Property Managers Continue Taxing Authority in Colorado

So you think only government entities have taxing authority?  Thank the Colorado legislature and the Community Association Institute (CAI) for bestowing this authority on HOA property property management companies (PMCs).  The definition of a tax is "a compulsory contribution to state revenue, levied by the government on workers' income and business profits or added to the cost of some goods, services, and transactions".  Similarly, PMCs have the authority to levy a compulsory "exit tax", better known as a transfer fee, on the sale of homes in HOAs. for no other reason than "because they can".  Making this worse, this is a no questions asked fee, no rules or amount limits, sellers can't shop for a better rate, no means for home sellers to protest the tax because if you don't pay you can't sell, the fee is used by private companies (PMCs) to enhance profits, and no one in or out of government has oversight authority over the abusive use of the fee: worse than any tax.  This taxing authority to a private firm is unprecedented and ignored by our legislature costing home owners $15 million a year.  This year HB 14-1254 attempted to rein in this abusive practice but the CAI (trade group for PMCs) not only road blocked the Bill but re-wrote it to ensure the transfer fee continues unabated.  When will our legislators end this extraordinary and improper practice?

HOA Issues: 2,500 members, thousands of emails/telephone calls, personal visits vs high paid lobbyist visit

It's not like the legislature and State Agencies aren't aware of HOA issues and problems its' just that they listen to a sole source (lobbyists from the CAI) that is the root of problems.  The State HOA Office has received thousands of HOA complaints against HOA Boards and property management companies.  This legislative session is once again exemplary of the fallacy of people power.
Our group and other HOA home owner advocacy organizations have sent literally thousands of emails, made hundreds of phone calls, and completed personal visits to legislators this session concerning one issue: HOA Transfer Fees.  This is the fee imposed on all HOA home sellers at the will and without dollar limits by property management companies: you don't pay it you don't sell your home.  We home owners worked hard to find legislative sponsors to end the abusive use of this fee that costs home owners $15 million a year.  We interviewed scores of realtors, property managers, and home owners and collected official closing documents on home sales to support reform.  A Bill was actually sponsored to limit this fee and mitigate the illegal and abusive use of the fee.  That took months.  Two week of the presence of Colorado and Virginia lobbyists from the CAI and large property management companies spreading misinformation (there's a better word for it) got the sponsors of the Bill to flip and basically allow them to rewrite the legislation to ensure no change would take effect, to silence home owner concerns, and protect the taxing authority of property managers on home sellers.  The next time someone complains about voter apathy or lack of involvement by citizens in their government let them know how their government really works.

The Privatopia Papers: Homeowners group targets HOA transfer fees in Colorado - The Denver Post

The Privatopia Papers: Homeowners group targets HOA transfer fees in Colorado - The Denver Post

CAR Remains Silent on HOA Transfer Fee Bill?

The Colorado Association of Realtors (CAR) has been oddly silent on a Bill before the legislature that would benefit the folks that pay their salary: home sellers and buyers.  The HOA Transfer Fee Bill, HB 14-1254, was intended to place a dollar limit and restrictions on the transfer fee imposed on home sellers by property management (PM) companies when a home is sold in an HOA (Homeowners Association).  The non-negotiable fee must be paid by HOA home sellers or they can't sell their home.   The fee is not limited in amount, ranges from $50 to over $1000 with no relation to additional costs incurred due to the sale of the home, and is not a legal requirement.  The real estate industry has tacitly approved of this abusive practice. .  The fee costs HOA home sellers/buyers $15 million a year.  The transfer fee is supposedly for services related to: 1) Issuing a Status Letter indicating the sellers outstanding financial obligations with the HOA that is mostly a reflection of their routine monthly bill and already paid for by the seller through HOA fees.  Many HOAs complete this for $50 or less or for no fee.  and 2) Changing records in the HOA data base similar to when someone gets divorced, marries, or dies and also already paid for by HOA dues.  So what is this fee really about?  PMs use the fee to supplement income, increase profits, and it allows them to under bid and win HOA contracts with the anticipation of transfer fee income.  Unfortunately, all the verbiage in this Bill that would rein in this abusive fee has been taken out at the request of those who pocket the money and CAR has remained silent.  If CAR understands who pays their bills and puts bread on their table they should stand up and defend home owner interests and work to change this Bill to rein in abuse. 

HOA Transfer Fee Provides Rude Example in Civics

Civics: the study of the rights and duties of citizens and of how government works (or doesn’t).  A Bill to rein in the use and abuse of HOA Transfer Fees (a fee assessed by property managers on home sellers simply because they can) offers an ugly lesson in civics.  The Bill started out with legislative support and enthusiasm.  Legislators from both parties were shocked and in disbelief about how the fee had no limit on the amount charged (ranging from $50 to over $1,000), had nothing to do with work perform, the use of the fee was in conflict with the law, and if home sellers didn't pay it they couldn't sell their home.  The Bill to rein in abuse with this fee was on track for wide support.  Then lobbyist from Colorado and Virginia who stood to lose millions if the abusive fee was contained worked the halls of our legislature and DORA (a government agency) to get the Bill killed or watered down.  HOA home owner groups continued to compile and present evidence on the abusive fees to our legislators.  They found support from realtors, property managers, home owners, and even lawyers who were in favor of ending or limiting the fee.  Some legislators even labeled the transfer as "extortion".   Then history repeated itself.  The sponsor of the Bill, who was appalled with HOA Transfer Fee practices, flipped and ignored home owner interests and allowed the lobbyist to not only get the Bill watered down to ensure no change took place but allowed the interest group to direct the total rewrite of the Bill.  The civics lesson in all this is that citizens aren't so much simply apathetic in participating in their government but understand that the system flunks as an example to encourage citizen involvement.   

Transfer Fee Bill Ignores Homeowners and Endorses CAI Demands and Fees

You won't be surprised at this but the CAI has managed to get the transfer fee Bill watered down.  They appear to owe many thanks to Senator Balmer whose involvement to favor CAI proposals and property managers over home owner interests is no surprise to our group.  The CAI and their well financed lobbyist from Virginia/Colorado spent much time and money spreading misinformation to salvage $15 million a year in fees assessed on home sellers and into their members pockets.  Thus, this Bill allows property managers to continue to extort transfer fees from home sellers for no other reason or justification other than "it can".  It allows them to use the fee to low bid contracts and use the fee to make up for low bids: very anti-competitive and anti-small business.  It endorses the illegal use of the fee for supplementing income by property management companies.  Note, no reason justifying this fee has been given by the CAI or legislators, NONE, and they don't have to because they can.

 

HB 14-1254 was stripped of any effectiveness by simply directing the profiteering property managers to document their bogus charges but not to limit them (that will work!).  Yes, a $1,000 transfer fee is still endorsed by the legislature, the Real Estate industry, and DORA.  Worse yet DORA has stuck its' nose in the picture to advocate no restrictions other than to document the fees (this at the apparent request of the CAI).  The involvement of DORA and the Division of Realty is another example of how the CAI and monied interests direct activities of these government agencies.  DORA was not directed to get involved in transfer fees with the licensing of property managers and this action on their part is deplorable.  Don't expect the licensing of property managers to help one home owner at this point as DORA will be directed by the CAI on requirements.

 

The CAI must support this Bill as they got legislators to re-write it and stick it to home owners.  This is a great example of why citizens can't stand/distrust politicians, lobbyists, and well financed groups.  Now add to that the distrust of government agencies like DORA who take orders from private industry.

 

The final version of this Bill will most likely be further weakened.  You will hear more about our plans for public hearing testimonies.  No Bill is better than one that advocates unjustified fees and taxes.  Your legislators that are supposedly against fees and taxes should be chastised if they support this Bill in its' current form. 

Open Letter to Colorado Legislators Considering HOA Transfer Fee Reform

Our group was instrumental in surfacing the need to reform and re-write SB 11-234 that made it illegal to assess an HOA transfer fee on residential home sales except for those in HOAs, timeshares, and mobile home parks.  At that time (and now) no reason was given for continuing the fee other than to recover expenses in relation to a home sale (but no specifics, amount limits, rules, regulations, or guidelines for its' use were provided).  HB 14-1254 was intended to place limits on this fee that is forced upon home sellers by a property management company ranging from $50 to over $1,000 with no relation to expenses incurred: no negotiation, justification, or limit to the fee, pay it or you can't sell.  The Bill was also intended to end the illegal use of and uncompetitive practices by large property management firms that hurts small businesses.  Specifically, the fee is used to allow for underbidding on HOA maintenance contracts with the anticipation of subsequent high transfer fee income: not what SB 11-234 authorized.  

 

This Bill was completely rewritten as directed by and to the elation of the lobbyist group CAI whose members pocket the transfer fee (this boasting is on their web site).  The CAI's directed solution to monitoring transfer fees is to have DORA include benign requirements in their property manager licensing program through HB 13-1277.  This amounts to requesting that the property manager simply document the amount of the excessive fee (not justify or limit it).  Note, DORA has no authority to limit the amount of this fee, control the use of the fee, or define specific rules on what the fee is comprised of, NONE!  In fact, this issue was not even considered by DORA in HB 13-1277.  DORA's involvement in intervening in this issue at the behest of the CAI is highly questionable.

 

The CAI was adamantly opposed to the original bill that would have saved Colorado home sellers $15 million a year, stopped the illegal use of this fee, and placed limits of the amount of this fee.  Opposition was so strong that lobbyist from their Virginia Office were flown in to help the opposition.  The CAI is now a strong proponent of this Bill as it will ensure nothing changes in the use of the fee and the unjustified amounts home sellers must pay. 

 

This Bill in its' current form doesn't address any problems mentioned above as originally intended.  I would appreciate a brief meeting with you at your convenience to explain the history and use of the transfer fee and how this Bill is meant to successfully ensure home owners will continue to be assessed a fee for no other reason than "it can continue".  Our fact sheet on this fee is attached and I hope you will consider what we present as it is supported by documents and interviews from property managers. Thank you.

HOA “exit tax” will surprise home sellers

Selling your home in a homeowners association (HOA)?  Open your check book to the sum of $50 to $1,150 to pay the HOA “exit tax” better known as the HOA Transfer Fee.  If you don’t pay it you can’t sell your home.  Sell the home yourself, you still pay the tax.  The amount is not negotiable, can’t be shopped for in the market place, is not limited in amount, relates not to work performed but is mostly used as supplemental income and profiting by property management companies and doesn’t benefit the HOA.   Worse yet you won’t know about the fee until you’re closing on your home, the charges will not be documented or explained, you will not have any venue to contest the fee, and your REALTOR and Title Company will just direct you to pay it or you can’t sell.  Yes, this is worse than the dreaded “tax man” that so many hate but with no rules or limits.  This fee costs home sellers and buyers $15 million a year.   The legislature will be considering a Bill, HB 14-1254, to limit this abusive practice that was made illegal in 2011 except on residential home sales in HOAs, mobile home parks, and timeshares.  It’s time fix the law, remove the exception, and end another unwarranted fee.