Colorado Construction Defects, SB 15-177: "protect the home owner" opposition in question

Let's be honest by acknowledging that any proposal on Construction Defects legal reform will not be ideal for either home owner or developer.  The high costs of unrestrained litigation, all fully funded on the backs of home owners without their knowledge or approval, simply needs change. Too often HOAs have their reserve funds depleted for legal costs and too often home owners are left with costly special assessments to pay for legal fees.  Then there is the argument by contractors that the proliferation and high cost of litigation associated with and instigated by HOA's thwarts the building of affordable housing. The system is broken, let's progress towards fixing it.

 

The predictable opposition to the Bill is from the Community Association Institute (CAI) and HOA trial lawyers.  They enjoy the current legal environment that results in a plethora of HOA court cases and unlimited funding of these cases through HOA bank accounts (and all without any involvement, knowledge, or approval of home owners).  The other opposition also comes from legislators on the "protect the home owner" band wagon. Their arguments are simply not consistent with their legislative actions.  Those legislators opposing SB 15-177 under the guise they want to "protect HOA home owners" have continually refused to support or sponsor Bills that would save home owners money, make current ineffective HOA laws effective, and improve HOA governance.  This legislative session they were asked to sponsor legislation to allow for an out of court binding dispute resolution process that would empower home owners in enforcing HOA laws with an affordable, expeditious, and accessible venue to resolve disputes (a process recommended in a State HOA Study);  end the abusive, excessive, and illegal HOA Transfer fee on home sales that costs home owners millions of dollars each year; to limit the excessive collection of fees and lawyer assessments on HOA debt; and most recently provide financial relief to small HOAs in the property manager licensing program.  It is difficult to understand and accept the "protect the home owner" argument when they have avoided every opportunity to do so in the past.  This is called being inconsistent.

 

The latest legislative contention is that this Bill would require a home owner to "seek a majority vote from all other home owners in the HOA to acknowledge their construction defect claim".  This is at best a half truth.  SB 15-177 does not to require home owners to acknowledge the validity of the construction defects claim but requires a Board to inform home owners of their intent on litigation (for any one or all home owners) and gain a majority of home owner approval to use HOA funds for litigation.  Thus, a vote is required if the individual home owner wants the HOA to use HOA funds to sue in their behalf.  This will mitigate the practice of HOA Boards and their lawyers taking on narrow and special interest litigation that is funded by home owners without community approval or benefit.  This is called open governance and protecting home owner interests.

 

Legislators on the "protect the HOA home owner" bandwagon must be challenged as to the validity of their opposition to SB 15-177 and also why, if they are so concerned about helping HOA home owners, they have failed to sponsor any substantive HOA reform over the past several years.

Phantom Opposition in Media on Colorado Construction Defects Bill

Colorado SB 15-177, construction defects reform, is aimed at reducing the number of law suits entered into by HOAs and to define, improve upon, and reduce the cost of dispute resolution.  This particularly impacts HOA home owners as it requires the approval of home owners prior to the HOA spending its' funds on litigation.  Too often HOA Boards at the encouragement of their lawyer enter into costly litigation without the knowledge or approval of home owners.  The consequences can be burdensome special assessments and increases in HOA dues to pay for the litigation and replenish reserve funds.

 

The Colorado HOA Forum, representing home owner interests, supports this legislation as currently proposed.  The Bill is opposed by the Community Association Institute (CAI) with a membership comprised mostly of property managers and HOA and trial lawyers. 

 

Lakewood, CO and most recently Lone Tree, CO have enacted local ordinances similar to the proposed SB 15-177.

 

We have monitored press releases on both the Lakewood and Lone Tree efforts.  The press (Denver Post, Denver Business Journal, and TV news) has again mentioned that opposition to the subject Bill is strong among HOA organizations and HOA home owners.  We challenged the media to identify just one HOA organization (members being HOAs) and/or one HOA home owner's organization (mostly home owners as members).  TO DATE NEITHER COULD IDENTIFY ONE!  THERE IS NO HOA OR HOA HOME OWNER's ORGANIZATION IN THE STATE TO OUR KNOWLEDGE OR THE MEDIA'S EXCEPT THE COLORADO HOA FORUM, NONE, LET ALONE ANY WHO OPPOSE SB 15-177.

 

This happens time and again with HOA issues: those representing the home owner's opinion being organizations and trial lawyers that are a hindrance to and block any HOA legislative reform such as the CAI.

 

This misrepresentation of who represents HOA home owners exemplifies why our issues for legislative reform and SB 15-177 have such controversy and difficulties in gaining support:  the opposition identified basically doesn't exist and/or misrepresents itself as supportive of home owners.

 

Below is a link to the latest article from the Denver Business Journal that suggests opposition from phantom organizations such as home owner groups and HOA entities:

 

http://www.bizjournals.com/denver/blog/real_deals/2015/02/lone-tree-to-take-up-construction-defects.html

 

We ask the press to once again get it right and verify who represents home owners and those who reject legislative reform that promotes home owner's rights and good governance.

CAI Threatened Over Empowering HOA Home Owners on the Use of Their Own Funds in Litigation: SB 15-177

The Community Association Institute (CAI), long incorrectly identified as a home owner centric organization in the press and by State legislators, is at it again in attacking HOA home owner’s rights.  The CAI represents the interests of property managers and HOA lawyers and not home owners.  This time they are objecting to a provision in proposed Colorado SB 15-177 (construction defects) that requires HOA home owners to approve the use of HOA funds in litigation.  Why the opposition?  The CAI and HOA lawyers view the HOA as a profit center and easy money and empowering home owners on decisions on the use of their own funds is considered disruptive and meddling.

Too often HOA lawyers raid HOA bank accounts for legal fees and costly legal cases that should not have been litigated leaving home owners with depleted reserve funds, special assessments to pay legal costs, and/or increases in HOA dues to replenish reserve funds. HOA Boards can currently enter into litigation without apprising home owners of their intent, the cost and consequences of litigation or how they intend to finance legal fees. Boards can incur unlimited legal expenses and even take out debt instruments to pay legal fees. Home owners in too many cases only know of the financial consequences after the case has been litigated and they are stuck with the bill.  This Bill simply reins in the authority of an HOA Board (that is highly influenced by HOA lawyers and property managers) in making decisions on litigation that can have significant if not catastrophic financial impact.

SB 15-177 would not preclude legal action but require a majority of home owners to approve litigation. This would mitigate the number of law suits and the abusive practice of an HOA Board suing in behalf of a very few (as few as two) vs the community at large.  More cases would be handled in the less expensive legal venue of arbitration thus saving HOA’s significant sums of money. Home owners could still pursue individual actions using their own funds.

The CAI is fabricating a tall tale in contending that any legal fees paid to an HOA lawyer related to routine advice and counsel would take a majority vote of home owners. This Bill doesn’t get involved in regulating or interfering with the operations and daily functions of the HOA. Legal counsel on enforcing covenants, controls, restrictions, and debt collection or other issues involving common and routine HOA issues would not require a majority vote of home owners. It’s just not in this Bill.  Payment of routine legal counsel doesn’t require a law suit today nor would it under this Bill. This Bill is directed at legal cases filed in a court of law that are specific, unique, non-recurring and financially impacting. The CAI is attempting in what should be an embarrassing statement to say that any payment to an HOA lawyer would have to be voted upon: this is called desperation.

The winner in this Bill will be home owners in HOA community associations (not the Community Association Institute) who will now be empowered with more control over the assets of the HOA and still retain the right to litigate construction defects.  This Bill does not impair the ability of any HOA Board to govern but contributes to open governance.