Tuesday, December 24, 2013

CAI Continues to Misrepresent Costly HOA Transfer Fee

CAI Continues to Misrepresent Costly and Unjustified Transfer Fee

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.

Monday, December 2, 2013

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”.