May 3, 2012
The following report from the Housing Committee's "HOA Delinquent Assessments" Working Group is for discussion purposes only and has NOT been approved by the Housing Committee.
Issue:
What action, if any, should C.A.R. take with respect to delinquent assessments in home owners associations (HOAs) of common interest developments (CIDs)?
Action:
Optional
Options:
1. Sponsor legislation creating a law establishing a process whereby a tenant renting a unit in a CID, whose owner is delinquent in paying required HOA assessments, will be required to pay the delinquent assessments and deduct such payments from rent paid to the unit owner. As noted in #3, below, this discussion should also entail review of any potential conflict with C.A.R.-sponsored SB 150 (Correa) of 2010 that created the statutory "right-to-rent' to owners of units in CIDs.
2. Create C.A.R. education opportunities for REALTORS® about existing legal and operational solutions to delinquent HOA assessment challenges facing owners of units in CIDs.
3. Request C.A.R. Legal to evaluate this issue for possible guidance for REALTORS® to provide to owners of units in CIDs as to their responsibilities when the owners rent their unit for financial or economic reasons. Such guidance should also take into consideration the "Statutory Right to Rent" created by C.A.R.-sponsored legislation in 2010, SB 150 (Correa), which granted the unfettered right to rent to an owner of a unit in a CID if that right existed at the time the unit was purchased.
4. Request C.A.R. to conduct a survey of its Membership as to the extent of the "Delinquent HOA Assessments" problem and how HOAs have attempted to address the issue.
5. Conclude that additional information is needed and seek input between now and the October 2012 C.A.R. meetings from Housing Committee Members as to the extent of this problem in their respective regions.
6. Request the Federal Issues Committee to ascertain whether FHA has created, or is considering creation of, guidelines for HOAs to follow in order for units in CIDs to qualify for FHA-insured loans.
7. Is the Housing Committee interested in having this issue fully briefed for the October meetings in light of the fact that legislation to this end could not be introduced in the Legislature until January of 2013?
8. Take no action.
9. Other
Status/Summary:
The problem of delinquent HOA assessments is rampant throughout CIDs in California specifically, and the country generally. HOAs are facing a daunting fiscal burden of providing the services required by the CC&Rs in the face of diminishing operating revenues. Many home owners in CIDs are creating significant budgetary deficiencies for their HOAs when they refuse to, or are incapable of, maintaining a current status on their HOA assessment obligations. Following completion of two conference call meetings, the recommended Options, noted above, are submitted to the Housing Committee for its discussion and consideration.
Discussion:
At least one local jurisdiction in California has created a process through adoption of a local ordinance that, in instances of failure of a CID unit owner to pay required HOA assessments, a tenant of a unit in a CID would be provided a notice in writing by the management of the HOA that he/she has the right to pay the landlord's (unit owner's) late assessments and deduct that amount from the rent being paid to the unit owner. This authority exists by virtue of language authorizing such action by the tenant that is included in the lease/rental agreement with the unit owner.
The "trigger" of such a payment process is an assessment delinquency of the unit owner of more than two months. The HOA contacts the tenant in writing and states that pursuant to current law and the provisions in his/her rental agreement, the unit owner and tenant are now jointly responsible for the delinquent assessments owed to the HOA. Once the tenant receives this notice, he/she has 15 days to pay directly to the HOA, and deduct from rental payments to the unit owner, an amount equal to the delinquent assessments up to the maximum amount of the monthly rent. The tenant is thus legally relieved from having to pay that amount to the landlord. The landlord would continue to be responsible for all interest, late charges, reasonable fees and costs of collection, amount dedicated to reserves, and attorneys' fees incurred in the attempt to collect the late assessments. Once all past assessments are paid, the tenant continues to pay the normal monthly assessment directly to the HOA, deducting this amount from the rent paid to the unit owner, until the landlord resumes paying assessments.
The unit owner continues to be responsible for any unpaid delinquent assessments and related costs, but the Association would begin receiving reimbursement of regular monthly assessments from the tenant, until the owner of the unit resumes meeting his/her assessment obligations.
What action, if any, should C.A.R. take with respect to Home Owners Associations (HOAs) delinquent assessments challenges?
HOA Delinquent Assessments Working Group of 2012 Housing Committee - Membership
Chair of Working Group: Dona Crowder, CID Issues Chair,
Chair of Housing Committee: John Torres
Vice Chair, Housing Committee: Jay Avirom
Working Group Members:
Raylene Brundage, San Diego
Mary Jane Cambria, Orange County
Paulina Lee, Arcadia
Lauren Parry, San Francisco
Don Readinger, Capistrano Beach
Cathi Walter, Palm Desert
Carol Yeater, Plumas County
