Collections Law — 7 Things a Homeowners Association Should Know to Improve Its Collections

1. The Davis-Stirling Act and California Civil Code § 1365(e) require each Homeowners Association to adopt a written collection policy.
   The policy must be delivered annually to the association members. It is to the association’s benefit to establish a clearly stated collection policy and enforce that policy consistently because uniform enforcement promotes voluntary payment by association members. If an association intends to pursue collection actions against delinquent owners, that fact must be stated clearly in its assessment collection policy. Silldorf & Levine, LLP drafts association collection policies and ensures compliance with all legal requirements.
   
   
2. Collection costs incurred by the association may be recovered against the delinquent owner.
   Under California Civil Code § 1366(e), assessments unpaid 15 days after the due date are considered delinquent. The association may recover reasonable collection costs, including reasonable attorney’s fees, incurred in collecting a delinquent assessment. The association may also impose a late charge that does not exceed 10 percent of the delinquent assessment or $10 (whichever is greater). If the owner’s assessment remains unpaid for 30 days, the association is authorized to collect interest on all sums that it is owed at an annual percentage rate not to exceed 12 percent.
   
   
3. The association has the power to file a lien on a delinquent owner’s property.
   15 days after a delinquent assessment is due to be paid, the association may send the delinquent owner a Certified Pre-lien Notice in accordance with California Civil Code § 1367.1(a). 30 days after the mailing of the Pre-lien Notice, the association may record a Notice of Delinquent Assessment and this notice creates a lien against the owner’s property for all delinquent assessment related collection costs and interests. The Pre-lien Notice and Notice of Delinquent Assessment must fulfill many statutory requirements, thus, be sure to enlist the help of qualified counsel, like Silldorf & Levine, LLP, before pursuing a lien.
   
   
4. The association has various powerful remedies to collect assessments that it is owed.
   30 days after the recordation of the Notice of Delinquent Assessment the association can enforce the lien though any means permitted by law, including civil action, judicial foreclosure, or non-judicial foreclosure by trustees’ sale. The threat of civil action or foreclosure is a powerful incentive for owners to stay current on their obligations. However, these powerful legal remedies should not be pursued without first consulting with Silldorf & Levine, LLP or other qualified counsel.
   
   
5. Bankruptcy does not discharge an owner’s responsibility to pay assessments incurred after the filing of a bankruptcy case.
   Title 11 USC § 523(a)(16) of the Bankruptcy Code makes association assessments incurred after the filing of a bankruptcy case nondischargeable if the debtor either continues in possession or is paid rent by a tenant. Courts have reasoned that the obligation to pay assessments is a function of owning the land, and continued ownership of the land leads to a continued obligation to pay the assessment. Bankruptcy is a complicated matter and Silldorf & Levine, LLP has the experience to guide your association through the process of pursuing legal action against a bankrupt homeowner.
   
   
6. Teaming with qualified counsel will greatly increase timely payment of assessments.
   The association has many powerful tools to force a delinquent owner to pay his or her dues. If the association makes clear that it will use the tools available including legal action by its attorney, the owner’s will be more likely to pay on time. Having qualified counsel on your side will also free up time for the board to more successfully manage the property. Silldorf & Levine, LLP stands ready to assist your association will all the legal challenges that it faces, including the collection of delinquent assessments.
   
   
7. Voluntary assessment payment is the goal.
   Using all of these tools, the association can reach its goal of voluntary and timely assessment payment by all of its members.