For the average citizen reading the popular press, the California Legislature is engaged in a continuous series of high-profile debates about controversial subjects like minimum wage, greenhouse gases, prison reform, and the like. Not of interest to the masses, and therefore not covered, are literally hundreds of bills to resolve narrow issues for targeted industries and occupations. These niche issues are resolved quietly, and normally passed with overwhelming or even unanimous votes. They do, however, require significant commitments of time and resources to craft properly and shepherd through the legislative process.

Such is the case with the 2006 UTA-sponsored measure in California, AB 2624. To shamelessly borrow from Abraham Lincoln, “the world will little note nor long remember” the bill, but once again, specific areas of concern for trustees are addressed. It is good news, therefore, that the Legislature approved the bill in the closing days of the 2005-2006 session. After overwhelmingly positive votes in both the Assembly and Senate, Governor Schwarzenegger signed the bill into law.

As reported previously, the major goal of AB 2624 was to resolve ambiguities in the laws relating to foreclosures of HOA assessment liens. Other issues were included as well, however, including language to address the “ancient mortgage” statute of limitations issue raised in recent court cases. The final bill contains both the HOA and other miscellaneous issues; as will be seen below, the HOA issues are only partially resolved.

Prior issues of UTA News have discussed the HOA problems raised by the passage of SB 137 last year. While last year’s bill contained a lengthy series of ambiguities, the biggest issues revolved around the 90-day redemption right granted to foreclosed unit owners. Grafting a judicial redemption concept on to nonjudicial foreclosures of assessment liens was awkward at best. If the sheriff is the “levying officer” for purposes of judicial foreclosures, who exactly is the levying officer for these assessment lien foreclosures? And if the sheriff (who has absolutely no involvement in the foreclosure) is not the levying officer, exactly how does the unit owner exercise the redemption right?

AB 2624 originally proposed that trustees would act as levying officers, with fees tied to sheriff’s fees for performing similar duties in judicial foreclosures. Remarkably, groups representing senior citizens opposed this concept, arguing that trustees are too close to homeowners associations to fairly and impartially handle the redemption process. When asked who they would prefer to act as levying officers, the opposition would occasionally suggest lawyers, without providing any greater specificity as to how this would work.

For it’s part, the legislature was reasonably comfortable with trustees handling the redemption function. But for UTA, ultimately the problem with this plan was that trustees would be required to perform more duties, with attendant liability, without any clear standards relating to allowable fees. It is surprisingly difficult to ascertain what sheriffs in particular counties charge for duties which would be performed by trustees. In some counties there are fees established for the entirety of the judicial foreclosure process, without breaking out the redemption function. In the final analysis, it was not possible to point to readily ascertainable fees in most jurisdictions, which would leave the trustee vulnerable to attack for excessive fees.

As passed and sent to the Governor for signature, AB 2624 cures some of the more glaring deficiencies in SB 137, but does not clarify who the levying officer is for purposes of handling the redemption process. Instead, the bill would require the notice of sale in an assessment lien foreclosure to specify that the property will be sold subject to the redemption right; require the trustee conducting the sale to provide a notice to the unit owner that the redemption right exists; require recordation of a certificate of sale, so that there will be evidence that the 90-day period is running; require the trustee to receive notice if redemption occurs; and require the trustee to deliver the trustee’s deed after the 90-day period if the unit owner does not redeem.

Also relevant to HOA foreclosures, the bill clarifies that fees for service of process are recoverable; expands upon the personal service requirement to instead reference the manner of serving summons’ under the Code of Civil Procedure; clarifies who the owner’s “legal representative” is for purposes of Section 1367.1 (j); and provides that notices and actions taken to comply with the HOA assessment lien process are privileged just as other nonjudicial foreclosure activities are privileged.

With respect to non-HOA foreclosure issues, AB 2624 contains two clarifications. The first is an amendment to Section 2924a, specifying that sales may be conducted by agents of the trustee. Perhaps more significantly, the bill amends Civil Code Section 882.020, relating to statutes of limitation under the so-called “ancient mortgages act”. The section has been the subject of recent appellate litigation, discussing whether a 10-year or 60-year statute applies to foreclosure actions. The technical amendment in this area illustrates precisely how UTA works to resolve issues in legislation, even if the subject is so technical that it never receives notice in the mainstream press.

AB 2624 was signed into law by Governor Schwarzenegger on September 28th to take effect January 1, 2007. Also plan to attend the UTA Conference in Las Vegas in November for a thorough update.

For previous articles by Michael Belote, click here.