After paying your association dues for many years, you inadvertently neglect to pay your association dues for one month. You realize you forgot to pay the association dues the following month. So you pay two months of association dues in the second month. The association returns your check stating that you have to pay a late fee. You request the association to waive the late fee. You then receive a letter from the association’s attorney stating that you not only have to pay the late fee, but you also have to pay the association’s cost of the attorney’s letter. Are there any defenses available?
This subject is governed by Civil Code sections 1365 to 1367.5.
The association is required to annually distribute to its members its board approved written policies and practices for enforcing lien rights and other legal remedies for any default in the payment of assessments. If the association has not approved and distributed its written policies, the association may be barred from collection activity.
If the association exceeds the scope of its written policy on collection enforcement, the collection activity may be barred. For example, if the written policy provides for interest on past due assessments but does not provide for late fees, the association cannot recover late fees from the owner. Thus, the association is restricted to its approved and distributed policy.
The association cannot proceed with foreclosure (judicial or non-judicial) until the assessments exceed $1,800 or the assessments are more than 12 months delinquent. Further, the $1,800 must be comprised of just association dues. It cannot include fines, penalties or attorney’s fees.
Thirty days prior to recording a lien for non-payment of assessments, the association must provide the owner with its written collection policy, its method of calculating the amount owed and an itemized statement of charges. The owner then has the right to review the association’s records in order to verify the debt. If the association records a lien in error, the association must release the lien within 21 days and provide the owner with written confirmation that it has been released.
The owner has the right to dispute any assessment imposed by the association by submitting a written request for dispute resolution. The association may not initiate foreclosure without participating in the requested alternative dispute resolution. Alternative dispute resolution may consist of either mediation or arbitration.
The owner may request the association for a payment plan. The association must explain its standards for payment plans. The board must meet with the owner to discuss the payment plan.
There are limitations on how much the association dues may be increased. The association may not increase the regular annual assessment by more than 20% per year or impose a special assessment which exceeds 5% of the budgeted gross expense of the association without approval of a majority vote of the owners. If the board increases the association dues beyond these amounts without the approval of the vote of a majority of the owners, the increases are invalid.
Under very limited circumstances, emergency assessments may be permitted. These must be required by court order or under circumstances where there is a threat to personal safety or under circumstances where the expense could not have been reasonably foreseen by the board.
If the assessment is delinquent, the association may recover reasonable collection costs, including reasonable attorney’s fees, late fees not exceeding 10% or $10.00 whichever is greater and interest thereon not to exceed 12%. It bears emphasis that the attorney’s fees must be “reasonable.”
An excessive assessment or fee is prohibited.
This is a complicated and technical area of the law. If the legal requirements are not followed by the association, an owner may be able to avoid paying the assessments or fines. However, the owner must balance the cost of competent representation with the amount in dispute. In some cases, it may be more economical for the owner to pay the assessment or fine than to fight it.