The 2005-2006 two-year session of the California Legislature concluded at midnight, August 31, as required by the State Constitution. Despite predictions in some quarters that the total number of bills passed would be lower than prior years, due to the looming November elections and the focus on infrastructure bonds, the final bill tally was typical of other years. In all, nearly 1200 bills were passed and forwarded to Governor Schwarzenegger; of these, 910 were signed and 269 vetoed.

Once again, UTA was successful in sponsoring legislative changes to the California Codes. As summarized below, AB 2624 (Houston) was enacted, dealing with homeowner’s association assessment lien foreclosures, and a variety of technical changes to other areas of trustee practice.

The following paragraphs briefly highlight selected bills of interest to UTA. As always, members are reminded that these are merely summaries. The actual chaptered version of each bill should be consulted before changes in practice are implemented. The text of each bill is available here.

Each of the bills become effective on January 1, 2007 unless otherwise noted.

ASSESSMENTS
Time-Share Developments

Existing provisions of the Business and Professions Code contain comprehensive regulation of time-share developments, known as the “Vacation Ownership and Time-Share Act of 2004”. This bill makes a variety of changes to current law. Of interest to trustees, Section 11265.1 of the Business and Professions Code is added, to clarify when regular and special assessments in time-share developments are delinquent, the manner of providing notice of changes in assessments, and allowable late charges and interest on delinquencies. The section also clarifies the extent to which regular assessments are exempt from execution by judgment creditors of time-share owners associations. The clarifications on assessments became effective immediately upon the Governor’s signature on September 22, 2006; other provisions in the bill are effective on January 1, 2007.

Reference: Chapter 429, Statutes of 2006 (Assembly Bill 3020, Montanez).

DEBTS
Consumer Debts—Debt Collectors

In addition to the federal Fair Debt Collection Practices Act, California law regulates the collection of debts in provisions of the Civil Code, commencing at Section 1788. These provisions are known as the “Rosenthal Fair Debt Collection Practices Act”. Existing law defines “debtor” as “a natural person from whom a debt collector seeks to collect a consumer debt which is due and owing or alleged to be due and owing”. This bill contains a broader description of “debtor” for purposes of the protections contained in Section 1788.18. This section, in turn, requires debt collectors to cease collection activities if the debtor provides specified information concerning the debtor’s alleged status as a victim of identity theft. The law further articulates the circumstances under which the debt collector may recommence collection activities. For purposes of these protections, the bill defines “debtors” to include natural persons, firms, associations, organizations, partnerships, business trusts, companies, corporations, and limited liability companies.

Reference: Chapter 521, Statutes of 2006 (Assembly Bill 2043, Committee on Banking and Finance).

DISCLOSURES
Methamphetamine Contamination—Mobilehomes

Existing law in the Health and Safety Code, known as “The Methamphetamine Contaminated Property Cleanup Act of 2005”, contains very comprehensive provisions concerning identification and remediation of real property. Among other elements, existing law requires posting and notice to owners of possible contamination, testing, remediation by trained contractors, disclosure to potential buyers, and liens for cleanup activities undertaken by governmental entities. Existing law excludes from these provisions mobilehome parks, manufactured housing parks, and manufactured housing communities, as well as mobilehomes and manufactured homes in these communities. This bill eliminates these exclusions, thereby making mobilehomes and manufactured homes subject to the entire statutory program. Due to the special nature of these residences, the bill also permits removal and destruction of the homes in certain circumstances.

Reference: Chapter 789, Statutes of 2006 (Assembly Bill 2587, Liu).

FORECLOSURES
Ancient Mortgages--Assessment Liens—Redemption Rights

This UTA-sponsored bill makes two changes to general trustee practice, and other changes specifically designed to address issues raised by the passage of SB 137 last year, relating to homeowner association assessment lien foreclosures.

Relating to general trustee practice, the first change is to Section 882.020 of the Civil Code. This section creates a statute of limitations, after which the lien created by mortgages and deeds of trust expire and are no longer enforceable. Recent court cases differed on the result when recorded documents indicate a final maturity date. Where current law conditions the applicable statute of limitation on whether the final maturity date is ascertainable or not ascertainable “from the record”, this bill changes the language to “from the recorded evidence of indebtedness”.

Second, the bill amends Civil Code Section 2924a to clarify that the trustee, “or any duly authorized agent” may conduct sales and act as auctioneer for the trustee.

With respect to assessment lien foreclosures, the first change is to Section 2924 of the Civil Code. This change adds duties required of trustees in nonjudicial foreclosures of assessment liens to the list of “privileged communications” under subdivision (d).

Second, Section 1367.1 of the Civil Code is amended to clarify that the cost of service of process of an assessment lien notice of default, and the decision of the HOA board to foreclose, may be charged in addition to allowable trustee’s fees. In this same section, subdivision (j) is amended to clarify that service of the notice of default on the “owner’s legal representative” means the person identified as the owner in association documents, unless the owner has advised the association in writing that another legal representative has been designated.

Next, Civil Code Section 1367.4 (c) is amended to clarify that service of the board’s decision to foreclose may be made in the manner of a summons under Article 3, commencing with Section 415.10 of the Code of Civil Procedure. This same section is also amended to require the notice of sale in assessment lien foreclosures to include a statement that the property is being sold subject to a right of redemption.

Finally, a series of changes are made to sections within the Code of Civil Procedure relating to the redemption right created in last year’s SB 137. For example, Section 729.040 is amended to require the person conducting a nonjudicial foreclosure sale of an assessment lien to record a certificate of sale containing specified information, similar to the certificate of sale recorded after a judicial foreclosure. Next, Section 729.050 is amended to require the trustee conducting the sale to serve a notice of the right of redemption on the judgment debtor. Third, Section 729.070 is amended to include reference to the trustee, in addition to the “levying officer”, in procedures to be followed when a dispute exists as to the redemption right. Finally, Section 729.080 is amended to require the trustee to record a trustee’s deed at the conclusion of the redemption period, if the redemption amount is not tendered during the applicable period.

Reference: Chapter 575, Statutes of 2006 (Assembly Bill 2624, Houston).

LIENS
Private Child Support Collectors

This bill enacts new Chapter 9, commencing with Section 5610, to the Family Code, to create comprehensive regulation of the activities of private child support collectors. Of special interest to trustees is new Section 5616 of the Family Code, which provides that every court order for child support issued on or after January 1, 2010, and every agreement for support approved by a court after that date, must include a separate money judgment in favor of the private child support collector, with maximum percentages provided in the statute. The bill indicates that the judgment is in favor of the collector and the obligee jointly, but does not create a lien on real property unless an abstract of judgment is recorded. The section provides that a private child support collector lien has the force, effect and priority of a judgment lien.

Reference: Chapter 797, Statutes of 2006 (Assembly Bill 2781, Leno).

LOANS
Reverse Mortgages—Annuities

Existing law defines and regulates reverse mortgages, and requires that applicants be provided with a specified disclosure notice. This bill adds new regulation to these transactions. Among other requirements and limitations, the bill prohibits a lender from requiring the purchase of an annuity as a condition of receiving the reverse mortgage, and prohibits any referral to an annuity provider before closing the reverse mortgage transaction. The lender must refer the borrower to specified counseling prior to accepting a final and complete application for a reverse mortgage, and prohibit the payment of any fees prior to the completion of the counseling. The bill also clarifies that for transactions negotiated primarily in Spanish, Chinese, Tagalog, Vietnamese and Korean, the borrower must be provided with a translated copy of the contract prior to execution. In the case of brokered loans, the lender is responsible to assure compliance with this requirement.

Reference: Chapter 202, Statutes of 2006 (Senate Bill 1609, Simitian).

For previous articles by Michael Belote, click here.