HOA Home Owners Snubbed Again Over Ending HOA Home Sale Transfer Fees

Our legislators can pass a bill naming the State Pet but treat HOA home owners like feral cats.  The Colorado HOA Forum, the State’s largest home owners advocacy organization, has lobbied legislators for  the past eighteen months to limit/end the illegally applied and costly (upwards of $10 million a year) HOA Transfer Fee on the sale of HOA homes.   Last year lobbyist killed a bill to limit this fee.  Realtors, legislators, many property managers (PMs), and home owners voice objections to this abusive and excessive fee.  Many believe the fee is a mandatory fee for expenses incurred by the HOA/PM in the sale of a home: not true.  The fee has been called extortion and highway robbery by PMs and legislators.  When interviewed, The Colorado Association of Realtors didn’t understand the fee and wouldn’t object to having their clients pay it at home closing.   A Denver News Channel 7 consumer reporter indicated if home owners are stupid enough to pay it they only have themselves to blame even if not paying it means no home closing.   The fee is deceitfully presented to home sellers on sales documents as levied by the HOA, the amount determined by and pocketed by the HOA, and benefits the HOA by their recovering additional expenses due to the home sale:  all not true.  The law states the fee is assessed for expenses uniquely incurred by a PM in relation to a home sale else it is illegal.  However, homeowners are never provided with an explanation or detailed invoice of transfer fee charges.   The fee is well known to supplement PM income, charged “because it can” be, and used to low bid HOA contracts with the expectation of subsequent Transfer Fee income.  Fees range from zero to over $1,150 with no relation or justification for work performed.  The fee can preclude approval of FHA/HUD loans if part of the home sale transaction.  The state agency in charge of real estate transactions (DORA) places no requirements for justifying the fee based on the law or even suggests a detailed receipt be provided the payee at closing thus enabling the fee to continue.  Finally, the main justification for charging the fee by some large PM companies is that if home buyers want accurate information upon closing on a home as to any amounts owed the HOA they must pay extra for it.  Otherwise, they will simply get the regular monthly billing produced for the home owner that has the same information: what is on the regular billing, inaccurate information!  What else need be said to end this abusive fee!

Yes, this fee is a big deal.  It is costly, abusive, unjustified, and amounts to an unwarranted tax on HOA home sellers.  It should be easy to end/limit through HOA legislative reform but is viewed less important than identifying the State pet which passed without objection.  The Colorado HOA Forum will continue to fight to end this fee.

HB 15-1040 Would Remove Protections under Property Manager Licensing

A Bill, HB 15-1040, was introduced for legislative consideration and could have the affect of derailing HOA home owner protections from abusive practices in the property management industry.  The Colorado HOA Forum has reviewed the Bill in its' original form and we urge legislators vote against it.  The Bill would effectively reduce the number of HOA property managers (aka Community Association Manager (CAM)) required to be licensed by about 80% thus nullifying HB 13-1277 (the CAM Licensing Bill).  HB 15-1040 would require only those  CAMs in HOAs with 200 or more homes to be licensed.  Thus approximately over 7,700 of the 9,600 registered HOAs would be exempt from their CAM being licensed and allowing the CAM to operate without any oversight, guidelines, and with little accountability: the very problems that prompted licensing. 

Licensing was implemented to provide oversight and prevent abusive practices in the CAM industry in ALL HOAs and improve the skills and credentials of ALL CAMs.  There is no relationship between the size of an HOA and vulnerability to abuse.  In fact the opposite may be true as smaller HOAs more heavily rely on the CAM for all facets of asset and financial management  The reasons prompting this Bill have not been mentioned but surely won't be corrected by simply excluding smaller HOAs which is an arbitrary solution to an undefined problem in the licensing law.  As with any law there can be improvements when it causes unintended problems.  Minor changes to the law may be needed as we suggest below but NO consideration should be given to excluding CAMs from operating rules and guidelines simply because they manage a small HOA, 

A very important feature of the licensing law is that it provides for HOAs and home owners in small and large communities with an out of court dispute resolution process that otherwise requires complaints to be resolved in our costly, time consuming, and litigious court system.  The out of court dispute resolution saves HOAs and home owners on legal costs and allows an affordable and accessible venue for home owner and HOA problem resolution.  This right should be afforded to ALL HOAs but this Bill would exclude this process to home owners in smaller HOAs.

Smaller HOAs deserve the same protections afforded to those in larger HOAs and this Bill would do the opposite.  The educational requirements, cost to acquire a license, and/or type of license for those serving small HOAs (under 50 homes) might be revisited with just cause based on experience with the law but under no circumstances should CAMs serving smaller communities be allowed to operate outside of and not accountable under the CAM licensing law.

HOA Property Manager Licensing: Fees Transparency is a License to Abuse

The Community Association Institute (CAI), HOA lawyers, and large property management companies know one thing is certain: laws on transparency and disclosure will not inhibit abusive practices in the HOA property management industry.  In 2014 these groups combined their legislative, political, and financial efforts to kill a Bill (HB 14-1254) that would have ended or limited the dollar amount of the illegal and unjustified HOA home sale transfer fee.  They legislatively completed this by changing the Bill to address the transfer fee as a "disclosure item" in the upcoming property manager licensing law.  This was completed to avoid any direct oversight, scrutiny, or rules to ensure no change took affect.  Even the idea of real disclosure and accountability on justifying the legality/use of the transfer fee were so feared in the watered down Bill that ALL definitive language was removed:  no requirements to disclose why the fee was charged, who determined the amount and pocketed the fee, who benefited from the fee, what work was performed that was extraordinary/unique due to the sale of a home that was not already paid for by HOA dues, that the HOA did not mandate the fee and it was neither a mandatory or legal requirement, and that if not paid could hold up the sale of a home.  The modified Bill also avoided stating that that any excessive and unjustified fee COULD NOT be challenged by the home seller/buyer and if found to be inappropriate by the State property manager licensing authority COULD NOT be directed for refund or reduced in amount .  Thus the crafted disclosure Bill had nothing to do with justifying the fee or reining in abuse but only to ensure its' unabated continuance.

So the lesson in Disclosure and Transparency Legislation 101: A Bill portrayed to rein in abuse and misuse through disclosure will present the illusion of change, enforcement and consumer protection but change nothing with the most significant impact being that the abused be informed (and only minimally) of how they are to be abused.

The Colorado HOA Forum will continue its' efforts to educate the public and legislators on HOA issues and to legislatively end/limit the HOA Transfer Fee to save Coloradans millions each year.