Glenbrooke News

SUMMARY  SB 561 (Corbett)  Fact Sheet · 05/23/11

SB  561 protects homeowners living in common interest developments from unfair debt collection practices and possible foreclosure.  It requires anyone collecting payments on behalf of a homeowners association to follow the same rules the association would have to follow if it were collecting the debt itself.

BACKGROUND

Among other  protections for residents of common interest developments,  the Davis-Stirling Common Interest Development Act  requires that any payments  made by a homeowner towards an outstanding balance owed to an HOA must be applied first to any

outstanding assessment debt.  Current law allows the homeowner’s payments to be applied towards outstanding fees and costs only after the assessment is paid in full. These provisions are crucial because an HOA is allowed to foreclose on a homeowner who owes either more than $1,800 in assessments at any time, or any amount of assessment (even one cent) for more than 12 months.

Current law does not clearly require a debt collector to follow  the Davis-Stirling ommon Interest Development Act when collecting a delinquent assessment on behalf of an HOA.   Debt collectors exploit the lack of clarity and convince homeowners to sign agreements waiving their rights under the DavisStirling Common Interest Development Act.  As a

result, the homeowner’s payments are not used to pay down the outstanding assessment.  Instead, payments go first towards fees and costs, and only towards assessments after those other balances are paid in full.  Often, a balance is left on the delinquent assessment

after a period of 12 months, which triggers the HOA’s right to foreclose on the homeowner’s property.  In some cases, the debt collector even acts as trustee in the foreclosure proceeding.

PROBLEM

Homeowners Associations (HOAs) have been contracting with professional debt collectors to collect delinquent homeowner assessments and fees.  The companies, often associated with law firms, convince the homeowners to sign repayment contracts that  explicitly waive the homeowner’s rights under the Davis-Stirling Common Interest Development Act (Civ. Code 1350, et seq.).

SOLUTION: SB 561

SB 561 allows HOAs to contract with debt collectors to recover outstanding assessments

and fees only if the contracts require debt collectors to follow the provisions of the DavisStirling Common Interest Development Act.  It would also specify that a contract which waives a HOA’s responsibilities, or a homeowner’s rights, under the Act is void as a matter of public policy.

SUPPORT

California Alliance for Retired Americans (CARA) (Co-Sponsor) Center for California Homeowner Association Law (Co-Sponsor)

AARP

Older Women’s League - California

California Advocates for Nursing Home Reform

Consumers Union

Consumer Attorneys of California

California Alliance for Consumer Protection

Congresswoman Jackie Speier

Consumer Federation of California

STATUS

Passed Sen Judiciary 4-1; on Sen Floor

Contact: Alison Merrilees (916.651.4010),

alison.merrilees@sen.ca.gov

SENATE BILL 561

FORECLOSURE PROTECTION - COMMON INTEREST DEVELOPMENTS

SENATE MAJORITY LEADER ELLEN M. CORBETT

SENATE MAJORITY LEADER ELLEN CORBETT (D – 10)

SB 561 (Corbett)

Fact Sheet · 05/23/11