California Bars HOA Foreclosure Below $1,800 or 12 Months

The debt starts under Civil Code section 5650(a), which makes a regular or special assessment plus late charges, reasonable collection costs, reasonable attorney’s fees and interest a personal debt of the owner from the moment it is levied. Section 5650(b) makes an assessment delinquent 15 days after it is due unless the declaration allows longer, caps the late charge at 10 percent of the delinquent assessment or $10, whichever is greater, and caps interest at 12 percent per year beginning 30 days after the assessment becomes due. Section 5650(c) exempts associations from the usury limits in Article XV of the California Constitution, but only within those caps.

Before any lien is recorded, section 5660 requires the association to notify the owner in writing by certified mail at least 30 days ahead, with an itemized statement of assessments, collection fees and costs, attorney’s fees, late charges and interest, and this warning in 14-point boldface if printed or in capitals if typed: "IMPORTANT NOTICE: IF YOUR SEPARATE INTEREST IS PLACED IN FORECLOSURE BECAUSE YOU ARE BEHIND IN YOUR ASSESSMENTS, IT MAY BE SOLD WITHOUT COURT ACTION." The same notice must tell the owner about the right to inspect association records under section 5205, the right to request a payment-plan meeting with the board under section 5665, the right to the association’s "meet and confer" program under Article 2 of Chapter 10, and the right to alternative dispute resolution under Article 3 before foreclosure begins. Section 5673 then requires the board itself to approve recording the lien by majority vote in an open meeting, with the vote in the minutes, and forbids delegating that decision to a collection agent.

The lien attaches only when the association records a notice of delinquent assessment with the county recorder under section 5675(a), stating the amount, a legal description of the separate interest and the record owner’s name. The itemized statement from section 5660(b) is recorded with it. If the association intends to foreclose without going to court, section 5675(c) requires the recorded notice to name and give the address of the trustee authorized to sell. A copy of the recorded notice must go to every owner shown in the association’s records by certified mail no later than 10 calendar days after recordation.

Section 5720(b) is the threshold that makes California distinctive. An association chasing less than $1,800 in delinquent regular or special assessments, counted without accelerated assessments, late charges, collection fees and costs, attorney’s fees or interest, may not foreclose judicially or nonjudicially. It may instead sue in small claims court under section 5720(b)(1), where the recoverable amount is the balance owed at filing plus, in the court’s discretion, accruing assessments, reasonable late charges, fees, collection costs, attorney’s fees and interest up to the small claims jurisdictional limit. It may record a lien under section 5720(b)(2) that simply sits, unforeclosable, until the assessment portion reaches $1,800 or passes 12 months delinquent, and it must offer dispute resolution under Article 2 of Chapter 10 before recording even that lien. Section 5720(c) then lists three carve-outs where the $1,800 minimum does not apply at all: assessments secured by a lien that are more than 12 months delinquent, assessments owed on time-share estates as defined in Business and Professions Code section 11212(x), and assessments owed by the developer.

Once the threshold is met the sequence is fixed. Section 5700(a) bars enforcement until 30 days after the lien is recorded. Section 5705(b) requires the association to offer dispute resolution before initiating foreclosure and to take part if the owner asks, with the owner choosing between the meet-and-confer program and alternative dispute resolution, except that binding arbitration is unavailable if the association intends a judicial foreclosure. Section 5705(c) requires the board to approve foreclosure by majority vote of the directors in executive session, to record the vote in the minutes of the next open board meeting identified by parcel number rather than the owner’s name, and to take that vote at least 30 days before any public sale. Section 5705(d) requires personal service on an owner who occupies the home, in the manner of a summons under Code of Civil Procedure section 415.10, and first-class mail to an owner who does not.

A trustee sale runs under Civil Code sections 2924, 2924b and 2924c per section 5710(a), with a notice of default served like a summons under section 5710(b) and trustee fees capped at the amounts allowed by sections 2924c and 2924d plus the cost of serving the default notice and the board’s foreclosure decision. Section 5715(b) then gives the former owner a right of redemption that ends 90 days after the sale, and requires the notice of sale to state that the property is being sold subject to that right. Sections 5705, 5715 and 5720 each apply to assessment debts arising on or after January 1, 2006, and the whole of Part 5 became operative on January 1, 2014 under Stats. 2012, Ch. 180 (AB 805).

Two limits are easy to miss. Section 5725(b) provides that a monetary penalty imposed as a disciplinary measure for failing to comply with the governing documents, other than for late payments, may not be characterized or treated in the governing documents as an assessment that can become a lien enforceable by sale, so unpaid violation fines never build toward the $1,800 figure. Section 5725(a) is the exception in the other direction: a charge reimbursing the association for repairing damage a member, guest or tenant did to the common area may become a lien if the governing documents authorize it. And section 5735(a) stops an association from selling its collection rights, barring voluntary assignment or pledge of the right to collect assessments or to foreclose a lien to any third party except a chartered or licensed financial institution taking it as security for a loan to the association.

The immediate consequence of missing an assessment is money, not loss of the home: a late charge of up to 10 percent or $10 under section 5650(b)(2) and up to 12 percent annual interest from 30 days after the due date. If the section 5660 pre-lien notice arrives, an owner who mails a written request within 15 days of the notice’s postmark can compel the board to meet in executive session within 45 days to discuss a payment plan under section 5665(b), and section 5665(c) stops additional late fees accruing while the owner keeps to the plan, though a default lets the association resume collection from where it stood.

Recording a lien in error is expensive for the association: section 5685(b) gives it 21 calendar days to record a lien release or notice of rescission and hand the owner a declaration that the filing was in error, and section 5685(c) requires it to promptly reverse all late charges, fees, interest, attorney’s fees, collection costs, the cost of the section 5660 notice, and the recording and release costs allowed by section 5720(b), and to pay every cost of the related dispute resolution. Section 5685(a) also requires a release within 21 days once the noticed sums are paid.

Enforcement of all of this is private: the association acts through its board and its trustee, and a homeowner who believes the association skipped the board vote, the dispute-resolution offer, the personal service or the $1,800 threshold raises it in court or in the alternative dispute resolution the Davis-Stirling Act requires the association to offer first.