CAI Continues to Misrepresent Costly HOA Transfer Fee

CAI Continues to Misrepresent Costly and Unjustified Transfer Fee

Denver Post Article:  Dec 24, "Homeowners grouptargets HOA transfer fees as costly, unjustified"

Transfer fees exemplify an abusive fee (tax) on HOA home buyers that continues "because it can" and not because it adds value or integrity to a real estate transaction. Molly-Polly from the CAI has no pride in defending this fee on HOA home sales. She says others, not current HOA home owners, should pay for tasks associated with the conveyance of property such as administrative tasks and confirming the financial status of a homeowner with the HOA . Think about this. When someone dies, gets married, has someone else move into a home, gets divorced, or requires a routine status letter on a credit check there is no separate fee: this is part of what an HOA does and pays the property management company to do. Are there separate fees for each resident who uses the swimming pool, billiards tables, or clubhouse lounge? NO! She also mentions that DORA will take this issue up when licensing property managers. No it won't! DORA can't change the law and the law states the fee can be charged and in any amount. DORA can make any guideline it wants but it can't make or change laws, it follows the law. Her claiming that the transfer fee is high because a month's HOA dues are in the fee is unsupported.  In fact the law, SB 11-234, states this is not an appropriate use of the transfer fee and the fee is retained by and charged by the management company. If it includes dues why does the property manager retain the money! This fee is illegal on most all other residential home sales except for HOA's due to a "one-liner" in the law without any justification other than "it should continue because it can". Home buyers believe this fee is legally imposed, mandated by the HOA, and the amount set by the HOA, all not true. What a tangled web some continue to weave on this issue and unfortunately to date have gotten away with it.

 

The Colorado HOA Forum   www.coloradohoaforum.com  will continue in its' effort to end this abusive and costly fee on HOA home buyers.

HOA Dispute Resolution Study: opportunity lost or recognized

Got an HOA problem, read on.  Colorado's State HOA Office through HB-1134 was directed to perform a study to recommend an optimal HOA dispute resolution process for homeowners.  Due date, December 31, 2013.  The result of this study will either make Colorado's many extensive and definitive HOA laws effective or endorse a continuation of the empty HOA law enforcement environment that has been in place for the past two decades.  Depending on the outcome of this study, home buyers may continue to have a legitimate reason for not moving into an HOA: their HOA by-laws and State laws will continue to provide little protection from abusive practices of HOA Boards from a homeowner’s perspective.

 

Colorado HOA laws provide homeowners with our courts as the primary means of dispute resolution: costly, litigious, time consuming, and out of reach for most homeowners.  State HOA law also advocates the processes of mediation and arbitration.  Mediation, unfortunately, is a process that asks homeowners to gamble hundreds of dollars on a process that doesn't guarantee a binding outcome.  Additionally, any mediated agreement can subsequently be ignored by either party without prejudice sending the homeowner back into the unworkable court system for a decision.  Who is kidding whom by advocating mediation as a workable process?

 

Colorado law (CCIOA) includes a process for settling disputes, providing decisions, and avoiding court.  It's called arbitration.  It has been avoided like the plague for over 20 years.  Arbitration for HOA disputes would simply empower mediators to render enforceable decisions for most cases.  This is called med-arb: a recognized legal process and profession.  It can be implemented at no cost to taxpayers, requires no additional staffing in the State's HOA Office, and can financed through a combination of funding through HOA registration fees and litigant filing fees.  The accessibility, affordability, and fairness of such a system would immediately make HOA laws enforceable from the homeowner’s perspective.  All homeowners would have a venue to file complaints and gain decisions to pursue their rights.  No advantage to the HOA that has unlimited resources and lawyers to fight the ordinary HOA resident.  This type of system would also relieve our court system of cases that don't belong in court and can and should be resolved in a more informal setting.  Litigating such cases out of court will save the homeowner and HOA in legal costs and reduce court operational costs.  Med-arb would not require a homeowner to give up their right to a court case.  The homeowner can opt to go to court or use the State med-arb process.  Decisions would be legally binding.  Note, med-arbs (mediators empowered to render decisions) would be trained in HOA law, mediation, and receive the required training in arbitration.  Those making decisions on HOA complaints would do so based on HOA law and their training in this subject matter vs a court judge who most likely is totally unfamiliar with these matters.  Med-arb brings finality to HOA homeowner complaints as opposed to mediation that is built on a platform of maybe’s, if’s, and hope; a process that guarantees no decision is reached; adds costs and time to home owner dispute resolution; and over its’ twenty years as a recommended solution for resolving complaints has failed homeowners.

 

Note this fact about mediation in Colorado and another reason it doesn’t serve homeowners well.  Mediators, well, anyone can be a mediator.  Mediators are not licensed or regulated.  Kickboxers, hair stylists, tow trucks, and investment advisors are regulated but a mediator for resolving HOA complaints has no minimum qualifications, rules, or regulations under which to operate.  Mediators are not required to be certified in the topic they mediate.  You could get a divorce or labor mediator for your HOA complaint: what is wrong with that picture.  So, using mediators to gain a competent, informed, based on HOA law, satisfying decision may be something promoted by that trade group but simply can’t be supported by the professionalism of the industry.  We advocate med- arbs that are required to be educated in mediation skills, arbitration skills to the level needed in these simple HOA cases, and in HOA law.

 

Then there is the strong argument that if one is to mediate a dispute why not simply set the mandatory goal, as in med-arb, to reach a decision based on economic factors.  Specifically, it will cost several hundred dollars to mediate with no guarantee of a decision.  Most will avoid and can’t afford to gamble on mediation for a result.  Does it really cost anymore or only a few dollars more to empower the mediator (med-arb) to finish off the deal and render a decision when mediation doesn’t result in an agreement.  NO! 

 

One state, Virginia, has a system for resolving most HOA complaints out of court.  Other states, such as Nevada offer dispute resolution under the titling of "referee program" that is a nothing more than mediation disguised by a fancy title (uncreative at best).  Some states have moved towards mandating mediation prior to presenting a case in court: this only mandates the pitfalls of mediation.  Other than the Virginia type process, the other states seem to set the bar for dispute resolution through mediation at resolving at best 50-60% of the complaints leaving a good number of homeowners out in the cold.  Also, with any mediation system there are many more not filing claims due to the weaknesses of that process and the requirement for a homeowner to gamble hundreds of dollars and their time on a hope of a decision. 

 

Colorado recently passed HB 1277 that will license and regulate HOA property management companies.  As a result, the State (DORA) will review, process homeowner and HOA complaints, and render decisions and penalties for violations.  All out of court and low cost!  This is in effect a med-arb environment that is good enough to settle most complaints against property managers but such a process has to date not been offered for homeowner HOA complaints with their HOA?

 

The legislature has recognized the need for change in HOA law enforcement through HB 1134.  I doubt the expectation of the study mandated under this Bill is to continue with our failed system of courts and mediation.  I also doubt that legislators want the current processes simply re-labeled and dressed-up and offered as a creative solution.

 

Colorado HOA homeowners await the results of the State HOA Office's study.  The opportunity for Colorado to lead in HOA governance has arrived.  The Colorado HOA Forum www.coloradohoaforum.com has been a leader in promoting a process of out of court binding dispute resolution to make our good laws effective and provide both the HOA and homeowner with a venue to resolve conflict that is fair and workable.  We hope the State’s study will result in opportunity recognized and not lost?

 

HOA Transfer Fees on Home Sales Must End

One issue we can all agree upon is that unjustified, opportunistic, and excessive fees and taxes should end.  A “transfer fee” on residential home sales was prohibited through HB 11-234 except on community association properties (HOA’s).  HOA transfer fees can range anywhere from $75 to over $500+.  The HOA does not demand, authorize, or receive the fee.  The fee is charged and received by a Community Association Manager (CAM) also referred to as a property manager.  The exception was allowed into law to ensure CAM’s are reimbursed for extraordinary records maintenance and administrative costs related to HOA home sales (not present with non-community property home sales).    

Some misinformation needs to be cleaned up on this issue.  The transfer fee is not an advance payment of HOA dues, a “contribution” to the HOA to raise revenue for capital improvements, an amount determined/mandated by the HOA to be charged the homeowner, required by a financial institution or HUD for loan approval, a cost to provide HOA governing documents/by-laws, or a type of “buy-in” to the community.  Most of all, 1) it is not revenue to the HOA and 2) the HOA home sale transfer fee continues because it can.

 

Now consider the operating environment of most HOA’s.  They contractually compensate CAM’s to perform a variety of services such as snow removal, lawn service, painting, and administrative and financial services.  This work can include maintaining HOA records on the names, telephone numbers, and addresses of residents and completing collection activities related to HOA dues. 

 

So what “extraordinary” expenses are incurred by the CAM that warrants this transfer fee?  Extraordinary meaning:  such work completed that is not routine or expected under the CAM’s contract with the HOA; work that is not already paid for in the CAM’s contract with the HOA; or work that imposes an unexpected financial burden or excessive work effort on the CAM?

 

Lobbyist justifying this fee argue:   “. . . a one-time fee paid to a . . . management company for an association of unit owners . . . for services rendered in connection with the conveyance for which the fee is earned . . .”  In other words, management companies are permitted to charge a fee related to work in relation to the conveyance of a unit.  They should have added in their justification “they charge because they can”. 

 

The CAM HOA home sale transfer fee is meant to charge for issuing a financial “status letter” and changing personal identifying information in HOA records.  The status letter is a form letter completed using existing data in possession/accessible to the CAM documenting the homeowner’s financial status with the HOA (are dues current, special assessments paid, any liens on the property).  Work related to changing personal records due to a home sale is similar to day-to-day tasks required when couples divorce, upon the death of a resident, when a property is rented, a resident changes their telephone number or contact information, etc.   These tasks are completed through computer applications and require very little research or coordination among others (if any) making the work effort minimal and routine.  Additionally, home sales in any given community are not in a volume as to justify and impose any extraordinary expense upon a CAM or cost to a home buyer. 

 

HB 11-234, in rescinding most transfer fees, found no reason to continue the practice.  It was found to be no longer required to reimburse any entity for extraordinary cost.  No justification was offered by CAM’s or their trade organization to continue the fee based on extraordinary costs or relating the work performed to the fee imposed.  It continued because it could and ever since homeowners have been led to believe this is imposed by law, it is the HOA who imposed and/or receives the fee, or is compensation for unique HOA related work not paid for through any of the many costs incurred when closing on a home and/or unique work at a level that requires imposing hundreds of dollars of cost on the home buyer.

 

HOA homebuyers, who represent most home sales in the State, would save an estimated $20 million dollars for every 100,000 home sales by repealing the HOA transfer fee or $15 million if this fee was capped at $50.  It’s time to end this unjustified fee “because we can”.

Colorado HOA Forum Issues HOA Home Buyer's Guide

The Colorado HOA Forum, a home owner’s advocacy organization, has published its’ HOA Home Buying Guide.  This is a list of issues that every home buyer should address prior to buying a home in an HOA (Homeowners Association).  Too often home buyers find out about restrictions, assessments, and other issues after they settled into their new home causing conflicts that could’ve been avoided if they knew about HOA governance and finances prior to signing on the dotted line to buy the home.
The Colorado HOA Forum guide is based on feedback from its’ hundreds of members many of whom wished they had the guide when buying into their HOA community.  Home buyers must understand that when they move into an HOA they are giving up something (property rights and living restrictions) to get something (strong local governance, enforced community standards, amenities, etc.).  Furthermore, homeowners are subject financial responsibilities and obligations of the HOA many of which they are unaware of until after they move-in.  Many of the items listed in the Guide are being pursued to become State law and mandated as part of the home sale transaction.
The Forum understands that informed consumers make better purchasing choices and with your home being the most major purchase you will ever make the benefit of full disclosure in imperative.  The guide is available on their web site at www.coloradohoaforum.com.

The Colorado HOA Forum, www.coloradohoaforum.com , has published its' August - September Newsletter   The organization of Colorado HOA homeowners publishes a bi-monthly newsletter for public reading with past issues archived on its' web site.  The most current issue covers such topics as how HOA's can respond to the newly enacted law in Colorado legalizing marijuana, pets in HOA's, the newly passed law licensing HOA property managers, HOA Super liens, and how the newly enacted HOA laws will affect homeowners.  The organization invites homeowners to join its' mailing list via the web site to receive future newsletters and updates on their initiatives. 

Colorado HOA Forum Issue White Paper on Legislative Initiatives 2014

The Colorado HOA Forum, a homeowners advocacy group, has published a White Paper on its' 2014 legislative goals and objectives.  The list of seven issues builds upon the success in the last legislative session that resulted in four HOA bills placed into law.  The organization feels that the items on the list also address needed change in all States to improve HOA governance. 

Colorado HOA Forum Publishes New HOA Homeowner's Guide

The Colorado HOA Forum has posted its' new HOA Home Buying Guide on its web site:
www.coloradohoaforum.com  (on the Home Page)   or   click here

This is a comprehensive checklist of items that any homeowner can benefit from prior to purchasing a home in an HOA.  If you can an item we may have overlooked please let us know. 

We intend to pursue making most items on this list part of Colorado HOA law rather than leaving it up to the realtor, homeowner, or others to optionally complete. 

Colorado HOA Forum Promotes 2013-2014 Legislative Agenda

The Colorado HOA Forum (www.coloradohoaforum.com) , an HOA homeowner advocacy group, has published its’ 2013-2014 legislative agenda.  The past legislative session saw very good progress in Colorado HOA legislative reform including licensing and regulatory oversight of property managers, limits on debt collection and foreclosures, and beginning the process to identify an out of court binding dispute resolution process.  The group will now turn its’ efforts to strengthen current law and pursue additional changes in the law to improve HOA governance and disclosure  to home buyers, ending abusive and excessive debt collection practices, and limiting real estate transfer fees when selling a home in an HOA community.   The group’s number one issue remains implementation of an out of court binding dispute resolution process (not mandatory mediation as this only adds time, cost, process, and no certainty of decision in dispute resolution and is available now under current HOA law and has failed homeowners) .  See the group’s web site for more on this issue:

http://www.coloradohoaforum.com/outofcourtbinding.html

2013-14 Goals and Objectives  (an expanded discussion on these proposals can be found at:

http://www.coloradohoaforum.com/2013goalsandobjectives.html

1. Include an out of court binding dispute resolution process in Colorado HOA law

2. Improve upon Colorado legislation that licenses HOA property managers

3. Limit fees and administrative costs on HOA debt

4. Increase the roles, responsibilities, authority, and enforcement capabilities of the Colorado HOA Information Office and Resource Center including involvement in administering an out of court binding dispute resolution process

5. Restrict/limit transfer fees in the sale of HOA homes

6. Require realtors and home buyers to be provided a copy of the HOA's governing documents, insurance coverage, a current HOA financial statement, the amount of HOA dues, any special assessments current and ongoing, and certify they read them prior to purchasing a home.

7. Term limits on HOA Board members when others are willing to serve.

8. Include as part of the HOA registration process a certification that HOA Board members read their own HOA governing documents and applicable information posted on the State's HOA Offices web site concerning State HOA law. In addition, require each HOA to provide the State's HOA Office a copy of their governing documents, the amount of HOA dues, the CAM hired to manage the HOA, and any special assessments that are current and/or proposed.  This information posted on the State's HOA Office's web site. The HOA is required to update this information when changes occur and review the information annually.

Colorado HOA Forum Sets 2013 - 2014 Objectives

This past legislative session in Colorado resulted in passage of several HOA (Homeowner's Association) Bills. Specifically and noted on the Colorado HOA Forum's website, www.coloradohoaforum.com , were bills that will require HOA property managers to be licensed and regulated, enable xeriscaping within HOA's by homeowners, provide some protection for homeowners against foreclosures when debt is due the HOA, and mandates a study by the State's HOA Office to identify an improved dispute resolution process for HOA complaints. Overall, a victory for HOA homeowners and provides the most significant improvement in HOA governance in decades.  Homeowners are urged to visit this organization's web site for specific information on how these new laws will affect the HOA living environment.  

The Colorado HOA Forum, the State’s largest and leading HOA homeowner advocacy group, will focus its' 2013-2014 legislative efforts on:

1.  Include an out of court binding dispute resolution process in all Colorado HOA law:  http://www.coloradohoaforum.com/outofcourtbinding.html  OUR NUMBER ONE OBJECTIVE

2.  Improve upon Colorado legislation that licenses HOA property managers

3.  Limit fees and administrative costs on HOA debt

4.  Increase the roles, responsibilities, authority, and enforcement capabilities of the Colorado HOA Information Office and Resource Center with specific involvement in resolving HOA homeowner complaints

5.  Restrict/limit "transfer fees" in the sale of HOA homes

6.  Require realtors and home buyers to be provided a copy of the HOA's governing documents and financial statement and certify they read them prior to purchasing a home

7.  Term limits on HOA Board members when others are willing to serve

8.  Include as part of the HOA registration process a certification that the HOA Board members read their own governing documents and information posted on the State HOA Office's web site concerning State HOA law

Buying a Home in a Homeowners Association (HOA): do your homework

No doubt you've heard about the many problems associated with living in an HOA community.  Most of these problems, however, can be avoided with a few simple tasks completed by home buyers prior to closing on the purchase of a home.  Informed home buyers will be happier in their new community vs those who buy and find out later about the restrictions the HOA’s impose.  Almost every new community in Colorado is under some form of HOA governance.  The State has over 8,000 HOA’s and two thirds of the State’s population lives under some form of HOA governance.  It is becoming increasingly more difficult for home buyers to avoid an HOA community.

Before you buy into an HOA you should read the HOA's governing documents (referred to as by-laws).  They explain the controls, restrictions, and covenants imposed upon all residents.  You will be giving up some of your property rights and you must make an informed decision as to whether you can comply with this new living environment.  Furthermore, understand that if you don’t comply with these governing documents you are subject to fines.  You will also benefit by visiting the State HOA Office's web site.  This is a one-stop shopping, unbiased web site for HOA information.  It contains an HOA home buying guide. 

We recommend you review the latest HOA financial statement with particular attention to the HOA's reserve fund.  The reserve fund is simply money in an account accumulated from HOA dues to be used for future planned capital improvements and upkeep of the community.  This fund should be confirmed to be fully funded or you could be moving into a community that is financially distressed with future community maintenance problems.  Also, ask about any known current or planned special assessments.  These are financial obligations placed on homeowners for community improvements and can be material.  This financial obligation is in addition to monthly HOA dues.  Get information on the number of foreclosures in the community and the number of homeowners with delinquent HOA dues.  Delinquent dues of other homeowners must be made up by those who pay and that means you.  We suggest you find out about the percentage of rental properties in the community as this can sometimes have a negative effect on the financial well-being of the HOA, enforcing community standards, and the sense of community commitment by the residents.

  
Understand that HOA governing documents and State HOA laws are very effective in enforcement from the HOA Board's perspective but very weak for homeowners.  Holding your HOA Board accountable, exercising your rights (such as access to financial records and contracts), ensuring open and fair elections of Board members, and disputing abusive practices of a Board can be a very costly endeavor to the homeowner.  The only means of enforcing your HOA homeowner rights is our costly, litigious, time consuming court system that is basically not accessible to most homeowners.  Understand, such court cases will involve your limited funds and time against the HOA’s unlimited financial resources and their paid lawyers (even for simply disputes).   Groups such as the Colorado HOA Forum, www.coloradohoaforum.com, are attempting to change State law to provide HOA homeowners a more affordable and accessible means of HOA dispute resolution that is needed to improve HOA homeowner’s rights.  See our web site for information on this topic http://www.coloradohoaforum.com/outofcourtbinding.html

There are many other home buying tips but if you follow the above you can mitigate many problems otherwise encountered in purchasing into an HOA community.

 

Marijuana Use in Condominiums and HOA's

Increasingly, the Colorado HOA Forum, www.coloradohoaforum.com, is receiving inquiries about the use of marijuana in condominium complexes.  The inquiries involve the odor of marijuana in the hallways and throughout the building.

Since marijuana has become legal in Colorado it is now out in the open and odor emitted from a "joint" can be offensive, intrusive, and affect the quality of life of others (not dissimilar to cigarettes).  This is particularly the case in condominiums or any high-rise in which smoking in the hallways and or in one's own dwelling can result in the smoke and odor entering the residence of all on the same floor and/or throughout the building.

This is not a moral argument on the use of marijuana but addressing a real problem to allow both user and non-user to co-exist in harmony.  HOAs seem to have run into a road block in addressing this problem but are they powerless?

HOAs can't ban the use of pot in one's own dwelling as it is a legal substance and the practice is conducted within private property. However, similar to HOAs setting rules for what color a home can be painted, how big and where an American flag is hung, or how, when, and where political signs are displayed an HOA can similarly make and enforce rules to mitigate the problems with marijuana smoke and odor.  An HOA can prohibit smoking in lobbies of buildings or by the swimming pool area, ban glass/alcohol in the pool areas, or prohibit washing cars in certain areas.
These are all restrictions on legal activities but don't prohibit the activities in a personal dwelling.  So, an HOA could prohibit smoking weed in common use areas such as hallways and building lobbies and entranceways.  Furthermore, rules can be implemented to prevent/mitigate pot smoke from being emitted from a condo into the hallways.

The HOA can direct the resident homeowner to seal the door to stop leakage into the hallways and/or vent the living unit (open the patio door for example) during marijuana use.  This can all be done by claiming that the practice by the homeowner is a nuisance and/or health problem to other residents which under most HOA governing documents allows the HOA to warn and/or penalize the homeowner if the infraction continues.

HOA's should utilize existing governing documents and implied authority to address this problem as mentioned above.  HOAs can also modify existing governing documents/by-laws to implement restrictions and controls that allow both users and non-users of marijuana to co-exist in harmony. No doubt the odor and smoke from marijuana can be a problem in condominiums and high rise buildings.

Marijuana is here to stay in Colorado and addressing usage problems in shared areas and condominium complexes during the initial legalization stage can mitigate problems.  HOA Boards and residents can take the lead in ensuring "pot" usage neither infringes upon the quality of life of others nor interferes with one's right to use weed.