Saturday, January 25, 2014

CAI playing Whack-a-Mole with Home Buyer’s Money

A Bill to limit the unjustified and costly HOA transfer fee is being introduced to the Colorado legislature this year.  Expect the Community Association Institute (CAI), the trade group for HOA property managers (PM), to play the “whack-a-mole justification” game with legislators in opposing this Bill: one empty explanation after another.  However, this is no game for HOA home sellers who shell out $15 million a year in transfer fees to PM companies for services already and almost always paid for through their HOA dues.  The fee is authorized by law (not required by law) and assessed by property managers on HOA, mobile home park, and timeshare property sales.  The fee is intended to reimburse PM’s for work in the conveyance (home sale) of property for which they are not compensated for by the HOA.  The fee can range from $50 to over $1.000, has little to do with work performed, and/or is not used in accordance with the law.  The fee seems mostly used to supplement PM income allowing for low bids on HOA contracts in anticipation of receiving high transfer fees later.  Worse yet, there are no limits on the fee, it is not negotiable, can’t be shopped for in the market place, and if you don’t pay the fee you can’t sell your home.   

Defending this fee has included the contention that HOA’s mandate it, determine it, and retain it.  Wrong, PM’s do all this.  Then is it justified because PM’s incur extraordinary, costly, and uncompensated expenses when a home is sold.  Really?  This costly work involves: 1) completing a Status Letter (basically a form letter indicating the home seller’s financial status with the HOA).   It is now known that many HOA’s don’t charge for this task and the work takes minutes not hours .   2) costs to change HOA records.  Truth told this requires no more work than when someone gets married, divorced, or upon a resident’s death all which require no extraordinary work or special charges to homeowners.  Both these tasks are already paid for by HOA dues and to payments from the HOA to the PM.  Also note, transfer fee costs are not for providing HOA governing documents, researching property ownership, or researching liens and encumbrances, period.  These are paid for via Title insurance, direct payment to the HOA from the seller/buyer, and or involve no cost.
What’s next in the CAI defensive play book on this fee?  Appears they are trying to convince lawmakers to allow DORA to address this abuse through ambiguous and unrestrictive “guidelines” when licensing property managers in 2015 vs modifying the law authorizing the fee which is the proper means to rein in the abuse and high fees.  Note, SB 11-234 and HB 12-1277 authorizing the transfer fee and licensing respectively, have nothing to do with each other.  Neither Bill even remotely mentions the other.  DORA is not directed to address transfer fees in either Bill.  Note, DORA can’t make or change the law or limit fees!  Thus, this last ditch effort to defend this fee lacks merit, fact, enforcement, and is unsupportive of any good business practice. 
Playing whack-a-mole justification has worked for the CAI on this issue in the past.  This fee has yet to be even remotely defended based on CAM expenses incurred and not reimbursed or that it is used as intended under the law or why there is such a disparity in fee amounts.   The concept of the transfer is not complicated.  You can expect more diversions and deflections from the CAI on repackaging and redefining the transfer fee.  However, it all comes down to reining in a fee that never could be justified by other than the fact that it exists and continues “because it can” and should end “because it can”

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