Thursday, October 15, 2015

Denver's Construction Defects Ordinance: make it simple

State construction defects legislative reform has failed so localities do it themselves.  Now it's Denver's turn. The goal for developers is to cut down on the number of and frivolous lawsuits.  However, this always comes with too many caveats at the expense of home owner's rights.  Home owner's (not represented in the debate) would like to be empowered on the use of their funds in litigation.  Too often costly HOA litigation is pursued by HOA Boards and their lawyers without the knowledge or approval of home owners and can result in draining HOA reserve funds and special assessments.  A simple, compromise law that would serve both interests groups can be crafted by State legislators and integrated into State HOA law.  It is no more complicated than this:  All HOA litigation, other than for routine and administrative matters, funded with HOA resources and/or debt instruments requires a majority vote of approval by home owners.  Supplement this by requiring that prior to any vote home owners be made aware of the proposed law suit, its' purpose, total cost and funding sources, and the consequences in the event of an unfavorable decision.  This simple amendment to State HOA law will automatically cut down on law suits, save home owners and developers significantly in legal costs, and empower home owners over the use of their funds.  The issue of requiring arbitration is mostly a moot point.  Almost all HOA declarations over the past fifteen years requires this dispute resolution process and is only changed to promote costly court cases at the encouragement of HOA lawyers. Simple in this case is a WIN WIN for all. 

Friday, October 9, 2015

HOA Transfer Fees Costing Homeowners and Businesses Millions (Colorado)

The HOA Transfer Fee is assessed HOA home owners upon the sale of their home.  The fee ranges from under $50 to over $1,000 with no requirement to justify the fee based on work performed.  It's pay it or you can't sell your home.  Misunderstood is the fact that the fee is not retained by or amount determined by the HOA but by the HOA's property manager.   The fee is not negotiable nor can the services it supposedly provides be shopped for in the market place.  Worse yet the fee is not legally mandatory like taxes and filing fees but unquestionably entered on closing documents.   The fee costs Colorado home owners upwards of $10 million a year.

The fee was made illegal via SB 11-234 on all residential home sales except those with community associations such as HOAs, condominiums, mobile home parks, and time shares.  The fee can be assessed home owners for unreimbursed costs incurred by property managers related to the sale of a home in an HOA.  Thus only extraordinary costs apply. At no time in the debate to allow this fee has anyone from the property management industry and their trade group, Community Association Institute (CAI), offered evidence of what these unreimbursed expenses were to warrant any fee let alone fees averaging $350+.  Home owners pay HOA dues to cover updates to administrative and billing records, changing and exchanging security codes and cards, creating monthly billings and home owner financial status documents.  The dues also pay for updating and making readily available copies (for a small fee) of HOA governing documents.  So why are home owners being charged $350 on average to do what they are already paying for?

There is more.  Title/home closing companies charge a document fee averaging $150.  This in part/full is to cover costs associated with ensuring the buyer receives copies of the HOA governing documents and a Status Letter (no more than a final billing statement indicating the home owner's financial status with the HOA).  The property manager, not the HOA, can bill the Title company a fee in any amount to provide this information.   Thus the Title company may or may not use the fee in total to cover their own costs.  As mentioned, the HOA official documents can be obtained free by the home owner/Realtor via the HOA's web site and hard copies cost no more than $25 and the home owner has already compensated the property manager to complete these ordinary tasks with their HOA dues.

Then there is the Transfer Fee on home refinancing.  Yes, you buy a home then refinance a year later and pay the fee again.  The administrative and billing records remain the same and your security codes/cards don’t change.  The Status Letter (current billing) and HOA governing documents are emailed to the Title company and this costs you hundred’s of dollars in a Transfer Fee and "for what"?

Legislation to end this abusive, excessive, and illegally applied fee was pursued in Colorado several years ago but was watered down and then killed by HOA property manager interests.  The HOA property manager licensing bill was supposed to address the disclosure of the fee but not ending or limiting the amount or ability to challenge the fee: basically allowing things to continue as is.  Then the State Agency overseeing licensing endorsed disclosure to be a one-liner on closing documents ("HOA Transfer Fee") with no detail, invoice, limit on amount, or justification required.   

The Colorado HOA Forum, a Colorado home owner advocacy organization, will continue to lobby legislators to support a Bill to end or limit this fee.