Unpaid fine - can a lien be placed?

Started by PaulL12 • 37 replies • 883 views

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PaulL12 (California)
Posts: 116

Posted:

A homeowner in our community is refusing to pay a fine which has been assessed. I brought up the issue of whether or not a lien could be placed on this homeowners property for failure to pay a fine. Two of the other board members said yes a lien could be placed while the other two (there are five) say a lien can't be be placed. I looked this up in Davis Stirling, but do not see a clear answer to it. Maybe someone here has the answer. Thanks!

AugustinD
Posts: 3,698

Posted:

Here's my layperson's take, based on three minutes of study at davis-stirling.com and the net:

As long as a California HOA's governing documents allow a lien to be placed for the amount of a fine (plus maybe late fees, attorney fees, interest et cetera), then yes, the HOA may lawfully place such a lien. The catch: Such a lien may only be foreclosed judicially.

In California, nonjudicial foreclosure of liens is possible under some circumstances. A lien for the amount of a HOA fine (plus related charges) is not one of these circumstances.

Judicial foreclosure apparently gives the owner a lot more due process compared to a nonjudicial foreclosure. Judicial foreclosure is harder to achieve compared to nonjudicial foreclosure.

See:
https://www.davis-stirling.com/HOME/C/Collecting-Fines
https://www.davis-stirling.com/HOME/Statutes/Civil-Code-5725
https://www.nolo.com/legal-encyclopedia/how-foreclosure-works-30066-2.html

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Quote:

Posted By AugustinD on 04/25/2022 3:54 PM
Here's my layperson's take, based on three minutes of study at davis-stirling.com and the net:

As long as a California HOA's governing documents allow a lien to be placed for the amount of a fine (plus maybe late fees, attorney fees, interest et cetera), then yes, the HOA may lawfully place such a lien. The catch: Such a lien may only be foreclosed judicially.

In California, nonjudicial foreclosure of liens is possible under some circumstances. A lien for the amount of a HOA fine (plus related charges) is not one of these circumstances.

Judicial foreclosure apparently gives the owner a lot more due process compared to a nonjudicial foreclosure. Judicial foreclosure is harder to achieve compared to nonjudicial foreclosure.

See:
https://www.davis-stirling.com/HOME/C/Collecting-Fines
https://www.davis-stirling.com/HOME/Statutes/Civil-Code-5725
https://www.nolo.com/legal-encyclopedia/how-foreclosure-works-30066-2.html

Would the HOA still get the money when the home is sold?

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By JohnT38 on 04/25/2022 3:58 PM
Would the HOA still get the money when the home is sold?

Do you mean: If the HOA does not attempt a judicial foreclosure, will the HHOA still get the money when the owner eventually, of her/his own accord, sells the home?

The nationwide answer is yes, isn't it? Title to the home cannot pass without all debts being paid.

Is this your point? Foreclosing is dumb, much of the time? Just place the lien and get the money when the house is sold? If so, I agree this is usually the best strategy. Though I am soo an amateur on this topic, having merelye: helped oversee a transition from a collections agency (bleh) to a collections attorney (much better) and having spoken to one, seasoned HOA manager who said simply: Just lien it and forget about it.

This site seems to urge not bothering with foreclosure in California:
https://www.courts.ca.gov/1048.htm?rdeLocaleAttr=en#:~:text=Judicial%20foreclosures%20are%20rare%20in,1%20year%20after%20the%20sale.

Excerpt:
Judicial foreclosures are rare in California. A judicial foreclosure allows the lender to get a deficiency judgment against the borrower. BUT the homeowner has the “right of redemption,” which allows him or her to buy the home back from the successful bidder at the auction for 1 year after the sale. The process is longer and more costly than a nonjudicial foreclosure.

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Quote:

Posted By AugustinD on 04/25/2022 4:14 PM

Posted By JohnT38 on 04/25/2022 3:58 PM
Would the HOA still get the money when the home is sold?

"Is this your point? Foreclosing is dumb, much of the time? Just place the lien and get the money when the house is sold? If so, I agree this is usually the best strategy."

Yes, this what I was implying for any minor issue. If it's a situation where the fines are accumulating on an ongoing basis then foreclosure might make sense.

MaxB4
Posts: 3,513

Posted:

You cannot lien a property because of a fine,ever, in California.

AugustinD
Posts: 3,698

Posted:

From https://www.davis-stirling.com/HOME/C/Collecting-Fines:
Fines can be included in liens that are foreclosed judicially.

California Civil Code 5725:

(b) A monetary penalty imposed by the association as a disciplinary measure for failure of a member to comply with the governing documents, except for the late payments, may not be characterized nor treated in the governing documents as an assessment that may become a lien against the member’s separate interest enforceable by the sale of the interest under Sections 2924, 2924b, and 2924c.

I believe sections 2924, 2924b and 2924c concern nonjudicial foreclosures.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By AugustinD on 04/25/2022 4:40 PM
From https://www.davis-stirling.com/HOME/C/Collecting-Fines:
Fines can be included in liens that are foreclosed judicially.

California Civil Code 5725:

(b) A monetary penalty imposed by the association as a disciplinary measure for failure of a member to comply with the governing documents, except for the late payments, may not be characterized nor treated in the governing documents as an assessment that may become a lien against the member’s separate interest enforceable by the sale of the interest under Sections 2924, 2924b, and 2924c.

I believe sections 2924, 2924b and 2924c concern nonjudicial foreclosures.

YOU CANNOT PLACE A LIEN ON A FINE!

PaulL12 (California)
Posts: 116

Posted:

Quote:

Posted By JohnT38 on 04/25/2022 3:58 PM
Posted By AugustinD on 04/25/2022 3:54 PM

As long as a California HOA's governing documents allow a lien to be placed for the amount of a fine (plus maybe late fees, attorney fees, interest et cetera), then yes, the HOA may lawfully place such a lien. The catch: Such a lien may only be foreclosed judicially.

Thanks for your feedback.

What do you mean by "foreclosed judicially"? IOW, if the homeowner simply sells the home, does it mean they are off the hook for the fine?

AugustinD
Posts: 3,698

Posted:

From earlier threads by the OP, this is a California condo or maybe townhome community.
Quote:
Posted By PaulL12 on 04/25/2022 5:55 PM

What do you mean by "foreclosed judicially"? IOW, if the homeowner simply sells the home, does it mean they are off the hook for the fine?
-- PaulL12, the bottom line is your COA does not want an owner to be able to sell her/his house without paying the fine, right? What is the best way to do this?

-- Be aware that a seller of a California COA/HOA home must disclose whether there are any outstanding fines on the unit. Furthermore, the COA/HOA is required to provide to the seller a signed statement indicating, among other things, whether any fines are owed. In my experience title companies are going to be looking for this statement and will work directly with the COA's/HOA's management to get it. If an owner has an outstanding fine, it is going to be paid before the sale is complete. See https://www.davis-stirling.com/HOME/Statutes/Civil-Code-4525

-- Special assessments and regular assessments that are past due may be liened, with the lien subsequently foreclosed via (the far less burdensome) nonjudicial foreclosure.

-- A number of sites (but not all sites) speak of California HOAs/COAs not liening for fines, but in somewhat cryptic language. E.g. from one California HOA site:

Penalties for violations depend on the individual community, but rest assured that not paying the penalty for a violation will not cause the HOA to put a lien on your home.

-- From the Davis-Stirling site on collecting fines (link above), if a California HOA/COA really wants to collect a fine, it can go to small claims court (when the fine is under $5000) or superior court. Superior Court can potentially yield an "abstract of judgment" recorded against the owner's property. Pursuing the fine in these courts is way less expensive than judicial foreclosure. Again, see the California site https://www.davis-stirling.com/HOME/C/Collecting-Fines . Perhaps this is why a number of sites and MaxB4 are saying liens for fines are not done.

-- Will a lien for a fine keep an owner from selling her or his home? Maybe. But come on. I think liening for fines is simply not done. Why? Because of the options above. Given how many sites say California HOAs/COAs do not put liens on properties for fines (for whatever reason), I think a lien for a fine is not necessary or appropriate. If the fine is large enough, use the Superior Court and "abstract of judgment" approach.

-- Regarding judicial foreclosure, see what I posted above and read the few paragraphs at https://www.hopb.co/blog/guide-to-hoa-assessment-collections-process#foreclosure-types . For now, suffice it to say that foreclosing judicially is a much more burdensome process compared to nonjudicial foreclosure. It sounds like choosing to pursue a fine by judicial foreclosure, when there are cheaper ways that are as effective, is a super duper dumb choice for a California COA/HOA.

-- I am no lawyer. I am sharing my impressions as someone interested in the law of CIDs (common interest developments).

LoriM15 (Florida)
Posts: 1,009

Posted:

In Florida, we can place a lien for a fine if the fine is over $1000. Even if we don't have lien on the house, we will get out money when the house is sold. The HOA is required to fill out an estoppel certificate for each home as it is sold. It's a part of the closing paperwork from the title company. If there is an outstanding balance owed to the HOA it gets paid directly from the proceeds at closing. We have one home right now that is being sold. The seller claims she cannot pay the past due balance, so she is negotiating with the buyer to have them pay the estoppel.

There is apparently some case law that says you may not be able to foreclose if the amount owed is only for fines unless your documents state that the fine is considered an assessment. We have never been in that situation because every homeowner that owes us money owes assessments besides any lien amounts.

MaxB4
Posts: 3,513

Posted:

Again, liens are NOT ALLOWED to be recorded in California for fines. Augustin is making things up as he goes.

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By MaxB4 on 04/26/2022 8:12 AM
Again, liens are NOT ALLOWED to be recorded in California for fines.

First, I welcome your citation of the law that prohibits liens for fines. Second, it appears to me that, in California, using a lien for fines is an academic discussion. The discussion has little or even no value practically.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

I have heard of work arounds on fines by applying any money sent to the HOA (including dues) go first to paying fines then the balance applied to the dues. This typically results in one being behind on dues so liens and even foreclosure can happen.

Get advice from your lawyer before trying this.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By JohnC46 on 04/26/2022 8:17 AM
I have heard of work arounds on fines by applying any money sent to the HOA (including dues) go first to paying fines then the balance applied to the dues. This typically results in one being behind on dues so liens and even foreclosure can happen.

Get advice from your lawyer before trying this.

Not in California

Civil Code §5655. Priority of Assessment Payments.

(a) 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.

(b) When an owner makes a payment, the owner may request a receipt and the association shall provide it. The receipt shall indicate the date of payment and the person who received it.

(c) The association shall provide a mailing address for overnight payment of assessments. The address shall be provided in the annual policy statement.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By AugustinD on 04/26/2022 8:16 AM
Posted By MaxB4 on 04/26/2022 8:12 AM
Again, liens are NOT ALLOWED to be recorded in California for fines.

Tell you what, drag your ass out to California and try and record a lien on a fine. Recorder Office's open at 9:00 AM

AugustinD
Posts: 3,698

Posted:

I do not think the statute MaxB4 cited prohibits doing what JohnC46 posted.

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By MaxB4 on 04/26/2022 8:42 AM
Posted By AugustinD on 04/26/2022 8:16 AM

Posted By MaxB4 on 04/26/2022 8:12 AM
Again, liens are NOT ALLOWED to be recorded in California for fines.
First, I welcome your citation of the law that prohibits liens for fines. Second, it appears to me that, in California, using a lien for fines is an academic discussion. The discussion has little or even no value practically.

Tell you what, drag your ass out to California and try and record a lien on a fine. Recorder Office's open at 9:00 AM

It appears to me the OP needs something to break a tie vote with his board. I have doubts the OP's telling his fellow directors that "MaxB4 at hoatalk.com said a lien for fines cannot be placed in California," along with other instructions for them to drag their back sides to the county clerk, will be dispositive to this board.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By AugustinD on 04/26/2022 8:42 AM
I do not think the statute MaxB4 cited prohibits doing what JohnC46 posted.

I have to now place you in the same boat as Melissa.

KennethS2 (California)
Posts: 36

Posted:

AS I have been on a Board in the past in Calif this is what has happened. When a fine gets large enough (around $5000) we took it to Small Claims Court and if the ruling is in favor of the HOA it can then be used for a lien. The court must make a ruling first for a fine to be used for a lien.

Ken

KennethS2 (California)
Posts: 36

Posted:

MaxB4
Posts: 3,513

Posted:

Quote:

If you are going to give Augie's legal advise, I would recommend spending more than three minutes of studying. California governing documents will not have provisions in them to place a lien for unpaid fines, NOR will they allow late fees to be assessed against any unpaid fines.

California does have a process in going after unpaid fines and that is through the courts. The problem is, even if an HOA wins, good luck trying to collect. The only winners are the lawyers, because they get paid, and generally, before all others.

SheliaH (Indiana)
Posts: 6,964

Posted:

You haven't said how much the fine is, so when you compare that to the time and trouble it takes to file a lien, you should consider if the costs justify that process. Perhaps you should just sue the homeowner - at least you can ask that court costs, attorneys fees AND the fine be rewarded to you if you win. Depending on how much money is at stake, you might be able to do it in Small Claims court, where you won't need an attorney.

Or ask your attorney if taking the matter to some sort of alternative dispute resolution process could occur - this way, the board and homeowner can duke out two issues (1) the violation that prompted the fine in the first place and (2) the fine itself. I suppose the homeowner is squawking because it's "too high," selective enforcement, or whatever. Let him or her make whatever argument(s) he/she has and then the arbitrator can make a decision. If you use a mediator, the mediator may be able to negotiate a settlement between you and everyone skips lien filing or a formal lawsuit (in the end, the only people who win are the attorneys who get paid regardless)

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By MaxB4 on 04/26/2022 10:24 AM
California governing documents will not have provisions in them to place a lien for unpaid fines

PaulL12, would you please quote what your HOA/COA governing documents say about placing liens?

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By AugustinD on 04/26/2022 8:16 AM
Posted By MaxB4 on 04/26/2022 8:12 AM
Again, liens are NOT ALLOWED to be recorded in California for fines.

California Civil Code §5725(b)

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By MaxB4 on 04/26/2022 12:20 PM

California Civil Code §5725(b)

Yup, reviewed this yesterday. See below. This statute section voids any CID covenant, bylaw or rule that declares that fines become an "assessment," such that nonjudicial foreclosure can be used to collect the fine.

By contrast, a California HOA/COA may lawfully lien an owner who fails to pay the regular assessment (or a special assessment imposed on all owners) and subsequently, use nonjudicial foreclosure to collect.

Hence the davis-stirling site observes:

"Fines can be included in liens that are foreclosed judicially." See again https://www.davis-stirling.com/HOME/C/Collecting-Fines

https://www.davis-stirling.com/HOME/Statutes/Civil-Code-5725

A monetary penalty imposed by the association as a disciplinary measure for failure of a member to comply with the governing documents, except for the late payments, may not be characterized nor treated in the governing documents as an assessment that may become a lien against the member’s separate interest enforceable by the sale of the interest under Sections 2924, 2924b, and 2924c.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By AugustinD on 04/26/2022 1:02 PM
Posted By MaxB4 on 04/26/2022 12:20 PM

California Civil Code §5725(b)

Exactly where does it say "Fines can be included in liens that are foreclosed judicially."

Before levying fines, an association must first (i) adopt a fine schedule, (ii) publish it to its members, and (iii) then hold a properly noticed hearing levying a fine. Fines must be reasonable and should not be viewed as a means of raising revenue but rather as a mechanism for encouraging compliance with rules. Once a fine is levied and goes unpaid, following are methods for collecting fines.

1. Suspend Privileges. Sometimes the best option is to suspend a person's privileges until the fines are paid.

2. Small Claims Court. Associations can sue for fines in small claims court. The benefit is that there is very little expense involved and an abstract of judgment can be recorded against the owner's property.

3. Superior Court. If the fines are over $5,000, associations can file an action in superior court. If the association is awarded a judgment for the fines, an abstract of judgment can be recorded against the owner's property.

4. Judicial Foreclosure. Because the prohibition on fines in liens only applies to trustee sales, associations may include monetary penalties (fines) in actions for judicial foreclosures.

AugustinD
Posts: 3,698

Posted:

MaxB2, I cited my sources.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By AugustinD on 04/26/2022 1:17 PM
MaxB2, I cited my sources.

No, you cited sources and, on your own, changed the langauage.

Curious, when was the last time you took a HOA monetary fine to a court of law?

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By MaxB4 on 04/26/2022 1:30 PM

No, you cited sources and, on your own, changed the langauage.

?
Quote:
Posted By AugustinD on 04/26/2022 1:02 PM

"Fines can be included in liens that are foreclosed judicially." See again https://www.davis-stirling.com/HOME/C/Collecting-Fines

MaxB4
Posts: 3,513

Posted:

So you don't have a statue, just one lawyer's opinion.

AugustinD
Posts: 3,698

Posted:

MaxB2, you have not produced a statute that prohibits liens for fines.

To me the law firm site explains why so many other California HOA law sites do not say baldly that liens for fines are prohibited. Why don't they say this? Because as an academic matter, such liens are not prohibited.

I do not think you understand the finer points of this. It's really tiresome when you sit there and accuse me of not providing a citation; changing the wording of a citation; and lying.

I will wait for the OP to get back to the thread, if he chooses to. Else I think the practical advice is all here for him to ponder.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By AugustinD on 04/26/2022 1:59 PM
MaxB2, you have not produced a statute that prohibits liens for fines.

To me the law firm site explains why so many other California HOA law sites do not say baldly that liens for fines are prohibited. Why don't they say this? Because as an academic matter, such liens are not prohibited.

I do not think you understand the finer points of this. It's really tiresome when you sit there and accuse me of not providing a citation; changing the wording of a citation; and lying.

I will wait for the OP to get back to the thread, if he chooses to. Else I think the practical advice is all here for him to ponder.

§5725(b) is that statue.

When was the last time you recorded a HOA lien in California and when was the last time you recorded a lien against a fine.

MaxB4
Posts: 3,513

Posted:

https://www.lawyers.com/legal-info/bankruptcy/foreclosures/hoa-foreclosures-for-cc-rs-violations.html

MaxB4
Posts: 3,513

Posted:

https://www.lawyers.com/legal-info/bankruptcy/foreclosures/hoa-foreclosures-for-cc-rs-violations.html

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By MaxB4 on 04/26/2022 2:12 PM
https://www.lawyers.com/legal-info/bankruptcy/foreclosures/hoa-foreclosures-for-cc-rs-violations.html

... which notes that:

State Restrictions on Foreclosures for Unpaid Fines
Just as some states forbid liens for unpaid fines, some also restrict or prohibit foreclosures when the HOA lien consists only of unpaid fines and related costs like attorneys’ fees. In North Carolina, for instance, the most common foreclosure method is nonjudicial. But under North Carolina law, an HOA can’t use a nonjudicial process to foreclose an HOA lien if the lien consists solely of fines, interest on unpaid fines, or attorneys' fees that are associated with fines. Instead, the HOA must foreclose judicially by filing a lawsuit. So, the homeowners get one last chance to convince someone (a court) that they don’t deserve to lose their home over a dispute with the HOA.

In Texas, an HOA can’t foreclose a lien at all (judicially or nonjudicially) that consists solely of fines and attorney's fees associated with those fines. However, as mentioned earlier, once the HOA gets a money judgment, it can potentially take money from the homeowner’s bank account or garnish the homeowner’s wages. And, if the lien also includes other amounts besides fines and related attorneys’ fees, such as unpaid assessments, the HOA can probably foreclose.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Aug said:

In Texas, an HOA can’t foreclose a lien at all (judicially or nonjudicially) that consists solely of fines and attorney's fees associated with those fines. However, as mentioned earlier, once the HOA gets a money judgment, it can potentially take money from the homeowner’s bank account or garnish the homeowner’s wages. And, if the lien also includes other amounts besides fines and related attorneys’ fees, such as unpaid assessments, the HOA can probably foreclose.

A great work around.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By JohnC46 on 04/27/2022 8:45 AM
Aug said:

In Texas, an HOA can’t foreclose a lien at all (judicially or nonjudicially) that consists solely of fines and attorney's fees associated with those fines. However, as mentioned earlier, once the HOA gets a money judgment, it can potentially take money from the homeowner’s bank account or garnish the homeowner’s wages. And, if the lien also includes other amounts besides fines and related attorneys’ fees, such as unpaid assessments, the HOA can probably foreclose.

A great work around.

In case you noticed, this isn't Texas.

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