DELINQUENT ASSESSMENT COLLECTION AGREEMENT TERMS AND CONDITIONS (Revised May 2016)

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1 The following are the Terms and Conditions of the Agreement to Collect Delinquent Assessments ( Agreement ). By agreeing to these Terms and Conditions, the HOA hereby appoints and authorizes ALS Lien Services, a California corporation d/b/a Association Lien Services ( ALS ) to act as its agent for the purpose of collecting delinquent assessments from a homeowner ( Owner ) on behalf of HOA. HOA hereby understands and acknowledges that this Agreement gives authority to ALS to attempt collection of delinquent assessments from Owner only, and no other homeowner, subject to the levy of assessments by HOA. HOA further understands that ALS non-judicial collection procedures may include but are not limited to sending attorney letters, letters offering to participate in dispute resolution, payment plans and other matters relating to collection, and if directed, preparing, executing and recording, on HOA s behalf, a lien ( Lien ), and/or a Notice of Default ( NOD ), Notice of Sale and/or a Notice of Trustee s Sale and any other documents permitted or required under Sections 4000 et seq. and 2924 et seq. of the California Civil Code. The assessment collection process is complicated. There are many statutory requirements. These Terms and Conditions outline many but not all of those requirements. It is important that you read and understand these Terms and Conditions. IT IS IMPORTANT TO PROVIDE ALS WITH ACCURATE AND UP-TO-DATE ACCOUNTING INFORMATION REGARDING THE DELINQUENT OWNER S ACCOUNT. ALS WILL NOT BE RESPONSIBLE FOR ACCOUNTING ERRORS AND POSSIBLE INVALIDATION OF REQUIRED NOTICES BY REASON OF ANY MISTAKES IN THE HOA S ACCOUNTING. HOA REPRESENTS AND WARRANTS THAT THE ASSESSMENTS HAVE BEEN LEVIED IN ACCORDANCE WITH HOA S GOVERNING DOCUMENTS, COLLECTION POLICY AND STATE STATUTES. THE HOA FURTHER REPRESENTS AND WARRANTS THAT IT HAS APPLIED ALL PAYMENTS FIRST TO THE ASSESSMENTS OWED AND ONLY THEREAFTER TO THE FEES AND COSTS OF COLLECTION, ATTORNEYS FEES, LATE CHARGES OR INTEREST. NOTWITHSTANDING THE FOREGOING, TO ENSURE THAT THE DELINQUENT OWNER ONLY PAYS WHAT IS DUE AND OWING TO THE HOA, ONCE THE MATTER IS REFERRED TO ALS, NEITHER HOA NOR HOA S MANAGING AGENT AND/OR MANAGEMENT COMPANY WILL ACCEPT OR DEPOSIT ANY PAYMENT RECEIVED FROM OWNER, PRIOR TO PROVIDING NOTICE, IN WRITING, TO ALS UPON THE RECEIPT OF SAME AND THE AMOUNT OF THE PAYMENT. ANY PAYMENT RECEIVED BY ALS OTHER THAN PURSUANT TO A PAYMENT PLAN WHICH WAIVES CIVIL CODE SECTION 5655 WILL FIRST BE APPLIED TO DELINQUENT ASSESSMENTS. IF PAYMENTS ARE SUFFICIENT TO PAY THE ASSESSMENTS IN FULL OR BELOW THE LEGAL THRESHOLDS ($ OR AT LEAST 12 MONTHS DELINQUENT), THEN THE COLLECTION ACCOUNT WILL BE CLOSED AND THE HOA WILL BE INVOICED FOR ANY AND ALL COLLECTION FEES AND COSTS INCURRED TO THAT POINT IN THE COLLECTION PROCESS. Further, the California Court of Appeal has held that partial payments made by homeowners, during the collection process or otherwise, must be accepted by the HOA and applied to delinquent assessments first. If ALS acceptance of such payment pays off the owner s delinquent assessments only, then, even though the delinquent homeowner remains liable to the HOA for interest, late fees and costs of collection, ALS will have no choice but to close the collection matter and bill the HOA for ALS fees and costs. Board Resolution to Lien. HOA understands that for ALS to record a Lien, a majority of the HOA s Board of Directors must vote and approve the recording of a Lien against Owner s property to collect Owner s delinquent assessments at a duly held open meeting of the Board of Directors and record the votes of such decision in the minutes of such meeting as required by California Civil Code Section HOA will provide written confirmation that such a vote has occurred and of the results of said vote by providing ALS a copy of a resolution and/or a copy of the minutes of the Board meeting where the vote was taken. No Lien can or will be recorded until authorization of the vote to Lien has been received by ALS from the Board. Page 1 of 5

2 IDR/ADR. Upon HOA s or its managing agent s receipt of a demand from Owner, or such Owner s agent, for HOA to participate in Internal Dispute Resolution ( IDR ), as required by California Civil Code Section 5900 et seq., or Alternative Dispute Resolution ( ADR ), as set forth in California Civil Code Section 5925 et seq., HOA agrees that HOA or HOA s managing agent will notify ALS in writing promptly and in no event, later than two (2) business days after the request for IDR or ADR is received. If no demand for IDR or ADR is made, HOA and/or its managing agent shall confirm in writing that no demand has been made prior to the recordation of a Lien, or that any ADR or IDR request has been complied with. Settlement/Release. If HOA engages in IDR, as set forth in California Civil Code Section 5900 et seq., or ADR, as set forth in California Civil Code Section 5925 et seq., HOA agrees that if a settlement is reached, ALS shall be paid any and all of ALS fees incurred by HOA no later than ten (10) days after the date of the settlement. HOA agrees further that if Owner executes a release in favor of HOA, HOA will require that ALS is included as a released party. Failure to include ALS as HOA s agent in the release will trigger, without limitation, ALS s full right of indemnification and defense by HOA, which includes all rights to ALS s attorneys fees and costs as set forth herein below. Secondary Address. If Owner gives notice to HOA or its managing agent of a secondary address for purposes of receiving notices (as described in California Civil Code Section 4040(b)), HOA or its managing agent shall promptly, and in no event, later than two (2) business days after the notice is received, provide ALS with such secondary address. Owner Legal Counsel. If Owner informs or has informed HOA and/or its managing agent that Owner is represented by legal counsel, HOA shall promptly, and in no event later than two (2) business days after the notice is received, notify ALS of same and shall provide the name and address of such legal counsel. Initiation of Foreclosure: $1800 or 12 Months Delinquent. It is expressly understood and agreed that ALS will not initiate a foreclosure sale until Owner s delinquent assessments, as verified by HOA or its authorized representative: (a) are in an amount of One Thousand Eight Hundred Dollars ($1800) or more, (not including any accelerated assessments, late charges, fees and costs of collection, attorney s fees, or interest); or (b) have been delinquent for more than twelve (12) months as set forth in California Civil Code Section It is expressly understood that the required acceptance of partial payments can affect the dates upon which a foreclosure sale will occur. Initiation of Foreclosure: Board Resolution to Initiate Foreclosure Fees and Costs. It is expressly understood and agreed that a decision to initiate foreclosure of a Lien shall be made by a majority vote of HOA s Board of Directors in an executive session meeting, in compliance with California Civil Code Section 5705(c), and that the Board of Directors must record the votes in the minutes of the next open meeting of the Board of Directors. HOA hereby agrees that any decision made by the Board of Directors to initiate foreclosure of a Lien shall be made in compliance with California Civil Code 5700 et seq. Thereafter, HOA or its managing agent shall notify ALS in writing of its decision to initiate a foreclosure of the Lien and provide a copy of the Board s Resolution to Initiate Foreclosure and/or a copy of the minutes wherein the resolution/vote was recorded. Failure of the Board to initiate foreclosure will result in ALS closing its collection file and the HOA will be invoiced for any and all collection fees and costs incurred to that point in the collection process. Service of Board s Resolution to Initiate Foreclosure. ALS will arrange for notice of the Board s Resolution to Initiate Foreclosure to be delivered to Owner in the manner required by California Civil Code Section 5705(d). HOA understands and agrees that ALS cannot record or serve notice of the foreclosure sale until the Board has made its decision to initiate foreclosure. In the event HOA elects to make arrangements for delivery or have its managing agent deliver the notice to initiate foreclosure to Owner, HOA or its managing agent shall deliver notice by personal service to the Owner, or the Owner s legal representative (meaning hand-delivery to the Owner directly at the Owner s Page 2 of 5

3 address at the property) in accordance with the manner of service of a summons, or service upon the Owner s legal representative, if such Owner lives at the property. If such Owner does not live at the property subject to a Lien for which the delinquent assessments described herein apply, notice shall be provided to Owner by first-class mail at Owner s most current address. HOA or its managing agent shall provide Proof of Service on a resident Owner or proof of service in the form of a statement signed under penalty of perjury on an offsite Owner of the results of the Board s vote to initiate foreclosure. HOA understands and agrees that until ALS receives proper proof of service on Owner, no sale will occur. ALS will provide, upon request, a form Proof of Service. Payment Plans: ALS encourages the HOA to consider reasonable payment plans proposed by the delinquent homeowner. ALS does not recommend that an association reduce the amount that is owed, waive any fees or costs or accept a payment plan that is longer than six months in duration. Payment plan arrangements can be renewed for reasonable periods of time. Required acceptance of payments during the collection process may leave the HOA unreimbursed for its costs of collection, if payments are sufficient to pay the delinquent assessments in full or bring the owner s delinquent assessments below the legal thresholds ($ or at least 12 months delinquent). Unless otherwise instructed by the HOA in the Agreement, ALS confirms the HOA s instructions that, as part of any payment plan arrangement, the HOA requires that the homeowner waive the provision of Civil Code Section 5655 which requires that monies received from a homeowner in payment of their assessments be first allocated to delinquent assessments (principal) and then to any costs or collection fees, etc. Homeowners may want to pay the assessments but then refuse to pay the fees and costs that are left, leaving the HOA with limited remedies for collection (and its continuing obligation to pay ALS its fees and costs that have been incurred). At HOA s direction, HOA authorizes ALS to submit six (6) month payment plans to all delinquent owners who do not dispute the then debt to the HOA. ALS will provide the Homeowner with a payment plan agreement that covers these points, and by agreeing to these terms and conditions, the HOA instructs ALS to require that the owner agree to the terms of the standard payment plan agreement terms and conditions. HOA acknowledges that the Court of Appeal has recently held that an owner may make partial payments, which must be accepted by the HOA even though such payment(s) are not pursuant to the terms of a payment plan agreement. Fees and Costs: See Attached Fee Schedule. HOA has reviewed ALS current collection Fee Schedule. HOA understands that ALS Fee Schedule is subject to change. HOA understands that the Fee Schedule may not list all fees and costs that ALS can or will charge as part of the collection process. All fees and costs incurred by the HOA will be charged to the delinquent Owner in order for HOA to be reimbursed for its cost of collections. HOA authorizes ALS to collect all fees and costs as part of the assessment collection process and to pay itself those fees and/or costs then due and owing for services rendered from the proceeds of collection received, subject to applicable law, from the homeowner or from a third party through foreclosure. In addition, as part of this Agreement, HOA confirms that ALS is instructed to and authorized to collect the managing agents fees and costs of collection, as agreed to between HOA and managing agent, if applicable. It is expressly understood and agreed that HOA is responsible for all fees and costs charged by or incurred by, or on behalf of, ALS or its designated trustee. In the event ALS is unable to proceed with the Lien and/or foreclosure process or if, upon sale, the property reverts to HOA, for any reason, including, without limitation, HOA s failure to follow these Terms and Conditions, HOA placing a file on hold for more than thirty (30) days; HOA s acceptance of payment directly from delinquent owner, HOA s failure to advise ALS of the acceleration of special assessments or any requirement set forth in HOA s delinquency policy, or for any reason other than the foreclosure of a senior lien or bankruptcy, including, without limitation, if a collection file must be closed or re-started for reasons not attributable to ALS, other than ALS s requirement, as applicable, to accept Page 3 of 5

4 partial payments from the owner, ALS will seek payment directly from the HOA. In the event the collection process must be terminated due to the foreclosure of a senior lien or bankruptcy, where the owner s debt to the HOA is discharged, ALS will discount its fees and HOA will pay to ALS a cancellation fee of $350, plus costs, incurred by ALS. Notwithstanding the foregoing, should the HOA fail to attempt to obtain relief from the automatic bankruptcy stay, ALS shall have no choice but to close the homeowner s collection file and bill the HOA for all collection fees and costs. Payment Processing. All payments received by ALS for the payment of delinquent assessments and related fees and costs will be deposited by ALS into a trust account to be maintained for the benefit of its clients. If the funds received are in the form of a cashier s check and less than $2,500, said funds will be paid to client within five (5) business days of clearance of funds by ALS bank. Payments of $2,500 or more or any payment made by personal check or bank bill payment will be held for fourteen (14) calendar days to allow time for funds to clear the bank, except when such payment constitutes owner s final assessment only payments on its delinquency to the HOA. In such case, ALS shall hold such sums, and release same to the HOA, when ALS outstanding fees and costs are paid by the HOA. Please be advised the HOA is required to credit the full amount of the Owner s payment to the delinquent assessment on the Owner s Account, upon being advised that the funds were received by ALS. If a partial payment is accepted pursuant to a Payment Plan, or other payment arrangement to which the delinquent owner has waived the provisions of Civil Code 5655 regarding the application of payments, the HOA agrees that such funds will be allocated fifty percent (50%) to the delinquent assessments and fifty percent (50%) to the collection fees and costs until fees and costs are paid in full. Thereafter, HOA will receive 100% of funds collected. ALS is authorized to pay ALS fees and costs directly from the collected funds at the same time the HOA s share of the funds is disbursed to HOA. Consultation. In the event a legal issue arises which impacts ALS ability to proceed with collection of a delinquent Owner s account for any reason, including the HOA s acceptance of money directly from the Owner, ALS is authorized to consult with legal counsel from the law firm of SwedelsonGottlieb ( Law Firm ) at Law Firm s regular hourly rates. If Law Firm deems necessary, it will contact HOA in writing regarding HOA options or the reasons why ALS cannot proceed with the collection process. These services will be charged to HOA by Law Firm at Law Firm s customary billing rate. Please be advised that ALS is affiliated with SwedelsonGottlieb. Cooperation. IN AN EFFORT TO MEET TIMELINES PRESCRIBED BY CALIFORNIA CIVIL CODE, ALS WILL MAKE FOUR (4) ATTEMPTS TO CONTACT HOA FOR INSTRUCTIONS FOR A RESPONSE TO ANY ALS REQUEST FOR INFORMATION. FOR EXAMPLE, ALS WILL SEND TWO (2) S, ONE (1) FAX, AND MAKE ONE (1) TELEPHONE CALL OVER A THIRTY (30) DAY PERIOD. THEREAFTER, HOA WILL BE INVOICED FOR ALS FEES AND COSTS ON FILES ALS HAS HELD IN ABEYANCE AS A RESULT OF HOA S FAILURE TO RESPOND, AND THE FILE WILL BE CLOSED. ANY FILE CLOSED IN OUR OFFICE FOR LESS THAN 18 MONTHS MAY BE REACTIVATED FOR A FEE OF $ ANY FILE CLOSED IN OUR OFFICE FOR MORE THAN 18 MONTHS WILL REQUIRE THE COLLECTION PROCESS TO BE RESTARTED. No Representations or Warranties. ALS makes no representations or warranties regarding the successful results of the collection process. HOA and its managing agent have read these Terms and Conditions and understand their contents. HOA understands and agrees that ALS contracts with and relies on outside agents and/or vendors for information or services during the collection process. HOA expressly agrees that ALS shall not be liable for the errors or omissions of its vendors. Association Lien Services is not a law firm. It is a fictitious business name for ALS Lien Services, a California corporation. ALS is affiliated with the law firm of SwedelsonGottlieb, which from time to time may consult with and/or render legal services for which the HOA may be separately billed/charged as more fully set forth in the consultation sections above. Page 4 of 5

5 Indemnification, Defense and Hold Harmless Agreement. If, at any time, ALS is named as a party in a lawsuit or other proceeding involving the collection matter that is the subject of the Agreement, HOA expressly and unequivocally agrees that all attorneys fees and costs incurred by ALS, its officers, directors, attorneys and employees, in defense of such a lawsuit or proceeding, shall be borne by HOA. HOA agrees to indemnify ALS and hold ALS, its agents, officers, attorneys, directors and employees harmless from any claims, obligations, causes of action, losses, damages, costs, expenses, judgment or liability of any nature, whatsoever. HOA expressly agrees to indemnify and accept the responsibility for all of the expenses and costs incurred by ALS in defending itself in any such lawsuit, together with any loss, liability, or judgment suffered as a result of same. If HOA tenders the defense of any lawsuit to its insurance carrier and said carrier denies coverage to ALS, HOA shall still be obligated to indemnify, defend, and hold harmless ALS, its officers, directors and employees. Mediation/Arbitration. For matters other than the HOA s non-payment of ALS invoices, HOA expressly agrees that any other dispute arising out of this Agreement or the services provided by ALS shall first be submitted to mediation as a condition precedent to proceeding with arbitration. If the dispute cannot be resolved by mediation, any dispute arising out of this Agreement (other than for HOA non-payment of ALS invoices) shall be resolved by binding arbitration pursuant to the terms of Judicial Arbitration Mediation Services (JAMS), or ADR Services, Inc. The party initiating the mediation/arbitration will be entitled to select the mediation/arbitration service. Unless a mediator or arbitrator is mutually agreed upon, the mediation/arbitration service will utilize its selection process to appoint the mediator and, thereafter, the arbitrator. The parties will share equally the costs of mediation and/or arbitration. The prevailing party shall be entitled to recover its costs and attorneys fees, including the mediator s and/or arbitrator s fees and costs, from the losing party. The arbitration award may be entered as a judgment in any court of competent jurisdiction. This mediation and arbitration provision applies only to disputes between HOA and ALS (other than non-payment of ALS invoices) and expressly does not provide a right of mediation or arbitration to any third party, including, without limitation, a homeowner subject to the delinquent collection process.. HOA Failure to Pay Invoices. For matters regarding non-payment by HOA of ALS invoices upon presentation, no mediation or arbitration is required, and ALS may bring an action in a court of law. The prevailing party in any lawsuit brought as a result thereof shall be entitled to their attorneys fees and costs. Further, ALS is entitled to charge interest on unpaid balances owed to ALS after 90 days in the amount of 12% per annum simple interest calculated monthly. Entire Agreement. These Terms and Conditions and the Delinquent Assessment Collection Agreement constitute the entire understanding between ALS and HOA, and cannot be modified, changed or any provision hereof waived, except by a writing signed by both parties. By agreeing to these Terms and Conditions, HOA represents that the information provided in the Agreement and provided to ALS is true and correct and further authorizes ALS to commence collection, including non-judicial foreclosure proceedings, under the Terms and Conditions set forth hereinabove. The individual making this Agreement on behalf of HOA is either a member of the Board of Directors or its authorized agent and certifies that the Board of Directors authorized that he/she enter into this Agreement on behalf of HOA. Page 5 of 5

6 ASSOCIATION LIEN SERVICES SCHEDULE OF FEES AND COSTS (Revised October 2014) Association Lien Services charges for most services on a set fee and cost basis that include, but are not limited to, the following services: Open Account Includes opening file and obtaining and reviewing legal vesting title holder verification report. Step 1- Initial Attorney Demand Letter Includes review and confirmation of homeowner accounting, computation of interest and late fees, preparation of Accounting Statement, review of the association s governing documents to confirm association collection policies and lien procedures, preparation of attorney demand letter, and telephone calls and other communications ( , faxes) with management and the homeowner. Letter with Lien Already Recorded Includes review of a previously prepared pre-lien letter and previously recorded lien for compliance with California Civil Code, recalculation of homeowner accounting statement, computation of interest and late fees, review of the Association s governing documents to confirm compliance with the collection policies and lien procedures, preparation of attorney demand letter to homeowner prior to recordation of Notice of Default, and telephone calls and other communications ( , faxes) with management and the homeowner. Bankruptcy Investigation & Research Research bankruptcy court records to determine whether bankruptcy has been filed and, if applicable, the status of the homeowner s bankruptcy. Step 2 - Preparation of Lien Includes lien preparation and release of lien when applicable after payment, correspondence and communications with the homeowner and/or management regarding the lien and related matters. Pre-Notice of Default Letter Review file, update accounting and prepare letter to the homeowner advising that the pre-foreclosure NOD process will commence in ten days if payment is not received. Transfer to Trustee Administrative Fee Review file to confirm statutory compliance prior to commencement of the foreclosure process and prepare Association Lien Services file for transfer from the pre-trustee department to the trustee department for Notice of Default and Notice of Sale preparation. $ $ $ $50.00 $ $75.00 $75.00 Direct all correspondence and payments by mail to our main office Branch Offices in Newport Beach (949) Oxnard (805) San Francisco (415)

7 Step 3 - Preparation of the Notice of Default/ Trustee s Fee The Trustee s Fees do not include additional communications with Owner for payment plans and/or other services, including obtaining a Trustee Sale Guarantee. Step 4 Notice of Sale Preparation of the Notice of Sale; $50.00-$ fee for each postponement of sale; $100-$125 post sale investigation of priority and validity of claims and the disbursement of sale proceeds. $ $ Trustee s Certification of Sale $ Post Foreclosure Sale Administrative Fees Telephone conversations and/or communications with auctioneer; review Certificate of Sale, correspondence and communications with association, invoicing, and calendaring and monitoring the 90-day redemption period. Certificate of Redemption or Trustee's Deed Upon Sale (as applicable) Preparation of a Certificate of Redemption if the owner redeems the property within 90 days of sale or preparation of the Trustee's Deed Upon Sale if the owner does not redeem the property. Payment Plan Request and Approval Communications with management and homeowner regarding proposed payment plan; preparation of payment plan agreement showing monthly payment breakdown incorporating all outstanding balances and homeowner s assessments, interest and costs that will become due during the payment plan; monitor the payment plan; and distribute monies upon receipt. Partial Payments Acceptance of partial payments required by law and distribution to the Association as applicable per payment tendered. Payment Plan Default Letter Preparation and transmittal of letter to homeowner for default of an approved payment plan. Verification of Account Response to homeowner disputes over amount owed and verification of account with the association/management pursuant to the Fair Debt Collection Practices Act. $ $ $ $50.00 $75.00 $ Direct all correspondence and payments by mail to our main office Branch Offices in Newport Beach (949) Oxnard (805) San Francisco (415)

8 Personal Check Payment Verification of clearance of personal check prior to account distribution. Escrow Demand Fee Preparation of escrow demand. Update $75.00 if updated within two weeks of the first demand (thereafter, $110.00): Preparation of accounting for escrow payoff on sale or refinance. Settlement Fee Preparation of owner s settlement offer and dissemination of owner s settlement offer to the Board of Directors. Application Service Provider Fee Monthly fee for Assessment Recovery Management System (ARMS) web hosting and servicing. File Management Fee ALS will charge for file review and management during all periods when a file may be on hold for senior lien foreclosure, bankruptcy stay, or during the 90 day Notice of Default period of the 90 day post foreclosure redemption period. Status Report Association Lien Services makes available a comprehensive Status Report for each association via ARMS on the Internet, 24/7. Contact our office for access information. $30.00 $ $50.00 $10.00 $25.00 No charge Extraordinary Collection/Attorney s Fees At ALS discretion, additional attorney s fees (and/or paralegal or collection staff fees) will be charged to the homeowner for extraordinary services, including preparing and responding to homeowner s attorney letters/telephone calls, excessive homeowner letters/telephone calls, and related extraordinary services. Costs All costs relating to the above services are additional and include, but are not limited to, ALS and/or outside vendors costs and handling fees for the following: Trustee s Sale Guarantee (title report), county recorder document recording fees, delivery, mailing, postage, publication, posting, auction, process service, miscellaneous title company charges, etc. Costs include actual charges plus associated costs for handling, supplies, courier, messengers, etc. This Schedule of Fees and Costs is being provided as part of ALS marketing materials and may not reflect the actual costs or fees being charged. For up to date and/or additional information regarding our current fees or costs, please contact our offices. Direct all correspondence and payments by mail to our main office Branch Offices in Newport Beach (949) Oxnard (805) San Francisco (415)