California Proposed legislation

This just in from Marjorie Murray:

SB561/Corbett Targets Illegal Debt Collector Contracts

California Senate Majority Leader Ellen Corbett has introduced SB 561, a bill designed to
protect both homeowners and association boards during the assessment collection process.

HOA debt collectors routinely strike contracts with associations – or their agents -- that void the
board’s assessment collection DUTIES under EXISTING law. The debt collector then coerces the homeowner into signing a payment plan that voids his RIGHTS under EXISTING law.

SB561 targets both practices. Voiding either board duties or homeowner rights via these
contracts puts the association at legal risk.

How do these debt collection contracts work?

The debt collector coerces the homeowner into “agreeing” that, when s/he makes a payment,
the debt collector can pay himself instead of paying down the assessments owed, as required
by EXISTING law (Civil Code 1367(a). Because the debt collector is paying himself first, the
association typically gets paid last. This is irrational, given that the purpose of hiring the debt
collector in the first place is to recover assessments and give them to the HOA.

Not applying the homeowner payment to the assessment debt --obviously -- puts the owner at
risk of foreclosure.

CCHAL has documented numerous cases in which the homeowner was forced into a
payment plan, because homeowner “consent” is a condition of getting one. SB 561 clarifies
that these practices are prohibited by EXISTING law.

SB561 further specifies that the association cannot foreclose if the foreclosure is based on such
contracts. The bill says: “A waiver by an owner of his or her rights or a waiver by an association
of the association’s responsibilities under the act is void as contrary to public policy, and would
prohibit a foreclosure proceeding from being initiated or proceeding if it is based on an
agreement that is void.”

SB 561 applies to “Any debt collector, agent, or third party acting to collect payments or
assessments on behalf of an association.” This element of the bill is crucial, since debt
collectors often subcontract with other vendors during the collection process; the bill clarifies
that these parties too are bound by California’s assessment collection laws.

CCHAL urges all homeowners, board directors, and advocates to carefully read Senator
Corbett’s legislation at http://leginfo.ca.gov/pub/11-12/bill/sen/sb_0551-
0600/sb_561_bill_20110217_introduced.pdf

Reading and understanding the bill will enable homeowners and board directors in California’s
49,000 associations to counter any campaigns mounted by opponents of SB561 that distort
either its language or intent.

In 2010, the Community Associations Institute (CAI) built its statewide opposition campaign
against the Brownley bill (AB2502) around the fraudulent statement that the bill REQUIRED
homeowners wanting to negotiate a payment plan with the board to meet with the board in an
open meeting to discuss – or dispute – their debt. (AB2502 also dealt with the business
practices of association debt collectors.)

The bill said no such thing.

What AB2502 said was “IF REQUESTED BY THE HOMEOWNER, (this bill would)
require a meeting to discuss a payment plan to be held in an open session.” In other words, if
the homeowner wanted SUNSHINE shed on the negotiations, then s/he could request an open
session; if not, then the homeowner could meet privately with the board in executive session.

It was the HOMEOWNER who made the decision, but CAI claimed AB2502 forced the
negotiations out in the open.

Not true.

A Fact Sheet on SB561 -- prepared by Senator Corbett’s office -- is posted on the CCHAL
website: http://www.calhomelaw.org/doc.asp?id=1312. Use this as a guide to the bill, especially
if you are a board director, so you know what the bill says – and does.

But again, there is no substitute for reading the legislation itself. You can study it at
http://leginfo.ca.gov/pub/11-12/bill/sen/sb_0551-0600/sb_561_bill_20110217_introduced.pdf

Letters of support for the bill can be faxed to Senate Majority Leader Ellen Corbett, fax
916.327.2433. Please also thank Senator Corbett for carrying SB561 because it protects both
homeowners and associations.

Do fax (510.272.9830) a copy of your letter to CCHAL or email a pdf of it to
info@calhomelaw.org

SB561 is co-sponsored by the Center for California Homeowner Association Law (CCHAL) and
the California Alliance for Retired Americans (CARA).

SB561 specifically calls out the devastating effects of the debt collector’s predatory practices on
seniors. These cases have been documented in many NewsBriefs on the CCHAL website, e.g.
Curry v Association Lien Services; Fuller v Association Lien Services; Dacumos v Sunrise
Assessment; Santaella v Angius & Terry, etc.

A contract that one homeowner was forced into signing is on the CCHAL website:
http://www.calhomelaw.org/doc.asp?id=1156. Actually, the debt collector didn’t even demand
that the homeowner sign it: the plan says that just mailing a payment meant the homeowners
was ”consenting” to the debt collector’s plan to collect his profits first before paying down the
assessments.

A downloadable flyer of homeowner rights under EXISTING Californbia law during assessment
collection is on the website at http://www.calhomelaw.org/doc.asp?id=1315. It also lists legal
resources for homeowners.

We will keep CCHAL members posted on SB561 as it goes through the policy committees in
Sacramento.

CCHAL NewsBrief
February 27, 2011
© 2011