Assessment Collections: The Court of Appeal Confirms Associations Must Accept Partial Payments on Assessment Debt
On October 14, 2014, the Court of Appeal issued an opinion in the case of Huntington Continental Townhouse Association, Inc. v. Miner (Fourth Appellate District, Division Three Case No. G049624) concerning associations’ duty to accept partial payments from delinquent owners. The opinion has been certified for publication.
The issue considered by the Court was whether an association is required by the Davis-Stirling Act to accept partial payments from an owner who is delinquent in the payment of assessments after a lien has been recorded against the owner’s property. Civil Code §5655(a) provides: “Any payments made by the owner of a separate interest toward a debt described in subdivision (a) of Section 5650 shall first be applied to the assessments owed, and, only after the assessments owed are paid in full shall the payments be applied to the fees and costs of collection, attorney’s fees, late charges, or interest.”
The Court found that the plain language of §5655(a) permits delinquent owners to make partial payments, and requires an association to accept partial payments. The Court held that under the statutory language of §5655(a), if an owner of a separate interest makes any payment, the association cannot reject it, but is required to apply that payment to the debt in the order set out in Section 5650.
The impact of the Huntington decision is that where a partial payment is made which reduces the principal amount of the debt to an amount below the statutory threshold for foreclosure, which is $1800, then foreclosure may no longer be a remedy available to the association. When payment is tendered during litigation, an association could still obtain a money judgment for the amounts due, but it would not be entitled to a judgment for foreclosure if the threshold amount is not met after applying a partial payment. In cases where a lawsuit has not yet been filed, then acceptance of a partial payment may simply result in a delay in initiating foreclosure rather than a bar to using that remedy. The association would have to wait for the debt to reach the statutory threshold after applying the payment before initiating an action for foreclosure.
Release date: October 16, 2014
