an assessment lien.

With an increasing number of delinquent homeowners resorting to bankruptcy protection, it is more important than ever that California community associations move quickly with the assessment collection process and record a lien. Keep in mind that the lien cannot be recorded until 30 days after the pre-lien letter with all the required language and attachments (association collection policy, statement of account, etc.) has been sent out to the owner(s) in compliance with the California Civil Code. Click here for more information on what is required for the pre-lien letter.

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On May 28, 2009, in the matter of Dee v. PCS Property Management Inc. the California Courts of Appeal – 2nd District ruled that proposed expert testimony is properly excluded where experts relied on unsupported assumption that mold exposure caused plaintiff’s symptoms.
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The Wall Street Journal reports that there is another sign that California’s foreclosures could jump in 2009: Delinquencies on dues (assessments) owed to homeowner associations have risen sharply. This is not a surprise to those of us in the trenches. Many managers report to us that they can barely keep up with the maintenance and repair issues because they are spending so much of their time dealing with delinquent assessment issues and matters.

The Wall Street Journal Article suggests that “[t]he homeowner association delinquency rate can serve as a leading indicator of sorts because homeowners usually stop paying dues before they stop paying their mortgage.” Click here to read the article in the WSJ.

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Association Lien Services has been successfully collecting delinquent assessments, non-judicially, for over twenty years and has weathered a few economic downturns along the way. However, never before have we encountered such a perfect storm of economic turmoil. In the past, as now, when there has been a burst in the real estate bubble (and there have been two others in the past 20+ years), we have seen many owners let their properties go back to their lenders (or in some cases to their associations) because they were not worth what they paid for them. We are also seeing some owners that want to keep their homes, as they believe that they will eventually rise in value.

The “perfect storm” is the unprecedented sub-prime crisis coupled with a stock market collapse, accompanied by a significant increase in unemployment. Several commentators have reported that we would see different waves of foreclosures, and that is exactly what ALS has been experiencing. Starting in September of 2008, ALS experienced the first wave of the “sub-prime” owner defaults, assessment delinquencies and resulting lender foreclosures.
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Never in more than 20 years has ALS experienced a time when assessment collection has been as complicated and difficult as it is today. Many boards of directors are unsure as to what to do when an owner is not paying their association or the senior lien holder/lender is not prepared to foreclose. David Swedelson has prepared an article setting out the analysis that is required to assist boards in making what is truly a difficult decision. Follow this link to read this article, and feel free to share this with your board of directors and/or other managers.

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This economic downturn and the significant increase in the number of delinquent homeowners are impacting all community associations. To be sure, some are facing more delinquencies than others. But even the most affluent communities have homeowners that bought their homes at the height of the market with adjustable rate loans that they now cannot refinance, and they are losing their properties. They are also not paying their assessments.

The website HOALeader.com (created to provide support and information to board members and other HOA leaders) recently conducted a survey of HOA leaders on how they were dealing with the problem. Comments from HOA leaders regarding their fears and feelings of helplessness on how this is impacting their communities is interesting; they show that owners are concerned as to how their neighbors’ foreclosures are going to impact the amount of assessments they pay. Follow this link to read the article.

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Click here to read an interesting article from the Wall Street Journal about complaining entitled “From Attitude to Gratitude.” We all do it. And we know that homeowners at community associations like to complain a lot. They complain about management. They complain about the board. Heck, sometimes they even complain about the association’s legal counsel. They complain about the landscaping, the paint color, the temperature of the pool and the list goes on (and on and on). The attached article talks about owners complaining as “nitpicking in paradise.”

Many of us complain we have so many calls or e-mails to deal with; we complain because there is so much work to do. Some board members complain about the homeowners, about all the delinquencies, about the high cost of insurance, etc., and the list goes on.

How about this: instead of complaining, why not say (or feel) how grateful we are for what we have. If you are employed, stop complaining because 10% of Californians are out of work. If you still have some money in the bank or invested in stocks, stop complaining because some people invested their money in Ponzi schemes.

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On Friday, February 27, 2009, the Orange County Chapter of Community Associations Institute (CAI) held its annual awards dinner. We are pleased to announce that our very own Sandra Gottlieb was presented with the Chapter’s coveted May Russell Hall of Fame Award.

Each year, the Orange County Chapter of CAI recognizes an outstanding individual who has been instrumental in the success of the Chapter. The Chapter’s most prestigious award is named after May Russell, a former Irvine Company Executive who helped form CAI and was its first president (CAI started in Orange County). Recipients of this Award were first announced in 1988 at the Chapter’s very first awards dinner. The Award is presented to an individual who has proved exemplary leadership and demonstrated the ideals and objectives of CAI through active participation at the local, regional and/or national level.

Congratulations to Sandra Gottlieb!

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The California Court of Appeal recently came down with a decision in the case of Ritter & Ritter Inc. v. The Churchill Condominium Association dealing with (among other things) the responsibilities and duty of care of a condominium association and its directors. We will address other issues relating to this case in a future article.

In this case, the homeowner requested that the association seal a hole in the slab which had been made as part of the original construction for pipes to pass-through from one unit to the other. There was no question that the hole should be filled in, as it constituted a fire danger. Somehow, the board incorrectly concluded that this hole was the homeowner’s responsibility to deal with, and the homeowner disagreed and sued the Association. The work would have cost the association approximately $2,500 (for that unit); instead, the case cost the Association hundreds of thousands of dollars for attorneys’ fees and costs. The Court of Appeals decision (click here) provides an excellent discussion on a homeowner’s versus the condominium association’s repair responsibilities and the director’s duty of care as well. The Court’s discussion on this issue follows:
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When an association discovers that an owner has made substantial alterations or modifications to their home that were not approved (often after the work has been done and a neighbor complains), we often hear board members or community association managers suggest that a judge is not going to make the homeowner remove an extensive modification of a home just because that modification violates the Association’s Governing Documents. While that is certainly a consideration that a court must make, we received a report (in the Daily Journal legal newspaper) that one judge did the right thing and ruled in favor of the Association under these circumstances.
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