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Assessment Lien Release

Where a member becomes delinquent in the payment of assessments to the association, the association is permitted to record a Notice of Delinquent Assessment (an “assessment lien”) against the member’s property to act as security for the payment of the member’s assessment debt, in addition to the late fees, interest, collection costs and attorney’s fees imposed upon the member in connection with the member’s delinquency. (Civ. Code § 5675(a); See also “Notice of Delinquent Assessment (Assessment Lien).”) Once the member pays the association the amount it is owed, the association must take the following actions within twenty-one (21) calendar days:

Record Lien Release – The association must “record or cause to be recorded in the office of the county recorder in which the [assessment lien] is recorded a lien release or notice of rescission.” (Civ. Code § 5685(a).) and
Provide Copy of Release or Notice to Owner – The association must also provide the member (the owner of the separate interest against which the assessment lien was first recorded) “a copy of the lien release or notice that the delinquent assessment has been satisfied.” (Civ. Code § 5685(a).)

Assessment Lien Recorded in Error
If it is determined that the assessment lien was recorded in error, the party who recorded the lien must take the following actions within twenty-one (21) calendar days:

Record Lien Release – The party who recorded the lien must “record or cause to be recorded in the office of the county recorder in which the [assessment lien] is recorded a lien release or notice of rescission.” (Civ. Code § 5685(b).) and
Provide Declaration of Error & Copy of Release to Owner – The party who recorded the lien must also provide the member (the owner of the separate interest against which the assessment lien was first recorded) with “a declaration that the lien filing or recording was in error and a copy of the lien release or notice of rescission.” (Civ. Code § 5685(b).)

Promptly Reverse All Late Charges, Fees & Costs
In addition to the above, if it is determined that the assessment lien was recorded in error, the association must “promptly reverse all late charges, fees, interest, attorney’s fees, costs of collection, costs imposed for the [pre-lien letter], and costs of recordation and release of the lien authorized under subdivision (b) of Section 5720, and pay all costs related to any related dispute resolution or alternative dispute resolution.” (Civ. Code § 5685(c).)

Notice of Delinquent Assessment (Assessment Lien)

Assessment payments become the legal debt of the member at the time the assessments are levied by the association. (Civ. Code § 5650; See also “Duty to Pay Assessments.”) Where the member fails to remit payment within a timely fashion, an association may record a Notice of Delinquent Assessment (an “assessment lien”) against the member’s property to act as security for the payment of the member’s assessment debt. (Civ. Code § 5675(a).) The assessment lien effectively prevents the member from transferring title to the member’s property and potentially from re-financing the property without first satisfying the member’s assessment debt and having the assessment lien released.

Pre-Lien Letter Required
At least thirty (30) days prior to recording an assessment lien on a member’s property (the member’s “separate interest“) for delinquent assessments, late charges, interest, collection fees and costs owed by that member to the association, the association is required to provide the member with a pre-lien letter via certified mail. (Civ. Code § 5660; See also “Pre-Lien Letter.”)

Decision to Record Assessment Lien
The decision to record an assessment lien must be made by a majority vote of the board at an open board meeting and recorded in the meeting’s minutes. (Civ. Code § 5673; See also “Decision to Record Assessment Lien.”)

Required Information
An assessment lien must contain all of the following:

Itemized Statement of Amounts Owed – The assessment lien must state the amount of the delinquent assessments and any other sums imposed (i.e., late fees, interest, collection costs, etc.) in accordance with Civil Code Section 5650. (Civ. Code § 5675(a).) The itemized statement of these amounts which were provided to the owner in the pre-lien letter must also be recorded together with the assessment lien. (Civ. Code § 5675(b).)
Legal Description of the Member’s Property – The assessment lien must include a legal description of the member’s (owner’s) property (“separate interest”) within the association’s development against which the delinquent assessment and other sums are levied. (Civ. Code § 5675(a).)
Name of the Member – The assessment lien must include the name of the record owner of the separate interest against which the assessment lien is imposed. (Civ. Code § 5675(a).)
Name & Address of Foreclosure Trustee – In order for the assessment lien to be enforced by nonjudicial foreclosure, the assessment lien must state the name and address of the trustee authorized by the association to enforce the lien via foreclosure sale. (Civ. Code § 5675(c).)
Signed by Designated Person – The assessment lien must be signed by the person designated in the CC&Rs or by the association for that purpose, or if no one is designated, by the president of the association. (Civ. Code § 5675(d).)

Copy of Recorded Assessment Lien Mailed to all Owners
Once recorded, a copy of the recorded assessment lien must be mailed by certified mail to every person whose name is shown as an owner of the separate interest in the association’s records; the notice must be mailed no later than ten (10) calendar days after recordation. (Civ. Code § 5675(e).)

Decision to Record Assessment Lien

The decision to record a Notice of Delinquent Assessment (an “assessment lien”) against a member’s property for delinquent assessments must be made by the board of directors and may not be delegated to an agent of the association. (Civ. Code § 5673.)

Decision Made at Open Meeting & Recorded in Minutes
The decision must be made by at least a majority vote of the directors in an open board meeting, and the vote must be recorded in the minutes of that meeting. (Civ. Code § 5673.)

Suspension of Voting Rights

Provisions of an association’s bylaws may contain provisions that purport to allow an association’s board of directors to suspend a member’s voting rights as a form of discipline (e.g., in response to the member’s assessment delinquency or violation of the governing documents). However, due to the language of Civil Code Section 5105 (regarding the election rules that an association is legally required to adopt), associations are not able to deny a ballot to a member “for any reason other than not being a member at the time when ballots are distributed.” (Civ. Code § 5105(g)(1).)

“Record Date” for Elections & Voter List

Record Date
The term “record date” refers to the date established in the provisions of an association’s bylaws or, in the absence of such a provision, by the association’s board of directors for the purpose of determining which members are entitled to vote at a member meeting/election (e.g., to develop the “Voter List”.) Notwithstanding any other law, an HOA’s election rules must prohibit the denial of a ballot to an owner for any reason other than not being an owner at the time when ballots are distributed. (Civ. Code § 5105(g)(1).) The time when ballots are distributed therefore serves as the record date regardless of any contrary provisions in the association’s governing documents.

Contents of Voter List
The voter list must include the name, voting power, and either the physical address of the voter’s separate interest, the parcel number, or both. The mailing address for the ballot must be listed on the voter list if it differs from the voter’s physical address or if only the voter’s parcel number is used. (Civ. Code § 5105(a)(7).)

Verification of Individual Information on Voter List
The association must permit members to verify the accuracy of their individual information on the voter list at least thirty (30) days before ballots are distributed. (Civ. Code § 5105(a)(7).)

Adjourned Meetings
The record date also applies in the case of an adjourned meeting (i.e., if the association failed to achieve quorum at the initial meeting), unless the board fixes a new record date for the adjourned meeting. (Corp. Code § 7611(b).)

Cumulative Voting

Cumulative voting pertains to director elections. It provides every member with a number of votes equal to the director seats which are up for election, and further allows each member to distribute those votes amongst the candidates as they so choose provided that the total number of votes cast by the member does not exceed the number of seats up for election. For example, if there are five (5) seats up for election, every member is given five (5) votes. A member may cast all five (5) of his/her votes for a particular candidate, or three (3) votes for one candidate and two (2) votes for another, or one (1) vote for each of the five candidates, etc. so long as the total number of votes cast by the member does not exceed the number of seats up for election.

If an association’s governing documents provide for cumulative voting, the association is required to allow cumulative voting utilizing the required secret balloting procedures. (Civ. Code § 5115(e).)

Director Recalls
Cumulative voting has significant implications on the number of votes required to remove (recall) directors from the board. (See “Removal & Recall of Directors.”)

Developer Control
Provisions that allow for cumulative voting are automatically included in the bylaws of newly built associations in order to bolster the strength of the new homebuyers while the association is under developer control. Those provisions are included to satisfy the requirements imposed upon developers under 10 CCR § 2792.19 which mandate the use of cumulative voting for all director elections in which more than two (2) director positions are open for election by the association’s membership. (10 CCR § 2792.19(b)(1).) For master planned communities, developers may use a certain “class” of voting membership that grants the developer the right to elect a majority of the directors for an extended period of time. (10 CCR § 2792.32(f); See also “Developer Voting Rights & Classes of Membership.”)

Once the developer is no longer involved in the association, the association’s membership may vote to amend the bylaws in order to remove provisions that call for cumulative voting. The authority to do so is explicitly provided for under Corporations Code Section 7615(a).

10 CCR Section 2792.19. Reasonable Arrangements – Election of Governing Body.

(a) The first election of a governing body for the Association shall be conducted at the first meeting of the Association. All positions on the governing body shall be filled at that election.

(b)

(1) Voting for the governing body shall be by secret written ballot. Cumulative voting in the election of governing body members shall be prescribed for all elections in which more than two positions on the governing body are to be filled subject only to the procedural prerequisites to cumulative voting prescribed in Section 7615(b) of the Corporations Code.

(2) Unless the entire governing body is removed from office by the vote of members of the Association, no individual governing body members shall be removed prior to the expiration of his term of office if the votes cast against removal would be sufficient to elect the governing body member if voted cumulatively at an election at which the same total number of votes were cast and the entire number of governing body members authorized at the time of the most recent election of the governing body member were then being elected.

(c)

(1) A special procedure shall be established by the governing instruments to assure that from the first election of the governing body and thereafter for so long as a majority of the voting power of the Association resides in the subdivider, or so long as there are two outstanding classes of membership in the Association, not less than 20% of the incumbents on the governing body shall have been elected solely by the votes of owners other than the subdivider.

(2) A governing body member who has been elected to office solely by the votes of members of the Association other than the subdivider may be removed from office prior to the expiration of his term of office only by the vote of at least a simple majority of the voting power residing in members other than the subdivider.

Current through 3/20/15 Register 2015, No. 12

Developer Voting Rights & Classes of Membership

A member of an association is generally entitled to cast one (1) vote for each unit the member owns within the association. (See “One Vote Per Unit.”) However, the developer of the association (the builder of the common interest development (“CID”)) is permitted to establish different classes of voting memberships in the association’s governing documents. (10 CCR § 2792.18.) Developers do so in order to maintain control of the CID for as long as possible as units are sold to individual homebuyers while the CID is being built-out.

Class A Membership
Class A members are designated as owners of units and have one (1) vote for each unit/lot owned. (10 CCR § 2792.18(b)(1).)

Class B Membership
Class B membership is reserved to the developer, who is given up to three (3) votes for each unit/lot held by the developer. (10 CCR § 2792.18(b)(2).) Class B membership is tied to the developer’s ownership of separate interests (units) that are subject to assessments. (10 CCR § 2792.16(f)(2).) Pursuant to 10 CCR § 2792.32(c), Class B membership automatically converts to Class A membership when any of the following occur:

When 75% of the authorized residential interests transfer to homebuyers;
On the 5th anniversary of the most recent conveyance of a residential interest to a homebuyer. This deadline can be extended indefinitely as long as a residential unit is transferred once every 5 years; or
On the 25th anniversary of the first conveyance of a residential separate interest in a master planned community.

Class C Membership
Class C membership may only be used in master planned communities and extends only to votes for electing directors to the board. It allows the developer to preserve control of the board by giving the developer the right to elect a majority of the directors for an extended period of time. (10 CCR §2792.32(f).) Pursuant to 10 CCR § 2792.32(f)(1), these rights automatically terminate when any of the following occur:

75% of the residential interests have been conveyed to homebuyers;
On the 5th anniversary of the first conveyance of a residential interest to a homebuyer; or
On the 25th anniversary of the first conveyance of a residential interest in a master planned community.

10 CCR Section 2792.16. Reasonable Arrangements – Assessments & Liens.

(a) Regular assessments to defray expenses attributable to the ownership, operation and furnishing of common interests by the Association shall ordinarily be levied against each owner according to the ratio of the number of subdivision interests owned by the owner assessed to the total number of interests subject to assessments.

(b) In the case of a subdivision offering in which it is reasonable to anticipate that any owner will derive as much as 10% more than any other owner in the value of common services supplied by the Association, the assessment against each owner may be determined according to a formula or schedule under which the assessments against the various subdivision interests bear a relationship which is equitably proportionate to the value of the common services furnished to the respective interests.

(c) The subdivider -and his successor in interest, if any -is an owner subject to the payment of regular and special assessments against subdivision interests which he owns provided, however, that the subdivider and any other owner of a subdivision interest which does not include a structural improvement for human occupancy may be exempted by the governing instruments from the payment of that portion of any assessment which is for the purpose of defraying expenses and reserves directly attributable to the existence and the use of the structural improvement. The exemption may include, but shall not necessarily be limited to:

Roof replacement;
Exterior maintenance;
Walkway and carport lighting;
Refuse disposal;
Cable television; and
Domestic water supplied to living units.

(1) Any exemption from the payment of assessments attributed to dwelling units shall be in effect only until the earliest of the following events.

(A) A notice of completion of the structural improvements has been recorded.

(B) Occupation or use of the dwelling unit.

(2) The subdivider and any other owner of a subdivision interest may be exempted by the governing instruments from the payment of that portion of any assessment which is for the purpose of defraying expenses and reserves directly attributable to the existence and use of a common facility that is not complete at the time assessments commence. Any exemption from the payment of assessments attributed to common facilities shall be in effect only until the earliest of the following events.

(A) A notice of completion of the common facility has been recorded.

(B) The common facility has been placed into use.

(d) The governing body of the Association must comply with the provisions of Section 1366 of the Civil Code prior to any increase in assessments.

(e) (T)he governing body of the Association may not levy special assessments without complying with the provisions of Section 1366 of the Civil Code.

(f)

(1) Regular assessments against the subdivision interests in a phase of a multi-phase subdivision or against all subdivision interests in a single-phase subdivision shall commence on the date of the first conveyance of a subdivision interest in that phase under authority of a public report or on the first day of the month following the first conveyance of a subdivision interest in the phase.

(2) Except in those subdivision offerings where there is an approved subsidization plan which otherwise provides, voting rights attributable to subdivision interests shall not vest until assessments against those interests have been levied by the Association.

(g)

(1) A lien for regular or special assessments against an owner may be made subordinate by the CC&R’s to the lien of any first mortgage or first deed of trust (hereafter collectively first encumbrance) against subdivision interests of the owner.

(2) In the case of a subordination of a lien for assessments to a first encumbrance, the transfer of a subdivision interest as the result of the exercise of a power of sale or a judicial foreclosure involving a default under the first encumbrance shall extinguish the lien of assessments which were due and payable prior to the transfer of the subdivision interest.

(3) No transfer of the subdivision interest as the result of a foreclosure or exercise of a power of sale shall relieve the new owner, whether it be the former beneficiary of the first encumbrance or another person, from liability for any assessments thereafter becoming due or from the lien thereof.

(h)

(1) For the purpose of subdivision (d) and subdivision (e), a quorum means more than 50% of the members of the Association.

(2) Any meeting or election of the Association for purposes of complying with subdivision (d) and subdivision (e) shall be conducted in accordance with Chapter 5 (commencing with Section 7510) of Part 3, Division 2 of Title 1 of the Corporations Code and Section 7613 of the Corporations Code.

(i) Notwithstanding any other provision contained in this section, the governing body may increase assessments necessary for emergency situations pursuant to Section 1366 of the Civil Code.

(j) The governing body shall not expend funds designated as reserve funds for any purpose other than those purposes set forth in Section 1365.5 of the Civil Code.

Current through 3/20/15 Register 2015, No. 12

One Vote Per Unit

Virtually every set of association governing documents allow for only one (1) vote to be cast per “separate interest” (per unit) within the association, regardless of the number of persons on title to the unit. This is in accordance with the requirements contained within Title 10, Section 2792.18(a) of the California Code of Regulations.

Where ownership of a unit is vested in a number of persons (i.e., joint tenants, members of a partnership, etc.), whoever casts the secret ballot on behalf of that unit is presumed to be voting for all of his/her co-owners. (Corp. Code § 7612.) Once the secret ballot is received by the association’s inspector of elections, that ballot is irrevocable regardless if one of the co-owners desires for the ballot to be withdrawn or otherwise objects to the way in which the co-owner voted. (Civ. Code § 5120(a).)

Developer Voting Rights
The developer of the association (the builder of the common interest development) often establishes different classes of voting memberships in the association’s governing documents. Those classes allow for the developer to have up to three (3) votes per unit owned by the developer, subject to certain limitations. (10 CCR §§ 2792.18, 2792.32; See also “Developer Voting Rights & Classes of Membership.”)