Two thirds of Colorado residents live under Homeowners Association (HOA) governance. All live under covenants, controls, and restrictions and are assessed dues and fees in return for community provided services and amenities. Amounts vary and so do the range and quality of service. Dissatisfaction arises when the value of services for fees is not in line with home owner expectations and/or the justification for fees is poorly supported and can’t be contested. So what causes this misconnect between expectation and delivery.
Problems can occur when HOA home buyers/owners are unaware of what services are to be provided by the HOA. Providing this information to home owners prior to closing on the sale of a home and having buyers certify they read it should be a legal requirement. Problems also occur when HOAs mismanage funds resulting in an inability to provide services at a quality level. This includes not funding HOA reserve funds for planned maintenance, using intended maintenance funds inappropriately on Board special projects or on costly and mostly avoidable law suits, over paying and not competing contract work, and just poor financial planning and management with no oversight or accountability. Then there is the problem of HOA dues being too low for too long to deliver services. Another significant and less discussed problem relates to the lack of oversight and control over the property management companies (PMC). In most HOAs, the PMC runs the community and yes this is the tail wagging the financial dog with little oversight or disclosure to home owners. One more but necessarily the last problem is that HOA Boards have almost zero accountability and unlimited authority in making financial decisions for the community without apprising or with the approval of home owners. This includes raising HOA dues, making special assessments, embarking on high cost law suits, and funding special and high cost projects all without home owner approval or having to justify their actions to home owners.
Then there are fees assessed HOA home owners by PMCs that are not in any HOA documents or approved by HOA Boards. For example, the HOA Transfer Fee. This fee is NOT imposed by, determined by, or retained by the HOA but pocketed by the PMC upon the sale of a home in an HOA. No justification or legal requirement is given, the amount is arbitrary ranging from $100 to over $1,000, can’t be negotiated, must be paid or you can’t sell your home, and worst of all you don’t know about the fee until the closing on your home.
HOA fees and financial accountability are an ongoing problem for HOA home owners. Although Colorado has many HOA laws they all lack an ability to hold the HOA Board and/or PMC accountable for financial mismanagement, reckless behavior, or to provide quality services. The laws lack mandates for home owner involvement and approval on spending HOA funds. Home owners are left paying the fees and assessments unless they choose to challenge the HOA in our costly, litigious, time consuming, “pay to play” court system and most simply can not afford this venue. The good news is that most HOAs and PMCs operate with a good degree of integrity but when bad apples arise the financial consequences can be catastrophic and costly to home owners. Until our State laws are modified to empower home owners with a means (out of court binding dispute resolution process) to hold HOA Boards and PMCs accountable home owners will remain vulnerable to financial abuse and unexpected financial obligations.