California AB 2273 | Potential Impact on HOAs

California Assembly Member Wieckowski, along with Assembly Member Dickinson, has introduced a new bill that would amend the Davis-Stirling Common Interest Development Act. This amendment would make it easier for Homeowners’ Associations (HOAs) to identify the buyer of a home that has been foreclosed on and sold. This would benefit the HOA because, until the buyer is identified the HOA can’t collect fees on the property.

The Davis-Stirling Act – In a Nutshell

The Davis-Stirling Act allowed developers to create common interest developments, commonly called Homeowners’ Associations (HOAs). This act also gave HOAs the authority to make rules and levee fines against homeowners for breaking these rules. When HOAs are formed, they must create a document called a Declaration of Covenants, Conditions and Restrictions.

These CC&Rs, as they are commonly known, are recorded at the county court. When someone buys a home or condominium that is under the jurisdiction of the HOA, they agree to abide by the CC&R. HOAs have been likened to city governments; and they often provide similar services like security, utilities and trash pickup. The CC&R functions like a city charter, with the HOA being the government body.

Why the Law Needs to Change

The services that HOAs provide are paid for by those who live in the common interest development, in the form of HOA fees. If some owners don’t pay their fees, the rest of the homeowners may have to pay more to maintain the same level of service. When owners get behind or even stop paying their mortgage, they often also stop paying HOA fees.

If the property is foreclosed upon, the responsibility for the fees goes to the bank until it sells the property again. When this happens, it can be very hard for HOAs to find out who is now responsible for the fees. It is especially hard to find the new owner when the foreclosing agent doesn’t record the sale with the applicable agency.

Positive Outcomes are Possible

The current law requires that a notice be sent to the HOA within 15 days of the sale being recorded, if the HOA requested a notice. The law does not, however, require that the sale be recorded, and mortgagees often neglect to do so.

AB 2273, the Wieckowski amendment to the Davis-Stirling Act, would help remedy this situation. This bill introduces two requirements that would help HOAs. One is that mortgagees would be required to record the sale of a property within 30 days of the sale. The other is that the mortgagee would have to mail to the HOA a notice of the sale within 15 days of the sale rather than the date of the recording of said sale, as is currently the case..

AB 2273 will be a positive change for HOAs and the community homeowners who are in good standing. In these tough times there can be multiple foreclosures in one neighborhood at any given time, placing an undue burden on the common area commitments of the HOA. By requiring mortgagees to record the sale of a foreclosed property and more rapidly noticing the HOA as to ownership, the delinquent dues and/or legal fees will be recovered from the banks or new owners in short order.

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