Recently, a California court determined that a homeowners’ association governed by the Davis-Stirling Act to accept and apply partial payments to reduce delinquent assessments owed but not other amounts due, such as late fees, attorneys’ fees, interest, and costs. This case is important since it is one of the first cases to decide whether or not a homeowner’s association can accept partial payments. A copy of Huntington Continental Town House Association, Inc. v. The JM Trust can be found here.

Homeowners owned real property within the Huntington Continental Town House Association (the “Homeowner’s Association”) in Huntington Beach, California. From 2003 to 2009, Defendants paid the monthly assessments issued by the Homeowner’s Association on time. Defendants failed to pay the monthly assessment on April 1, 2009 and started to stop paying the monthly assessment. On October 23, 2010, the Homeowner’s Association sent Defendants a notifying them that they were delinquent $3,864.96. The Homeowner’s Association received no response, and recorded a lien on the property.

The Homeowner’s Association then passed a resolution authorizing the Homeowner’s Association to foreclose on the delinquent assessment lien. After providing notice to the Homeowners, a Complaint was filed on April 13, 2011 to foreclose on the lien and for additional damages.

In May 2011, after receiving an itemized statement of damages, Defendant sent a check for $2,000 along with a request to stop the foreclosure. Homeowners agreed to a monthly payment to pay all damages and delinquent assessment. Homeowners made two additional payments of $1,500 each.

On October 17, 2011, Homeowners were notified that they failed to make two monthly payments and that the agreement to stop the foreclosure would be cancelled. In November and December 2011, Homeowners paid the regular monthly assessment of $188. The Homeowners’ Association returned the checks because it stated it was unable to receive partial payments for the amount due. In January 2012, Homeowners attempted to pay $3,500 to the Homeowner’s Association, but again the Homeowner’s Association refused saying it was not allowed to receive partial payments.

The trial court granted the foreclosure and damages of $5,715.93 against Homeowners. Homeowners appealed the decision.

On appeal, the Court found that there is nothing to bar a homeowner’s association from receiving partial payments. Civil Code Section 1367.1 provides a list of accounts to be paid first if a homeowner’s association receives a partial payment thus contemplating partial payments.

The Court broadened the language of Section 1367.1 to include the time after litigation has commenced. As a result, if a homeowner attempts to tender a partial payment to pay a delinquent assessment, a HOA must accept it.

This case provides guidance for homeowners that are delinquent on homeowners’ association dues and for HOAs looking to to foreclose on delinquent assessment liens.

On a personal note, I lived in the Huntington Continental Town Houses during law school. Great place to live.

If you have a dispute involving a HOA, please contact Attorney Anthony Marinaccio at (818) 839-5220 for a free initial consultation.