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Feldsott Lee Pagano & Canfield
Orange County Homeowners Association Law Firm

What if I Receive an Assessment Collection Notice that is Unclear?

Collecting monthly maintenance assessments is a task with which all homeowners' associations are intimately familiar. The process of collecting delinquent assessments is dictated by both state and federal laws, and associations should take care that they are being clear in their collection correspondence with homeowner-debtors, as outlined in the Ninth Circuit Court of Appeal's recently published opinion in Mashiri v. Epsten Grinnell & Howell, 845 F.3d 984 (9th Cir. 2017).

In Mashiri, the plaintiff homeowner Zakia Mashiri was a member of the Westwood Club homeowners' association (the "Association"). Mashiri failed to pay one monthly assessment of $385.00 in July 2012. Nearly a year later, Epsten Grinnell & Howell ("Epsten"), counsel for the Association, sent Mashiri a collection letter dated May 1, 2013 seeking payment of the overdue assessment and fees and costs incurred by the Association in an effort to collect the debt (the "May Notice").

The collection letter stated, in pertinent part:

"This letter is to advise you that $598.00 is currently owing on your Association assessment account. Failure to pay your assessment account in full within thirty-five (35) days from the date of this letter will result in a lien being recorded against your property upon authorization of the Board of Directors. All collection costs incurred will be charged to your account. Unless you notify this office within 30 days of receiving this notice that you dispute the validity of the debt or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within thirty (30) days of receiving this notice that the debt, or any portion thereof, is disputed, we will obtain verification for the debt or a copy of the judgment against you (if applicable) and a copy of [] such verification or judgment will be mailed to you." [Emphasis added.]

Epsten included copies of Mashiri's account statement and the Association's assessment collection policy with the May Notice.

Mashiri sent a letter to Epsten disputing the debt and requesting that Epsten validate it. This letter was sent on or about May 20, 2013. Epsten responded to Mashiri's letter on June 5, 2013 with another copy of Mashiri's account statement. Epsten, on behalf of the Association, recorded a lien against Mashiri's property in the amount of $928.00 on June 18, 2013. Mashiri then sent the Association a check for $385.00, and a letter again disputing the balance of the debt. Epsten notified Mashiri of the lien on June 24, 2013 in accordance with Davis-Stirling, Cal. Civ. Code ยง 5675(e).

Mashiri thereafter filed her Complaint alleging Epsten violated the Fair Debt Collection Practices Act (FDCPA) based on: (1) the May Notice requested payment by a date that was inconsistent with her right to dispute the debt within 30 days from receipt of the May Notice; and (2) Epsten's threat to record a lien within 35 days of the date of the letter overshadowed her right to dispute the debt.

The Ninth Circuit Court ultimately found that the May Notice, which demanded payment within 35 days of the date of the letter, was inconsistent with Mashiri's right to dispute the debt within 30 days of receipt of the letter. The court reasoned that by the time the debtor received such a letter, there may be fewer than thirty 30 days before payment is due. Further, the court stated that the least sophisticated debtor would reasonably forgo their right to dispute the debt and seek verification within the 30 day limit, because they would not understand that after notifying the creditor-association of a dispute, debt collection activities would end and verification would be mailed to the debtor.

Here, the May Notice stated that a lien would be recorded if Mashiri did not pay the amounts demanded. The court noted that the "least sophisticated debtor would likely (and incorrectly) believe that even if she disputed the debt and Epsten had not yet mailed verification of the debt to her, Epsten would record a lien on the thirty-fifth day after the date of the letter."

Indeed, both the Davis-Stirling Common Interest Development Act (Davis-Stirling) and the FDCPA require associations to suspend debt collection activities pending debt verification. As such, an association's right to record a lien 30 days after providing notice under section 5660 of Davis-Stirling is not absolute, and will depend on whether the homeowner disputes the debt. If the homeowner does dispute the debt and requests informal dispute resolution, the association must participate in the same before recording a lien.

The court also found that even the threat of recording a lien is a debt collection activity, which must cease if the debtor-homeowner disputes the debt and the debt collector has not mailed verification of the debt under the FDCPA.

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