Rent Skimming

 Many banks are slow to foreclose on common interest development properties, in part, to avoid paying homeowner association monthly assessments.  As a result, some associations choose to take action and foreclose on those properties in order to supplement its budget with rental income.  However, associations that elect to do so should be mindful of the rent skimming laws established under California Civil Code Section 890.

 Generally, Section 890 prohibits using revenue received from the rental of residential property without first applying the revenue due on any mortgages encumbering the property.  The penalty for violation of Section 890 is fairly serious.  It can result in civil liability for damages, attorney’s fees and costs, as well as criminal liability for multiple acts of rent skimming.  As a result, association board members should consult with legal counsel to consider its options prior to renting out a foreclosed property.

 


Address: 8220 University Ave #100, La Mesa, CA 91942

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