Thursday, July 9, 2015

HOA Home Sellers/Buyers Improperly Paying HOA Transfer Fees

The HOA Manager Licensing Law effective July 1, 2015 provides HOA home buyers/sellers the opportunity to challenge their payment of the HOA Transfer Fee.  The Law is very weak on home owner consumer protections and purposely avoided requiring HOA property management (PM) companies to provide justification and documentation of fees assessed home owners.  The law does, however, require all fees, charges, and assessments imposed and collected between a PM and an HOA and its' home owners to be authorized and fully disclosed in their contract with the HOA and/or in the HOA's governing documents else the fee is illegal.  Yes, this is a big deal as HOA home owners shell out upwards of $10 million a year with this erroneous fee.

The authority of an HOA to assess and collect dues and special assessments are defined in HOA governing documents and State Law and are legal financial obligations of the home owner and should be disclosed to home buyers.

Fees assessed HOA home owners by a third party (PM) but not authorized in an HOA's governing documents/declaration or defined in an HOA contract are illegal.   Thus, PMs are not legally justified to assess home owner fees simply because the home owner's dwelling is in the HOA they service.  The new licensing law requires all HOA fees collected and retained by the PM (including the HOA Transfer Fee) to be documented with the HOA.  State HOA law does allow PM's to bill home owners for unreimbursed expenses related to the sale of a home if such action is authorized in HOA documents.  The key point is reimbursement of only additional and extraordinary expenses incurred by the PM from the sale of a home and such expenses must be justified by work performed and not otherwise paid to the PM in its' contract with the HOA .

The HOA Transfer Fee is rarely if ever defined, justified, or authorized in any HOA governing document or contract between the HOA and PM or disclosed to home buyers.  The new licensing law makes this fee illegal if not fully disclosed in HOA official documents.  The issue of a legal Transfer Fee based on unreimbursed expenses is also a basis for contesting this fee.  PM's argue the legitimacy of the fee relates to: 1) expenses incurred to provide a copy of the HOA governing documents and a "status letter" (indicating the home owner's financial status on obligations to the HOA such as dues, special assessments, fines) to the buyer and 2) updating HOA records to reflect the change of ownership and issuing credentials to the new owners such as security keys, entrance gate remote controllers, etc.).  PM's charge between zero to over $1,000 for these "extraordinary" services without having to justify, explain, or document charges.  The fact is that these services are not extraordinary and are base line services the PM is already compensated for in their contract with the HOA.  Further, HOA governing documents are free to home owners/Realtors on HOA web sites or for only a small service charge.  The "status" letter is no more than producing a final routine billing to the home owner.  Finally, updates to administrative records are routine and no more labor intensive than when a divorce, death, rental, or marriage occurs and are considered baseline services in the HOA contract with the PM.

Thus the legitimacy of the HOA Transfer Fee can fail on several counts:  1)  if the fee is not for extraordinary and unreimbursed expenses 2) if authority to assess the fee is not documented in HOA official records 3) if the home owner doesn't receive full and detailed documentation of work performed  and 4) the fee can't include charges for work already compensated for in the PM contract with the HOA.  Home owners should protest this fee to the Colorado Department of Regulatory Services (DORA) if any of these conditions exist.  The State complaint form can be obtained from the DORA and the Colorado HOA Forum ( web sites.

No comments:

Post a Comment