Category Archives: Assessment Liens

Pre-Lien Dispute Resolution

Where an owner fails to remit assessment payments within a timely fashion, an association may record an assessment lien against the owner’s property to act as security for the payment of the owner’s delinquent assessment debt. (Civ. Code § 5675(a); See also “Notice of Delinquent Assessment (Assessment Lien).”) The assessment lien effectively prevents the owner from transferring title to the owner’s property and potentially from re-financing the property without first satisfying the owner’s assessment debt and having the assessment lien released.

Pre-Lien Offer of Internal Dispute Resolution (IDR)
Prior to recording an assessment lien, an association is required to offer the delinquent owner the opportunity to participate in internal dispute resolution (“IDR” aka “Meet & Confer”). (Civ. Code § 5670).) The purpose of IDR is to provide a non-judicial forum to resolve disputes between an owner and the association that will not result in a fee or charge to the owner. For information on the IDR procedure and its requirements, see “Internal Dispute Resolution (IDR).” When the association’s pre-lien offer of IDR is accepted by the owner, the association must participate in IDR prior to recording the assessment lien. (Civ. Code §§ 5670, 5910(c).)

Right to Request IDR; Pre-Lien Letter
At least thirty (30) days prior to recording an assessment lien, the association is required to provide the owner with a pre-lien letter that is sent via certified mail. (Civ. Code § 5660; See also “Pre-Lien Letter.”) The pre-lien letter must contain various items of information; one of those items is a statement as to the owner’s right to dispute the assessment debt by submitting a written request for IDR to the association. (Civ. Code § 5660(e).) If the owner requests IDR before the assessment lien is recorded, the association must participate in IDR prior to recording the assessment lien. (Civ. Code § 5670.)

Assessment Lien Enforcement (Generally)

Payment of an owner’s delinquent assessment debt (including any applicable late fees, interest, collection costs, etc. lawfully imposed on the owner in connection therewith) becomes the personal obligation of the owner at the time the assessments and other sums are levied by the association. (Civ. Code § 5650(a); See also “Duty to Pay Assessments.”) Civil Code Section 5675 allows an association to secure this debt by recording an assessment lien against the owner’s lot or unit. After the expiration of thirty (30) days following the recording of an assessment lien, the assessment lien may be enforced “in any manner permitted by law,” including the following: (Civ. Code § 5700(a).)

Nonjudicial Foreclosure*
Judicial Foreclosure*
Lawsuit for Money Damages (whether Superior Court or Small Claims).

*Limitations on Foreclosure
Prior to enforcing an assessment lien through nonjudicial or judicial foreclosure, the underlying assessment debt must meet or exceed the limitations contained in Civil Code Section 5720. (See “Limitations on Foreclosure of Assessment Lien.”)

“One Action Rule” & Assessment Liens
California’s “One Action Rule” generally requires the holder of a claim secured by real property (i.e., a mortgage lender) to take only one action against the debtor, and to pursue the real property first before suing the debtor personally. (See “One Action Rule.”) Although an association that records an assessment lien against an owner’s property also becomes the holder of a claim secured by real property, Civil Code Section 5700 allows the association to pursue the owner personally (i.e., to file a lawsuit against the owner) even after an assessment lien is recorded. (See “One Action Rule.”)

Judicial Enforcement & Merger Doctrine
When an assessment lien is enforced by an association through judicial action (i.e., a lawsuit for a money judgment or a judicial foreclosure action), the assessment lien is merged into any judgment obtained by the association. (Diamond Heights Village Assn., Inc. v. Financial Freedom (2011) 196 Cal.App.4th 290; See also “Money Judgments (Assessment Collection).”)

One Action Rule

California’s “One Action Rule” (aka “Single Action Rule”) is codified at Code of Civil Procedure Section 726. It generally requires the holder of a claim secured by real property (i.e., a mortgage lender) to take only one action against the debtor, whether it is to conduct a nonjudicial foreclosure action, judicial foreclosure action, or to sue the debtor personally for the balance of the debt. Section 726 has been interpreted by California Courts to require a mortgage lender to pursue the real property first before being able to sue the debtor personally. (Walker v. Community Bank (1974) 10 Cal.3d 729.) The One Action Rule is therefore also known as the “Security First Rule.”

Exemption for HOAs & Assessment Liens
An association that records an assessment lien against an owner’s property also becomes the holder of a claim secured by real property, similar to a mortgage lender. However, there is an express waiver of the One Action Rule in the Davis Stirling Act, found at Civil Code Section 5700(b). Section 5700(b) allows for an association to pursue the debtor (the delinquent owner) personally even if the association has recorded an assessment lien against the owner’s property as security for the owner’s assessment debt. This allows for an association to, for example, initiate a nonjudicial foreclosure action while also filing a lawsuit against the delinquent owner. However, the association will at some point have to select one remedy. For example, if the association obtains a money judgment, the assessment lien merges into the judgment and can no longer be enforced through nonjudicial foreclosure. (See Diamond Heights Village Assn. v. Financial Freedom (2011) 196 Cal.App.4th 290: See also “Money Judgments (Assessment Collection).” )

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.)

Pre-Lien Letter

At least thirty (30) days prior to recording an assessment lien on an owner’s separate interest for delinquent assessments, late charges, interest, collection fees and costs owed by that owner to the association, the association is required to provide the owner with a pre-lien letter (aka “intent to lien letter,” “pre-lien notice,” etc.) via certified mail. (Civ. Code § 5660.)

Required Information
The pre-lien letter must be sent to the owner of record via certified mail and include all of the following information:

Description of Collection/Lien Enforcement Procedures – A general description of the collection and enforcement procedures of the association (i.e., a description of the association’s assessment collection policy). (Civ. Code § 5660(a).)
Debt Calculation Method – A general description of the method of calculation of the delinquent amount owed to the association.(Civ. Code § 5660(a).)
Right to Inspect Records – A statement that the owner has the right to inspect the association’s records pursuant to Civil Code Section 5205. (Civ. Code § 5660(a).)
Required Foreclosure Notice – 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.” (Civ. Code § 5660(a).)
Itemized Statement of Debt – An itemized statement of the charges owed by the owner, including items on the statement which indicate the amount of any delinquent assessments, the collection fees and costs, reasonable attorney’s fees, and any late charges and interest, if any. (Civ. Code § 5660(b).)
Non-Liability for Association’s Error – A statement that the owner shall not be liable to pay the late charges, interest, collection fees and costs if it is determined that the assessment was paid on time to the association. (Civ. Code § 5660(c).)
Right to Request Meeting to Discuss Payment Plan – The owner’s right to request a meeting with the board to discuss a payment plan, as provided in Civil Code Section 5665. (Civ. Code § 5660(d).)
Right to Request IDR – The owner’s 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 established pursuant to Civil Code Section 5900 et. seq. (Civ. Code § 5660(e); See also “Internal Dispute Resolution (IDR).”) If the owner requests IDR before the lien is recorded, the association must participate in IDR with the owner prior to recording the lien. (See “Pre-Lien Dispute Resolution.”)
Right to Request ADR – The owner’s right to request alternative dispute resolution (ADR) with a neutral third party pursuant to Civil Code Section 5925 et. seq. 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. (Civ. Code § 5660(f).)

Assessment Liens & Judgment Liens (Generally)

Notice of Delinquent Assessment (“Assessment Lien”)
Assessment payments become the legal debt of the owner at the time the assessments are levied by the association. (Civ. Code § 5650; See also “Duty to Pay Assessments.”) Where the owner fails to remit payment within a timely fashion, an association’s governing documents allow for the association to record a Notice of Delinquent Assessment (an “assessment lien”) against a 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.

An association must comply with strict procedures when recording and enforcing assessment liens. (See “Pre-Lien Letter,” “Notice of Delinquent Assessment (Assessment Lien),” and “Assessment Lien Enforcement (Generally).”)

Abstract of Judgment (“Judgment Lien”)
An abstract of judgment (a “judgment lien”) is a court-ordered lien that is placed upon a judgment debtor’s property. Where an owner fails to pay assessments and/or monetary penalties imposed by an association, the association may file a lawsuit against a member in Small Claims or Superior Court (depending upon the amount owed) and obtain a money judgment for that amount. The association will then record an abstract of judgment to secure the judgment debt in the event the member refuses to pay the judgment amount. (See “Money Judgments (Assessment Collection).”)

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