|August 27, 2014|
Previously published on August 20, 2014
The Davis-Stirling Act governs HOA initiated judicial foreclosures against homeowners relative to outstanding lien assessments. In 2011, the Huntington Continental Town House Association recorded a delinquent lien assessment against one of its homeowners followed by the filing of a judicial foreclosure action. The HOA and the homeowner subsequently agreed to a payment plan, but the homeowner failed to remit all payments when due and the plan was cancelled.
The homeowner then attempted to remit three partial payments to the HOA, which were all returned by the HOA to the homeowner. The returned payments included a check from the homeowner for $3,500 - which would have brought the assessments secured by the lien current - but would have left other amounts also secured by the lien (like late fees, interest, and attorneys’ fees) all outstanding and still due.
The Trial Court ruled that the HOA was entitled to reject the partial payments and allowed the foreclosure action to proceed. The matter was then brought before the Appellate Division of the Orange County Superior Court, which found that nothing contained within the Davis-Sterling Act actually prohibits the HOA’s acceptance of partial payments on delinquent assessments once litigation has commenced; and therefore reversed the Trial Court’s ruling. In its decision, the Appellate Division of the Orange County Superior Court noted that allowing partial payments to pay down delinquent assessments after the recordation of a lien is consistent with the Legislature’s intent to limit the remedy of foreclosure to those circumstances where it appears to be the only viable option for the collection of delinquent assessments.
Some argue that the above decision conflicts with various provisions of the Davis-Stirling Act and well-established foreclosure law. Currently, the issue is before the California Court of Appeal which will hear further arguments on both sides.