Tuesday, May 27, 2014

HOA Special Assessments: Costly Without Home Owner Oversight

If you live in a Homeowners Association (HOA) you are subject to special assessments with or without your knowledge or approval.  Your HOA Board is empowered to levy a special assessment for most any reason at any amount, at any time on each property owner.   Special assessments can occur when HOA Boards approve self-interest projects or community beneficial capital improvements, to pay for costly law suits approved by a Board, or to replenish depleted reserve funds due to mismanagement or unexpected expenses.  Special assessments can range from hundreds to thousands per household and must be paid.  Don't pay the assessment and your financial obligation can compound through interest and administrative charges.  Wait too long to pay and your property can be foreclosed.  Special assessments can happen without home owner knowledge or approval and without  dollar limit and it is all legal.

Colorado State HOA law and HOA governing documents empower Boards to financially manage the community and only indicate they must act in a fiduciary capacity (a statement that is open to a wide range of interpretation with little accountability).  Nothing in HOA law requires a Board to discuss, notify, or gain approval through a vote of residents when spending HOA funds on costly endeavors .  Boards are also empowered to create enforceable special assessments, no questions asked.  Problematic in this issue is that even when special assessments result from Board financial mismanagement, extravagant spending, or reckless decisions home owners only find out about the dire financial consequences after the fact and through their wallets.  Unless criminal intent is involved, no Board member will be held accountable

Reining in the independent authority of HOA Boards to spend without the consent of home owners that often results in special assessments will require legislative action.  Until this happens, home owners are left with our costly, litigious, and time consuming (pay to play) court system to challenge HOA Board actions and this simply doesn't work for home owners.


Tuesday, May 20, 2014

HOA Home Owner's Wallets Emptied Over Fees

HOA dues, transfer fees, debt collection fees, special assessments, legal fees (law suits and HOA lawyers) can become overwhelming and home owners have little control over any of these financial obligations.  Worse yet, if these fees and assessments aren't paid on time you can be fined without limit and have your home foreclosed for the smallest amount.  Add to this the infamous $100 a month debt notification letters from the HOA lawyers that are not contestable.  Try to sell your home in an HOA and you can be assessed a transfer fee ranging from $150 to over $1,000 without any justification or explanation.  If you don't pay it you can't sell the home.  Then you can be stuck for the cost of your HOA Board entering into costly litigation or a capital improvement projects without home owner knowledge or approval resulting in thousands, if not tens of thousands, of dollars in special assessments.  If the HOA Board is reckless with finances and drains the reserve funds all home owners can be assessed an amount to replenish the fund and this can be very substantial: don't pay it and the amount owed will compound and also can lead to foreclosure.  Your monthly HOA fee can also increase without home owner approval and without limit and it's pay it, pay it on time, or more excessive fees and assessments.  One more thought about all these HOA fees if you live in a gated community.  Even though you pay county and other state and local taxes for street maintenance and snow removal, the local governmental entity will not provide snow removal or street maintenance and repair in your HOA (you pay through HOA dues).
Most HOA dues and assessments are legitimate and support the operations and maintenance of the community.  It is also true that what one home owner doesn't pay in dues others must make up for so reasonable penalties are appropriate.  However, the abusive and reckless authority of some HOA Boards in (mis)managing a community are weakly constrained by HOA governing documents or State law.  These ruling documents mostly require home owners to contest HOA Board behavior and burdensome assessments in our costly, litigious, and time consuming court system.  Thus HOA law enforcement from the home owners perspective involves the limited financial resources of a home owner against the unlimited bank account of the HOA: a pay to play legal system favoring HOA Boards.
The HOA living environment can provide home owners with a rewarding life style.  Most communities involve some form of HOA governance and it is mostly impossible to buy a home in a new development without an HOA.  Understanding HOA governance and home owner's rights and financial responsibilities prior to moving into an HOA is incumbent upon the home buyer and will mitigate post purchase problems.

Wednesday, May 7, 2014

CAI Chalks Up Wins in HOA Reform Off Wallets of Home Owners

The defeat of Colorado SB 14-220, Construction Defects, joins HB 14-1254, the HOA Transfer Fees Limitation Bill that morphed into a token and ineffective "Disclosure" Bill, delivers a double blow to HOA home owners.  SB 14-220 would have saved home owners millions of dollars by moving litigation from the court room to out of binding arbitration and protected home owners from HOA lawyers raiding reserve funds with frivolous law suits and pursuing costly court cases without home owner approval.  HB 14-1254 was addressing the $15 million a year in unjustified and non-contestable fees on HOA home sales.  It was changed to a Bill to require that home owners be notified of the fee without any specific details on charges, the fee amount (ranging from $50- to $1,150) was left to be determined without question by the property management company and let stand the practice that if the fee wasn't paid the home couldn't be sold.  Both Bills were heavily lobbied for change/defeat by the Community Association Institute (CAI) whose members and the legal industry stood to lose tens of millions of dollars in fees income off the backs of HOA home owners.  The success of the CAI in stifling any meaningful HOA legislative reform and controlling information and votes in the legislature must change or home owners will lose.