California Court of Appeal Rules On Whether a Homeowners Association is Required to Accept Partial Payments

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On October 14, 2014, the Court of Appeal issued a published decision in the case Huntington Continental Townhouse Association, Inc. v. Joseph A. Miner (Court of Appeal Case No. G049624).

The case addressed whether a homeowners association must accept partial payments to reduce delinquent assessments. The Court of Appeal held that under Civil Code section 5655(a), a homeowners association must accept a partial payment made by an owner and must apply that payment first to any assessments owed, and only after assessments are paid in full, then to the fees and costs of collection, attorney’s fees, late charges or interest. The Court further held that the obligation to accept partial payments continues after a lien has been recorded against an owner’s separate interest for collection of delinquent assessments. The practical effect of the Court’s holding is that if the partial payment brings the delinquent assessments to below $1,800, any pending foreclosure proceedings would be halted, and the homeowners association would have to start over with the appropriate foreclosure notices, if and when the delinquent assessments once again reach or exceed $1,800. This case will have an impact upon homeowners associations and their management companies who have historically refused to accept partial payments from homeowners once the account has been turned over to collections and/or a lien has been placed upon the owner’s property. In light of the Court’s ruling, the better practice is to accept a partial payment and to advise the homeowner that the association is not waiving any of its legal rights in collecting any unpaid debt.