The recent case of Huntington v. Miller confirmed again that a HOAs must accept partial payments and are limited in their ability to foreclose on an assessment lien when such lien is for less than $1,800.00.
In Huntington, an owner of a unit in an HOA became delinquent in payment of their regular assessments. The HOA recorded an assessment lien for all delinquent payments, late charges etc. The owner established a payment plan with the HOA to cure the delinquency, on which the owner later defaulted. The owner made a partial payment which brought the amount of delinquent assessments, exclusive of fees and charges, to less than $1,800—the threshold for collecting delinquent assessments through judicial or nonjudicial foreclosure. The HOA rejected the partial payment and moved to foreclose on the owner’s property.
The Appellate Court held that an association must accept partial payment made by an owner and must apply that payment in the order prescribed by statute. This obligation continues after a lien has been recorded. The Court reasoned that the plain language of Civil Code § 5655(a) permits partial payments and requires the association to accept such payments. Moreover, nothing in the statute states that these requirements end upon the recordation of a lien. As Civil Code § 5720 protects owners from foreclosure for delinquent assessments of $1,800 or less, and the rejected partial payments would have brought to amount owed under $1,800, judicial foreclosure was not allowed.
WHY THIS DECISION IS IMPORTANT
This decision makes clear that an HOA must accept partial payments of delinquent assessments even after a lien has been recorded, and affirms the prior decision made. The purpose of such rule is to follow the Legislature’s goal of preventing foreclosures and loss of one’s home over a small overdue assessment.
The interesting take away from this case is that an owner can delay judicial foreclosure if he or she continues to make partial payments that keep the amount owing under $1,800. Therefore, HOAs need to be cognizant of their other remedies. The Civil Code allows the HOA to pursue a small claims action to recover the debt while maintaining the lien. Moreover, an association may foreclose a lien securing assessments in any amount that are over 12 months delinquent. Thus, although a clever owner may be able to dodge foreclosure by keeping the delinquent assessments under $1,800 and less than 12 months in age, the Court’s interpretation of the Code was that the Legislature chose to accept that risk in order to protect owners from foreclosure.
You can read the full decision by clicking the link below: