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Homeowners’ Association MUST Accept and Apply Partial Payments or Lose Its Right to Foreclosure

Foreclosure Litigation, Homeowners Association (HOA) Law, and Real Estate Law by Peter N. Brewer, Esq.

Most condominium or townhouse owners are familiar with the responsibility of paying their homeowner association’s (“HOA”) dues.  However, many owners do not realize that if they fail to do so, the HOA has the power to place a lien on the unit for the delinquency and foreclose on the property to satisfy the lien.

A Homeowners’ Association and its member-owners are normally governed by a handful of documents:

  • Articles of Incorporation and Bylaws;
  • Covenants, Conditions and Restrictions (“CC&Rs”)

The Davis-Stirling Common Interest Development Act (the “Act”) is the law that codifies the other obligations of the HOA and its members.  Civil Code Section 1367.1 explains how an HOA may secure delinquent assessments and related fees by way of lien against the homeowner’s unit.

Recently, in the case of Huntington Continental Town House Association, Inc., v. The JM Trust, the California Court of Appeals held that an HOA must accept and apply partial payments to the homeowner’s delinquency.  The homeowner in the case had tried to submit payment to the HOA, not once, not twice but three times.  The homeowner never got the amount quite right, or otherwise failed to abide by the payment plan they originally asked for.  Regardless, they did make efforts to pay to avoid foreclosure.  The HOA’s law firm rejected the partial payments each time and filed suit in court for foreclosure on the HOA’s lien.

The trial court ruled in the HOA’s favor, but the appellate court concluded that nothing in the Davis-Stirling Act allowed the HOA to reject partial payments from the homeowner.  Instead, the court noted “allowing partial payments to pay down delinquent assessments after lien recordation would be consistent with the legislature’s desire to limit the remedy of foreclosure…” [Huntington Continental Town House Association, Inc., v. The JM Trust, Jan. 13, 2014]

Author’s Comment – Foreclosure is a drastic remedy and HOA lien amounts tend to be very small.  Here, the disputed amount was about $3,500.  Accordingly, it is understandable that the court would conclude that where the Act could be construed in the homeowner’s favor, it should be.

If you are seeking real estate legal counsel regarding a California based property, don’t hesitate to contact our law firm at (650) 327-2900 or to learn more about our firm and read attorney bios, visit us on the web at www.BrewerFirm.com.

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