Housing Committee
Legislative Committee
December 22, 2011
The following is for policy consideration only; it has NOT been approved by the Housing, or Legislative Committees.
Issue:
Should C.A.R. sponsor legislation to authorize Homeowner Associations (HOAs) Boards of Directors to pursue garnishment of rents paid to an absentee homeowner, who is renting the owner's CID unit, in order to collect past due assessments owed to the HOA by the owner?
Action:
Optional
Options:
1. Sponsor legislation creating the absolute right of rent garnishment for HOAs in order to collect delinquent assessments owed by the CID Unit Owner who is renting his or her unit.
2. Take no action.
3. Other
Status/Summary:
The law on rent garnishment authority as it might apply to owners of units in common interest developments (CIDs) is vague and unclear. As the number of financially distressed CID homeowners in California increases, and such individuals fall further and further behind in their mortgage payment and assessment payment obligations, HOAs are becoming close to financially insolvent in many areas of the State due to the level of delinquent assessments. Homeowners in CIDs with a large number of vacancies are being burdened with increased assessments to make up for the delinquencies of vacant homes. Is financial relief for these HOAs and their homeowners necessary in order to help preserve such residential options in California?
Discussion
As homeowners in CIDs get into financial difficulties, more and more of them are renting out their units in order to keep mortgage payments current, but are not continuing to pay assessment obligations to the CID. Current law is vague about rent garnishment and its application to CID units. This legislation would attempt to improve this difficult situation for HOAs by specifically authorizing a HOA Board of Directors to proceed with rent garnishment after the HOA has obtained a judgment against the delinquent homeowner.
Under current law, if a CID homeowner is keeping the first trust deed payments current on his or her home, but has ceased paying the HOA assessments, and the HOA records a lien to attempt to force payment of the assessments, the HOA can initiate foreclosure proceedings against the homeowner if the delinquent assessment is $1,800 or more [CC 1367.4(a)]. The HOA can then foreclose its assessment lien and take subject to the first. If the monthly payments on the first trust deed are not made, the first can foreclose.
Representatives of HOAs have informed CAR that when a HOA places a demand in escrow for delinquent assessment dues, sellers will claim that they have no funds for such payments and the agents attempt to get the buyer to participate in bringing the assessment obligations current. Agents representing both buyer and seller are often forced to contribute significant sums from their respective commissions in order to facilitate closing of the transaction. During this process the "landlord" is being paid rent by the tenant and none of those funds are being applied to delinquent assessments.
Should C.A.R. sponsor legislation giving HOAs the authority to garnish rents paid to the homeowner in order to bring HOA assessment obligations current?
