CBA Publications >> CBA Regulatory Compliance Bulletin >> Vol 2004 No.17
September 20, 2004

Vol 2004 No. 17 September 20, 2004

New Delinquency Notices Law Protects Creditors

A new law, SB 1514, sponsored by the CBA, was passed to protect creditor rights when California water, sewer, and sanitation districts take title to property to recover delinquent assessments. There are some 1250 of these districts in California, many of which have authority to take property as a final enforcement measure.

According to the legislative comments to the bill, water districts are regulated by a dozen principal acts in the Water Code and over 100 uncodified special acts. Existing notice requirements to property owners and other interested parties vary greatly. Water storage districts and California water districts must provide notice to all real parties of interest by certified mail 45 to 60 days before a collector's deed is delivered. Reclamation districts must notify property owners 60 days in advance, but are required to notify only those other interested parties who have previously requested notice in writing. Irrigation districts are required to notify the last assessee 30 days in advance and to notify other interested parties 45 to 120 days before the property is auctioned. However, if an irrigation district decides to keep the property it is not required to notify the other interested parties at all.

As a consequence of these inconsistent laws, creditors face elimination of their security interests without being given an opportunity to cure which, among other things, help preserves owners' interests. Also, water districts could find themselves being challenged for violating interest holders' due process rights.

SB 1514 adds Article 8.5 to the Government Code (commencing with section 53880) providing that, notwithstanding any other laws, a water district must make "a reasonable effort" to determine the names and addresses of each holder of an interest in delinquent property before terminating a holder's interest. A district must provide each identified interest holder with at least 45 days' notice by certified mail at the holder's last known address of the intended action.

A district is deemed to have made a reasonable effort to ascertain the names and addresses of each interested party if it obtains a title guarantee, lot book guarantee, or similar guarantee from a title company, or searches the official records of the county in which the delinquent property is located. It has the authority to add the search costs, including the costs of the guarantees, to the amount necessary to cure the delinquency or redeem the property, or both.

If a district complies with these statutory standards, then it would not be deemed to have denied due process to any party to whom notice is required to be given in connection with terminating the party's interest. SB 1514 is intended to create a single standard for all water districts. Thus, it applies irrespective of other statutes applicable to water districts' notice duties to non-owner interest-holders of delinquent property, and a district that complies with SB 1514 will be deemed to have complied with such other statutes. The bill states explicitly that it does not affect existing notice requirements to owners of delinquent property.

The new law becomes effective on January 1, 2005. If you have any questions, you may contact Kevin Gould, CBA's lead lobbyist on the bill at kgould@calbankers.com.