Owner has dispute with homeowners association over payments

Question: I wrote a note and included it with my check payment to the homeowners association, and the association still misapplied it to my account. I am having a dispute with the association and wanted my payment applied to the most current invoice. I was ignored. I’ve continuously demanded a receipt and never get one. Owners who have automatic direct payments from their banks also do not receive receipts. Sometimes I cut it close because my paycheck is not received in time, so I’ve asked for an overnight payment address where I can drop it off, but the HOA and management won’t provide one. What can I do?

Answer: For condominium and other common-interest developments, payments made by an owner of a so-called separate interest, such as an individual condo unit, shall first be applied to the assessments owed, under Civil Code section 5655(a). This applies to debts described in Civil Code section 5650: delinquent assessments, fees, costs and interest charged. Only after the assessments that are owed are paid in full shall the payments then be applied to the fees and costs of collection, attorney’s fees, late charges or interest. It is important to note that under Evidence Code section 11, the term “shall” means “mandatory.”

When an owner makes a payment, the owner may request a receipt and the association shall provide it, according to Civil Code section 5655(b). The receipt shall indicate the date of payment and the person who received it. Under Evidence Code section 11, the term “may” is permissive. In other words, if the owner fails to request a proper receipt, even though it may be good business practice for the association to provide a receipt, it doesn’t have to do so. However, once a receipt is requested, the association must provide it. Owners should get into the habit of requesting a separate written receipt with every payment including automatic bank or electronic payments. Do not rely on canceled checks to function as receipts and do not let the board or management company get away with ignoring your requests for receipts.

According to Civil Code section 5655(c) all owners shall be provided with a mailing address for overnight payment of assessments. The address shall be provided in the annual policy statement. Owners may also receive this overnight mailing address by written request.

Although the failure to provide properly requested receipts or an address for overnight payment is a breach of the board’s duties to the owners, it does not relieve you of your obligation to make timely payments. Watch out for Civil Code section 5650, because that section is now laden with “reasonable attorney fees,” costs incurred in collecting delinquent assessments, late charges, interest and collection costs in general.

Perhaps the most important item that owners should be aware of is in Civil Code section 5650(c), which states that “associations are hereby exempted from interest-rate limitations imposed by Article XV of the California Constitution, subject to limitations of section 560.”

And buyers beware! Documents generally provided to prospective purchasers are governed by Civil Code sections 4525, 4528, 4530 and 4535. In addition, consider writing your own instructions and demands for documents and other association-related information into the actual offer. Do not wait to open escrow before making such demands part of your sale agreement, because later such changes may be deemed an amendment to the offer to buy, possibly resulting in additional fees and delays in closing of the sale. Some real estate agents may try to dissuade you from doing that, but remember, you — not the agent — are the buyer.

All owners should methodically keep up with these requests, especially for copies of their association invoices. If you dispute an item or amount on your invoice, you have remedies available, but they must be exercised in a timely way and all disputes must be documented in writing.

Zachary Levine, partner at Wolk & Levine, a business and intellectual property law firm, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian JD, P.O. Box 10490, Marina del Rey, CA 90295 or noexit@mindspring.com.