Colorado HB 16-1217: another administrative, mostly unenforceable HOA Bill

We have received several emails that have asked why we haven't been excited about HB 16-1217 (see below).  The presentation of this Bill is that it will change things for home owners; it will implement the significant components of the State HOA Study 2013; and it will improve upon home owner's rights and an ability to resolve HOA disputes out of court.  Unfortunately, none of this is fact and HB 16-1217 is more "feel good" legislation than impacting.  You make the call.  We would like to be more optimistic about HOA legislation this session but the only proposed Bill 16-1133 (simply requiring a receipt for fees assessed home owners) was vetoed.  If you think we are wrong let us know but we get exhausted with HOA Bills that are proposed with no means of enforcement. 

1.  This Bill will use a different methodology to compute HOA registration fees: a per unit fee.  Fine but no particular impact on home owners and the current law appears to authorize this. 

2.  Develop, maintain, and publish a statewide election monitoring referral list consisting of independent contractors who can monitor HOA elections.  First, how will "independence" be determined and who will select the contractor: home owner or HOA Board?  Who are these folks and what qualifies them to monitor HOA elections?  There is no background check on the integrity or experience of these contractors?  There is no certification of contractors as to their HOA educational requirements and HOA law?  The bigger question is who will pay for these contractors and what is the process to get these folks involved in an HOA election?  Who puts the money upfront to pay for these contractors?  The cost of these contractors will most certainly be several thousand dollars to do a thorough job with any report of the election and recommendation for changes mostly unenforceable.  Election irregularities will require the home owner to go to court to get enforced (same as now!).  What happens when the HOA refuses to allow these folks in to oversee an election? These contractors may monitor an election but what authority do they have to demand election procedure changes or when improprieties occur what enforcement authority do they have to demand election results be invalidated and another election occur: back to court?  Thus it appears we will have a list of costly and unvetted election officials that can have little to no experience in HOA matters, have no formal HOA education, have no enforcement authority, will keep HOA disputes in court, will cost home owners, and finally, get this, the law specifically states DORA will place a disclaimer on their site that they do not endorse anyone on the list. 

3.  Require the officer to develop, maintain, and publish a statewide referral list containing the names and contact information for independent contractors who provide mediation or arbitration services on HOA matters.  First, mediation costs and adds time and process to dispute resolution with NO guarantee of a decision and/or a decision that is enforceable.  Licensing HOAs will bring an out of court binding dispute resolution process that is affordable and accessible and we are working on this, not mediation that has failed home owners for decades.  Next, anyone, you, me, the Orkin bug man, can be a mediator: there are no professional mediator standards set by any licensing Board.  The folks on this list will not be required to have any confirmed formal HOA law and/or HOA coursework or history of HOA mediation.  The people on this list will not be vetted except for what they place on a resume.  The list will not provide the cost to the home owner.  If you currently want a mediator you can Google "HOA mediator" and your list will be as vetted as the DORA list.  DORA will disclaim endorsement of any mediator.  The list will not include any information as to what a mediator can accomplish, what is enforceable, indicate that the parties can walk away from an agreement at any time without prejudice (see CCIOA), discuss that the HOA need not attend the session or can walk out of the session at any time leaving the tab to the home owner, etc.  Thus we get a list of unvetted, unlicensed, no guarantee of knowledge of HOA law mediators for you to pay with you hard earned money.  This is the situation today.

 

 

HOA and Property Manager (CAM) Complaints: Speak Out

The HOA Property Manager (aka Community Association Manager (CAM)) licensing law was fully implemented July 15, 2015.  This law provides home owners a chance to help clean-up abusive industry practices and provide a forum for home owners to rein in violations of State law and HOA governing documents.  HB 13-1277 is the licensing law.

The complaint process involves an on-line/web application and is fully explained in our Complaint Guide and should not take more than 15-20 minutes.  Since the State HOA Office has no investigative or enforcement authority we suggest you direct all your HOA problems that you want investigated to DORA under the licensing law.  The State HOA Office can also be apprised.

Several CAM violations stand out and we ask you and your fellow home owners to pursue via a complaint: 1) CAM is not licensed (simple lookup on your part) 2) violations in conducting elections, meetings, extremely poor property maintenance, records release(items a,b,and/or c below)  and 3) charging HOA Transfer Fees (items “a” and “c” below).  All are applicable to CAM complaints.  Each one requires a separate complaint.

The explanation of your CAM complaint involves: 1) a description of your problem including how you understand it violates your rights.  Include one or more of the below statements extracted from the licensing law to support your complaint.  2) Evidence such as you paid a Transfer Fee documented on your home closing papers, your request for documents has been refused, etc.

Supporting all complaints should be your documentation including an email informing BOTH the HOA Board and CAM of your problem, allow 7-10 days for resolution and if not resolved file a complaint. If you need guidance let us know.  Complaints are confidential with DORA.

Let’s all participate to surface problems and hold violators accountable.

Extracts from CAM Licensing Law:

a. KNOWINGLY VIOLATING OR KNOWINGLY DIRECTING OTHERS TO VIOLATE CCIOA (or your HOA governing documents)

b. HAVING DEMONSTRATED UNWORTHINESS OR INCOMPETENCY TO ACT AS A COMMUNI-TY ASSOCIATION MANAGER BY CONDUCTING BUSINESS IN SUCH A MANNER AS TO EN-DANGER THE INTEREST OF THE PUBLIC

c. ANY OTHER CONDUCT, WHETHER OF THE SAME OR A DIFFERENT CHARACTER THAN SPECIFIED IN THIS SUBSECTION (1), THAT CONSTITUTES DISHONEST DEALING.

Colorado HOA Property Manager Licensing: make it effective and not burdensome

The HOA Property Manager Licensing Law HB 15-1343 has now been fully implemented and some obvious weaknesses and flaws exist that should be addressed.  Two issues stand out that need attention: changes to the law and DORA's administration of the law.  This posting addresses changes to the law.

 

Community Association Manager (CAM aks HOA Property Manager) law:

The law requires small HOA CAMs to pay and complete the same requirements as mega-CAMs.  This has caused CAMs serving small HOAs (in particular in rural communities) to end their services: the financial burden was too much.  Relief should provided in the law, similar to small HOA registration requirements, to reduce educational and other fees requirements but NOT eliminate them for those CAMs serving less than a total of 25 units.

 

This law, similar to HB 14-1254, Disclosure of Fees, was supposed to require full disclosure of any fees assessed and/or collected by a CAM (from the HOA or home owner).  DORA has allowed this to be defined as a one-liner in a contract or on home closing documents with no detail, no receipt to the home owner, no justification of the fee, and no mention that the CAM, not the HOA, determines the amount of the fee and retains it.  Disclosure is particularly important when CAMs assess HOA Transfer Fees that average $350 on the sale of an HOA home and provide no legal basis, receipt, or work justification.  Disclosure must be not only required in detail but clearly defined what detailed disclosure means.  Any fee assessed home owners, in particular the Transfer Fee, must be in compliance with State law SB 11-234 that authorizes and limits this fee. Note this law can't limit the amount of, refund, or adjust a fee but it is a first step in reining in this abusive fee.

 

The CAM law needs to be more clearly defined and strengthened to include requirements that CAMs must comply with State laws and the HOAs own governing documents.  DORA has refused to include explicit rules and the law should be updated to clearly include:

 

        CAMs must comply with all State HOA laws and with the governing documents of the HOA they serve and knowingly violating or being aware of such violations is subject to fines and/or revocation of license.

 

       If a CAM is aware of an HOA Board being in non-compliance with State HOA law or their own governing documents they must immediately advise the Board and their legal representation of such non-compliance and suggested corrective action;  if the corrective is not taken the CAM must apprise both Board and the HOA's legal representation in writing of such violation and recommended corrective action;  if corrective action is not taken within seven days after CAM notification, the CAM will notify DORA and the HOA's legal representation.

HOA Group Continues to Block HOA Legislative Reform

The name sounds HOA home owner friendly but the organization has nothing to do with representing home owner interests:  just the opposite.  The Community Association Institute (CAI), the trade group for property managers and HOA legal interests, has thwarted HOA legislative reform for decades.  They have obstructed legislative efforts to promote enforcement of HOA home owner’s rights as stated in State law and HOA governing documents while getting legislation passed to promote their financial interests and ensure continuation of abusive, unjustified, and illegal fees on HOA home owners.  To say this another way, our legislators have allowed this group to write, modify, and suggest HOA legislation that has been detrimental to home owners.
 
Recently the CAI led efforts to kill legislation that would have saved home owners nearly $10 million in abusive and unjustified HOA Transfer Fees; this legislative session successfully blocked legislation that would require home owner approval on the use of HOA funds in litigation;  don’t support an out of court, affordable and accessible binding dispute resolution process for most HOA complaints;  got legislation passed to promote the sale of their costly educational courses and gained exemptions from State testing mandates for those that purchased and completed their courses; didn’t support reduced financial and educational requirements for the smallest of HOAs (20 or less units) to relieve them of costly licensing requirements; and opposed requiring full disclosure and justification of fees assessed home owners by property managers in the licensing rules.
 
Until our legislators place a priority on and listen to HOA home owners who make up over half of Colorado’s population vs the CAI financial interests the complaints to the State’s HOA Office will continue and home owners will be vulnerable to abusive and costly practices.  

Construction Defects Legislation: home owners await final version, changes required!

To date, the Colorado HOA Forum, Colorado's largest HOA home owner advocacy organization,  has mostly commented on the Colorado Construction Defects Bill, SB 15-177, by refuting empty contentions from the opposition.  We favor the Bill in principle as it could provide protections and empowerment for home owners in the use of their funds for litigation.  This Bill is still in the development stage and our FINAL approval must await the FINAL Bill.

 

It appears the primary purpose of this Bill was to mitigate the number of construction defects law suits and to provide for an environment to promote the building of affordable housing.  This is to be accomplished by changing State HOA law and further defining the rights of home owners and authority of HOA Boards.  Our recommendations, listed below, have been submitted to the Bill's sponsors and Legislative Committees that will review the Bill. Our final support for this bill will be determined by the inclusion/exclusion of our recommendations.

 

1.  This Bill will modify State HOA Law and thus should not limit the requirement for home owner approval on the use of HOA funds in litigation and/or approving legal action to only construction defects litigation but all litigation/court cases.  This will provide home owners with broader protections against using HOA funds on costly litigation without their knowledge or approval and still accomplish the intended purpose of reducing the number of law suits.

 

2.  The process to gain home owner approval through voting on the use of HOA funds in litigation and/or to pursue litigation must include a process of voting similar to that used by the HOA for other referendums and  this includes the right to proxy vote.  Without the use of proxies those not capable of attending a meeting in person to vote on litigation will have their rights violated as described in their HOA governing documents.  The specific groups to be harmed by precluding proxy votes are the disabled, seniors, and in particular military personnel (who quite often are deployed and not available for in person voting.  Additionally, proxy voting precludes using scheduling as a means to control the outcome of a vote whereby a date/time is chosen to conduct the in person vote when most can't attend.  Thus gaining a majority outcome, pro or con, is highly unlikely; this is an anti-home owner practice. We also find no precedence in HOA law to exclude proxy voting.

 

3.  It should be clear in the Bill that both plaintiff and defendant must agree upon the arbiter.

 

4.  A clause indicating that any sole home owner can pursue litigation using their own funds to bring a law suit in their behalf.

 

5.  Defined procedures to give both developer and home owner opportunities to resolve the construction defects issue prior to proceeding to litigation.

 

6.  The Bill indicates that a vote of home owners can't negate/remove the mandate in the original Declaration to use arbitration for construction defects litigation.  Although this is problematic as it limits the right of home owners to change the governing documents it also can serve to keep costly litigation out of the time consuming and costly court system.  There is no evidence that such clauses are changed in significant numbers so the impact of this mandate may be more insightful than have any real impact.  Also, home buyers are made aware of this restriction when they purchase the home like any other HOA restriction.