ACCOUNTS RECEIVABLE
COLLECTION OF DUES AND OTHER RECEIVABLES
CIVIL CODE
SECTION 5650-5690
5650. (a) A regular or special assessment and any late charges,
reasonable fees and costs of collection, reasonable attorney's fees,
if any, and interest, if any, as determined in accordance with
subdivision (b), shall be a debt of the owner of the separate
interest at the time the assessment or other sums are levied.
(b) Regular and special assessments levied pursuant to the
governing documents are delinquent 15 days after they become due,
unless the declaration provides a longer time period, in which case
the longer time period shall apply. If an assessment is delinquent,
the association may recover all of the following:
(1) Reasonable costs incurred in collecting the delinquent
assessment, including reasonable attorney's fees.
(2) A late charge not exceeding 10 percent of the delinquent
assessment or ten dollars ($10), whichever is greater, unless the
declaration specifies a late charge in a smaller amount, in which
case any late charge imposed shall not exceed the amount specified in
the declaration.
(3) Interest on all sums imposed in accordance with this section,
including the delinquent assessments, reasonable fees and costs of
collection, and reasonable attorney's fees, at an annual interest
rate not to exceed 12 percent, commencing 30 days after the
assessment becomes due, unless the declaration specifies the recovery
of interest at a rate of a lesser amount, in which case the lesser
rate of interest shall apply.
(c) Associations are hereby exempted from interest-rate
limitations imposed by Article XV of the California Constitution,
subject to the limitations of this section.
CALIFORNIA CIVIL CODE
5655. (a) Any payments made by the owner of a separate interest
toward a debt described in subdivision (a) of Section 5650 shall
first be applied to the assessments owed, and, only after the
assessments owed are paid in full shall the payments be applied to
the fees and costs of collection, attorney's fees, late charges, or
interest.
(b) When an owner makes a payment, the owner may request a receipt
and the association shall provide it. The receipt shall indicate the
date of payment and the person who received it.
(c) The association shall provide a mailing address for overnight
payment of assessments. The address shall be provided in the annual
policy statement.
5658. (a) If a dispute exists between the owner of a separate
interest and the association regarding any disputed charge or sum
levied by the association, including, but not limited to, an
assessment, fine, penalty, late fee, collection cost, or monetary
penalty imposed as a disciplinary measure, and the amount in dispute
does not exceed the jurisdictional limits of the small claims court
stated in Sections 116.220 and 116.221 of the Code of Civil
Procedure, the owner of the separate interest may, in addition to
pursuing dispute resolution pursuant to Article 3 (commencing with
Section 5925) of Chapter 10, pay under protest the disputed amount
and all other amounts levied, including any fees and reasonable costs
of collection, reasonable attorney's fees, late charges, and
interest, if any, pursuant to subdivision (b) of Section 5650, and
commence an action in small claims court pursuant to Chapter 5.5
(commencing with Section 116.110) of Title 1 of the Code of Civil
Procedure.
(b) Nothing in this section shall impede an association's ability
to collect delinquent assessments as provided in this article or
Article 3 (commencing with Section 5700).
5675. (a) The amount of the assessment, plus any costs of
collection, late charges, and interest assessed in accordance with
subdivision (b) of Section 5650, shall be a lien on the owner's
separate interest in the common interest development from and after
the time the association causes to be recorded with the county
recorder of the county in which the separate interest is located, a
notice of delinquent assessment, which shall state the amount of the
assessment and other sums imposed in accordance with subdivision (b)
of Section 5650, a legal description of the owner's separate interest
in the common interest development against which the assessment and
other sums are levied, and the name of the record owner of the
separate interest in the common interest development against which
the lien is imposed.
(b) The itemized statement of the charges owed by the owner
described in subdivision (b) of Section 5660 shall be recorded
together with the notice of delinquent assessment.
(c) In order for the lien to be enforced by nonjudicial
foreclosure as provided in Sections 5700 to 5710, inclusive, the
notice of delinquent assessment shall state the name and address of
the trustee authorized by the association to enforce the lien by
sale.
(d) The notice of delinquent assessment shall be signed by the
person designated in the declaration or by the association for that
purpose, or if no one is designated, by the president of the
association.
(e) A copy of the recorded notice of delinquent assessment shall
be mailed by certified mail to every person whose name is shown as an
owner of the separate interest in the association's records, and the
notice shall be mailed no later than 10 calendar days after
recordation.
§ 5600 (a)(b) Excessive Fees Not Permissible
(a) Except as provided in Section 5605, the association shall
levy regular and special assessments sufficient to perform its
obligations under the governing documents and this act.
(b) An association shall not impose or collect an assessment or
fee that exceeds the amount necessary to defray the costs for which
it is levied
5650. (a) A regular or special assessment and any late charges,
reasonable fees and costs of collection, reasonable attorney's fees,
if any, and interest, if any, as determined in accordance with
subdivision (b), shall be a debt of the owner of the separate
interest at the time the assessment or other sums are levied.
(b) Regular and special assessments levied pursuant to the
governing documents are delinquent 15 days after they become due,
unless the declaration provides a longer time period, in which case
the longer time period shall apply. If an assessment is delinquent,
the association may recover all of the following:
(1) Reasonable costs incurred in collecting the delinquent
assessment, including reasonable attorney's fees.
(2) A late charge not exceeding 10 percent of the delinquent
assessment or ten dollars ($10), whichever is greater, unless the
declaration specifies a late charge in a smaller amount, in which
case any late charge imposed shall not exceed the amount specified in
the declaration.
(3) Interest on all sums imposed in accordance with this section,
including the delinquent assessments, reasonable fees and costs of
collection, and reasonable attorney's fees, at an annual interest
rate not to exceed 12 percent, commencing 30 days after the
assessment becomes due, unless the declaration specifies the recovery
of interest at a rate of a lesser amount, in which case the lesser
rate of interest shall apply.
(c) Associations are hereby exempted from interest-rate
limitations imposed by Article XV of the California Constitution,
subject to the limitations of this section.
5655. (a) Any payments made by the owner of a separate interest
toward a debt described in subdivision (a) of Section 5650 shall
first be applied to the assessments owed, and, only after the
assessments owed are paid in full shall the payments be applied to
the fees and costs of collection, attorney's fees, late charges, or
interest.
(b) When an owner makes a payment, the owner may request a receipt
and the association shall provide it. The receipt shall indicate the
date of payment and the person who received it.
(c) The association shall provide a mailing address for overnight
payment of assessments. The address shall be provided in the annual
policy statement.
5658. (a) If a dispute exists between the owner of a separate
interest and the association regarding any disputed charge or sum
levied by the association, including, but not limited to, an
assessment, fine, penalty, late fee, collection cost, or monetary
penalty imposed as a disciplinary measure, and the amount in dispute
does not exceed the jurisdictional limits of the small claims court
stated in Sections 116.220 and 116.221 of the Code of Civil
Procedure, the owner of the separate interest may, in addition to
pursuing dispute resolution pursuant to Article 3 (commencing with
Section 5925) of Chapter 10, pay under protest the disputed amount
and all other amounts levied, including any fees and reasonable costs
of collection, reasonable attorney's fees, late charges, and
interest, if any, pursuant to subdivision (b) of Section 5650, and
commence an action in small claims court pursuant to Chapter 5.5
(commencing with Section 116.110) of Title 1 of the Code of Civil
Procedure.
(b) Nothing in this section shall impede an association's ability
to collect delinquent assessments as provided in this article or
Article 3 (commencing with Section 5700).
5660. At least 30 days prior to recording a lien upon the separate
interest of the owner of record to collect a debt that is past due
under Section 5650, the association shall notify the owner of record
in writing by certified mail of the following:
(a) A general description of the collection and lien enforcement
procedures of the association and the method of calculation of the
amount, a statement that the owner of the separate interest has the
right to inspect the association records pursuant to Section 5205,
and the following statement in 14-point boldface type, if printed, or
in capital letters, 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."
(b) An itemized statement of the charges owed by the owner,
including items on the statement which indicate the amount of any
delinquent assessments, the fees and reasonable costs of collection,
reasonable attorney's fees, any late charges, and interest, if any.
(c) A statement that the owner shall not be liable to pay the
charges, interest, and costs of collection, if it is determined the
assessment was paid on time to the association.
(d) The right to request a meeting with the board as provided in
Section 5665.
(e) The right to dispute the assessment debt by submitting a
written request for dispute resolution to the association pursuant to
the association's "meet and confer" program required in Article 2
(commencing with Section 5900) of Chapter 10.
(f) The right to request alternative dispute resolution with a
neutral third party pursuant to Article 3 (commencing with Section
5925) of Chapter 10 before the association may initiate foreclosure
against the owner's separate interest, except that binding
arbitration shall not be available if the association intends to
initiate a judicial foreclosure.
COLLECTION PROCEEDINGS
A function of the Board of Directors is to collect the dues, assessments and other receivables of the association. The Board has a fiduciary responsibility to protect the assets of the association and the interests of the homeowners. The Board does not have the option nor the right to forgive the dues or other assessments owed the association by a homeowner.
1. Late Fees and Interest Charges
California Civil Code section 5650, Association’s CC&Rs and/or Bylaws allow the association to levy late fees when a homeowner fails to pay association dues or assessments on time. The amount of the late fee may vary depending on the respective association’s CC&Rs and/or Bylaws. A ten ($10.00) dollar late fee is common practice. The law also allows the association to levy a finance charge on the unpaid association dues. This is not commonly done though it is permitted. The interest charged may be determined by the Board of Directors but should be reasonable and not in violation of state law.
2. Liens
To assure that the interests of the association are protected, associations may file a lien against the unit of the owner in arrears. This lien, commonly known as a Default Lien, may be filed by the association without court action. This lien is only temporary and may be removed from the unit automatically in one year. A stronger and more permanent lien is a Judgement Lien. The court fills this lien when the association receives a judgement from the court. The association must file the proper forms with the court and pay the required fee. This fee will vary with each court but is generally a very small amount. This lien is good for ten (10) years.
3. Forbearance Agreement
In the process of collecting association dues or assessments from a cooperating homeowner, the board may decide to enter into a payment agreement with the homeowner rather than filing court or other action. This document, often referred to as a forbearance agreement, sets forth the conditions and provisions of the agreement.
CONDO SWEET CONDO
SAMPLE ONLY
HOMEOWNERS ASSOCIATION
FORBEARANCE AGREEMENT
We: ___________________________________, owners of record of unit # _______________ Ave. ______, California, do hereby acknowledge that we owe the “_______________ HOMEOWNERS ASSOCIATION” the amount of $________.00, for association dues, late fees, interest charges and foreclosure fees which are as of this date outstanding. We do herewith deposit with the Association a cashiers check in the amount of $_______.00 dollars towards this amount which shall result in a net balance of $_____.__.
I, (we) do hereby agree to pay off the balance, as indicated above, by making ______ (xx) equal monthly payments in the amount of $___.__. Said payments shall be paid in addition to the current monthly association dues, and shall be paid on or before the fifteenth (15) day of each month respectively until the account has been paid in full. The current monthly dues, as assessed by the Board of directors, for the homeowners association shall be paid monthly when due.
I (We) do hereby also agree to pay all current Association dues, late fees and interest, (and other costs which may subsequently accrue), on or before the fifteenth (15) day of each month, and to keep this account current in the future.
In the event legal action should be brought to compel payment, said owners do herewith agree to pay all legal fees, attorney’s fees and other costs incurred by the “_________________ Homeowners Association” in the collection or enforcement of this agreement.
I (We) do also herewith agree to fully exonerate, indemnify and save harmless “_________________ Homeowners Association” from and against all claims or actions and all expenses incidental to the defense of any such claims and actions based upon or arising out of or sustained in connection with the faithful performance of this agreement or by conditions created thereby and if requested by the association, to assume the defense of any such claims or actions.
WE DO ALSO ACKNOWLEDGE, THAT IN THE EVENT WE FAIL TO MEET ALL OF THE PROVISIONS AND CONDITIONS AS CONTAINED IN THIS AGREEMENT, AND AS PROVIDED IN THE CC&Rs AND BY-LAWS OF THE ASSOCIATION, THAT THE HOMEOWNERS ASSOCIATION WILL PROCEED WITH FURTHER LEGAL ACTION OR OTHER ACTION AS DEEMED APPROPRIATE BY THE BOARD OF DIRECTORS TO PROTECT THE INTERESTS OF SAID ASSOCIATION WHICH ACTION MAY INCLUDE SMALL CLAIMS COURT, JUDICIAL OR NON-JUDICIAL FORECLOSURE AND ETC.
Acknowledged this ___ day of ________, 200X.
_________________________________________________
Homeowner BOARD DIRECTORS
___________________________ __________________________________
Date:
4. Small Claims
Small Claims is becoming a more popular method of collecting outstanding dues and assessments from homeowners. The process is very inexpensive, does not require an attorney and with good account records and proper assessment procedures, judgement in favor of the association is almost guaranteed. When judgement is received, the association may proceed to collect the unpaid amounts by garnishment of wages, may file a judgement lien and proceed with other actions as provide by law.
5. Foreclosure: Judicial and Nonjudicial