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 Transfer Fees: the Most Abusive and Unaccountable Billing You Will Ever Receive

No other bill you will receive will be lacking in documentation and accountability as much as the property manager HOA Transfer Fee.  This fee, first known to the HOA home seller at home closing, requires no hard copy receipt, no justification for charges, and no limits on amounts billed and if you don't pay it you can't sell your home.  How do they get away this extortion of fees imposed on home owners?  Read about this illegal fee and efforts to contain the abuse imposed on home owners on the Colorado HOA Forums web site:  www.coloradohoaforum.com

Billing Practices Comparison

HOA Transfer Fee is Triplicate Billing

HOA Transfer Fee and the Community Association Institute (CAI): will not even support requiring property managers to provide a detail billing to home owners

HOA Property Manager Implementation: Problematic

Colorado fully implemented its' Community Association Manager (CAM) Licensing Program (aka HOA Property Manager) July 1, 2015.   DORA, the state Agency responsible for implementation and management of the program, had over one year to analyze, plan, design, develop, test, and implement the program.  The scope and complexity of the program are very similar to other regulated professions in the State thus making implementation neither new territory or requiring a host of new on-line applications.  Our organization, Colorado HOA Forum, offers the following status report on this program and it is not good:

1.  The rules developed by DORA to ensure CAM compliance with the law and bring accountability to the profession are ambiguous and require change.  Specifically, (1) rules need to definitively and comprehensively state CAMs must comply with all State HOA laws and HOAs governing documents; (2) require CAMs to notify HOA Boards if any of their activities are in non-compliance with State HOA laws and/or HOA governing documents and recommend corrective action and if violations continue the CAM must report the event to DORA and the State's HOA Office;
2. DORA requirements for full disclosure of CAM fees assessed HOAs and home owners are severely lacking and avoid accountability.  In particular, DORA requires nothing more than a one liner in an HOA contract or on home closing documents to represent full disclosure which is simply conceding to CAM industry demands to allow things to remain as is.  DORA full-disclosure requires no detailed explanation of a fee or why it is charged, who determines the amount of the fee and retains it, confirming and explaining that any fee doesn't overlap or duplicate any charge already paid for through HOA dues or by a Title Company ( (such as the HOA Transfer Fee), requires no receipt to the payee identifying charges by line item, and no requirement to justify the authority to charge the fee and a statement how any Transfer Fee is in compliance with State law HB 11-234 that defines and restricts this fee.
3. The DORA web site complaint application requires changes to make it easier to use:  develop an on-line complaint status process;  assign a tracking number upon completion of complaint for users to inquire/determine the status of their complaint; allow users to mail in documentation that is not conducive to e-mailing; immediate on-screen confirmation when completed with complaint that indicates a successful filing;  the license lookup system doesn't list provisional/temporary licenses and only lists one licensed CAM for the largest of property management companies;  one can't enter an HOA and find the CAM; search results for a CAM license lookup results in display of information from all DORA programs (clutter!); allow for display all HOAs serviced by a licensed CAM; and provide options to classify the type of CAM complaint to make review and justification of complaints easier to complete and review.
4. The time frame in which CAM complaints are resolved is extremely slow to non-responsive.  There are cases where DORA knows for months a CAM is not licensed and refuses to take action such as a cease and desist order and/or fine.  Closing out/decisions on complaints is very slow and too often complaints seem lost in a bureaucratic maze.
5. DORA licensing, fees, and educational structure is burdensome to the smallest of CAMs and relief to these small businesses should be implemented similar to relief given small HOAs in registration fees.
6. The licensing program to date is more of a fees imposition and collection system and sales promotion tool for educational courses for a private firm (Community Association Institute (CAI) than a program for bringing integrity and accountability to profession.

CAM licensing program deficiencies need to be addressed to serve the needs of the public vs catering to the interests of the very industry it is supposed to regulate.

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 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. 

If you paid an HOA Transfer Fee the Colorado HOA Forum wants to know

If you recently sold your home in an HOA and paid an HOA Transfer Fee or Status Letter charge the Colorado HOA Forum wants to know.  The fee is charged to HOA home owners, condominium and time share owners, and mobile home park residents on the sale of their homes.  The fee is NOT assessed, retained, or amount determined by the HOA but by the property management company (PM).  Home owners are normally first apprised of the fee at home closing, provided no receipt or justification, amounts range from zero to over $1,000 with no relationship to work performed, and if you don't pay the fee your home sale will be stalled.  The fee is not required by law or to be part of the home closing.  These fees cost Colorado HOA home owners upwards of $10 million a year. 

The fee is assessed illegally!  SB 11-234 makes the transfer fee illegal unless it pertains to extraordinary costs incurred by a PM in the sale of the home.  The transfer fee is "supposedly" charged to reimburse PM's for costs in producing a final home owner's "status of financial standing" with the HOA.  Note, this is mostly no more than a final billing that is computer generated taking all of five minutes i.e. routine work.  Any justified status letter/transfer fee charges should not include services already paid via HOA dues including producing a statement as to financial obligations of the home owner with the HOA, researching any liens on the property, inspection of the property's condition, producing copies of official HOA documents (that are normally free upon request or involve only a minor fee by the HOA), or for administrative costs such as changing names in records, issuing new card keys or gate remote controls, or updating billing systems (this is all routine, paid for with HOA dues and no different than work required when residents marry, divorce, upon a death that don't result in additional charges to the home owner).  Thus, any transfer fee/status letter charge should be fully documented, involve only extraordinary and unreimbursed costs incurred by the PM, and not involve any charges for work already paid for by the home owner with HOA dues.

The new HOA property manager licensing law also precludes PM's from duplicative billing for services, unreasonable and excessive billing for services, and not fully disclosing and documenting work performed.  PM's in non-compliance can have their licenses revoked.  Additionally, transfer fees as discussed in this article are not allowed when they involve an FHA/HUD loan.

The Colorado HOA Forum wants to hear from anyone who sold their home in an HOA and paid a transfer fee or status letter charge.  Contact them at coloradohoaforum@gmail.com .  Home owners may be eligible for a refund in part or in full as part of an individual claim or class action suit.

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 (www.coloradohoaforum.com) web sites.

HOA Bill Should be Downright Embarrassing to Colorado Legislators

HB 15-1343 was crafted to "fix and streamline" the HOA property manager licensing law" that will begin full implementation July 1, 2015.  To date, the Department of Regulatory Agencies (DORA) that is responsible for implementing the law has reported no problems to be fixed, no problems with available financial resources to support the program, no lack educational course providers, no problems with their ability to develop exams and conduct testing and grading, nor has DORA reported that the program is too burdensome on business.  DORA has not completed one status report on the results of implementing the licensing law.  DORA's responsibility is to get the program up and running and comply with the law (not  make the law). 
Arrive the special interests.  The same special interests (Community Association Institute (CAI)) that represent the industry to be regulated.  This interest group basically wrote the licensing law and rules and even got legislators to insert verbiage into the law to promote their lucrative business of selling property manager classes.  It appears they have even influenced DORA to avoid a legislative directive to make licensing rules that include full disclosure of all property manager fees and assessments levied against home owners. 
Now the CAI working with legislators and DORA manages to get this Bill proposed as a "streamline and fix" to the licensing law based upon no experience with the program and no reported problems and even before the program is fully implemented.  They further convinced legislators and DORA to again promote the selling of specific CAI courses in this Bill and to allow anyone who pays for and takes CAI courses to avoid State testing mandates. 
This Bill should be downright embarrassing to the sponsors of the Bill and any legislator who votes for it.  To date the licensing program is heavy on fees and mandates on businesses and lite on the intended purpose of the law which is to address abusive industry practices and consumer protections.  Is it any wonder why citizens don't trust or participate in government. 

Colorado Style HOA Manager Licensing

Colorado-style licensing of HOA property managers: let the fox watch the henhouse.  The business model to develop Community Association Manager (CAM) licensing legislation (and other HOA legislation):  1) legislators consult with the Community Association Institute (CAI)) to craft a Bill aimed at mitigating abusive practices of property managers who are the very folks the CAI represents 2) CAI lobbyist and their CAI “dependable” legislators become Bill sponsors 3) the Bill is assigned to Committees with CAI “dependable” legislators 4) the Bill becomes law with little to no home owner input, full of promoting CAI interests, and heavy on fees and costs and processes imposed on CAMs and 5) the Department of Regulatory Agencies (DORA) implements licensing rules highly reflective of CAI efforts but fail to even contain explicit language for CAMs to obey State law or an HOAs governing laws or for CAMs to report observed violation of the law thus ensuring oversight is empty from the home owner’s perspective.  Then adding one final insult to home owners, DORA was supposed to address abusive, duplicative, and excessive CAM fees assessed home owners (pocketed mostly by CAI members) by requiring “full disclosure” of fees in licensing rules.  DORA mandate for full disclosure on fees:  only require a one liner buried in an HOA contract with the CAM or on home sale closing documents; no requirement to provide any explanation or justification of fees, no required detailed billing  documentation of charges to the home owner, no documentation of how the fee was determined or who retained it, and no mention that the fee is not legally mandated or how the law limits this fee to be charged.
  
The HOA Manager Licensing Bill, well intentioned and having the potential to clean up abusive practices and fees, has turned into a fees and license collection entity within State, a marketing tool for the CAI to sell its’ educational courses, a law to support the continuation of the HOA Transfer Fees, and a financial burden on small HOA CAMs that has resulted in many quitting the business.  Little can be seen in this Bill to complete the intention of the law: consumer protection.  If all this wasn’t enough in supporting the status quo, a few legislators and DORA working with the CAI have proposed a Bill  (even before the law is fully implemented) to change licensing rules to further promote CAI educational courses and membership, allowing the CAI to partner with and complete DORA responsibilities of credentialing, testing, and grading CAM applicants, and gaining exclusions selected CAI members.

Licensing of CAMs in Colorado is truly the fox watching over the henhouse and exemplifies why it is so difficult to bring trust and participation from citizens in our government. 

CAM Licensing Hearings Fall Short For HOA Home Owners

The final public hearings on developing rules under the Community Association Manager (CAM) licensing program surfaced little in the way of new recommendations but plenty on weaknesses in home owner protections.  The rules were absent of details that are the foundation for home owners to bring complaints against abusive practices:

a.  No specific rule that CAMs must comply with HOA governing documents or State law.

b.  No rule requiring  CAMs to take action when they observe an HOA Board in non-compliance with their own governing documents or State law.

c.  Disclosure requirements on CAM fees imposed no new requirements.  DORA was supposed to address disclosure on the costly and controversial HOA home sale Transfer Fee.  Disclosure will only require a one line statement in a CAM contract and/or on home sale closing documents; no requirement to explain or document the fee to the home seller or to provide a hard copy invoice detailing (disclosing) services performed for the fee; no mention that the fee can only be for expenses incurred by the CAM in relation to the home sale for which they have not already been paid.

d.  The issue of reduced fees and educational requirements for the smallest of HOAs (20 or less units) was ignored.

A Bill will be submitted this legislative session to make changes to the licensing law.  The above shortcomings were requested for inclusion.  Unless these items are resolved the licensing law could end up being another HOA law that appears to help home owners but has little enforcement capability from the home owner’s perspective. 

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.

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.

Colorado HOA Forum's Newsletter Aug - Oct 2014

We've delayed the distribution of our newsletter until after the 2014 election.  We distribute it to legislators and wanted that event to pass and allow for our email with the newsletter to not be mixed in with their election material.  Previous newsletters 

 

Note, the newsletter will continue to cover Colorado HOA issues but we are attempting to provide readers with a more broad and diverse source of HOA news.  We do this by scanning HOA news from around the nation. We hope this provides the reader with topics we wouldn't ordinarily cover but are of importance.  Although some of these articles are from other states the content is applicable to Colorado.  As always, consult your HOA governing documents and our State laws prior to proceeding with any complaint or legal action and/or write us or the Colorado State HOA Office for comment.

 

We continue to ask your support in contacting legislators to sponsor our legislative goals to reform HOA governance.  We are available to meet with them at their location, date, and time of convenience.

 

Please join our cause, receive our newsletter, and get involved in our email campaigns for legislative reform.

HOA Oversight (in Colorado) Raises Questions: Part I of II

The length of this article requires it to be published in two Parts. This topic could have been written in two paragraphs without background and factual content but then the it would appear to be just another article of allegations and rambling without explanation or supportive discussion.

You've seen it before. An industry pollutes or its' practices cheat citizens so much resulting in regulation of the industry. You've also observed the very industry to be regulated writing the rules and getting too involved with the regulatory process. In Colorado the Department of Regulatory Agencies (DORA) implements HOA law, issues HOA property manager licenses, can levy fines for violations, hosts the State HOA Office, and provides oversight.

DORA's independence in HOA legislative proposals and implementing the law raises questions. In particular, their relationship with the with the well financed lobbying organization (the Community Association Institute (CAI)) that represents HOA property managers (also referred to as Community Association Managers (CAMs)) and HOA lawyers. Although we don't suspect any criminal violations or anyone in DORA receiving financial benefit, we do observe events that make the impression that the CAI is influencing regulatory guidelines and legislation at the expense of home owners.

A recent Colorado law licensing CAMs was jaded with DORA's tacit approval of a highly unusual precedent in regulatory legislation. DORA was aware of and never spoke up about questionable verbiage inserted in the law that defined educational requirements. The law listed one provider's (CAI) educational courses to satisfy when other's were known to be available. This is using regulatory legislation to promote a private business! DORA should have made known that they neither reviewed or certified any of the CAI courses since they would be stuck with using them if in the law (even if subsequently they found them to be deficient).

DORA has also been directed to write property manager guidelines. Their proposal seems very much like CAI guidelines that were developed several years arlier. How questionable is it to have the very industry you are regulating write the oversight rules and regulations? Will the dozens of proposed guidelines received by DORA from the public get equal importance?

More in Part II

Colorado Construction Defects Issue is an HOA Issue

A construction defects Bill was introduced to the Colorado legislature last session.  It got caught up in the legislative process (purposely) and never got voted upon.  The issue is back.  It touches directly on home owner rights and limiting the ability of an HOA Board to spend HOA funds on law suits without the knowledge of, awareness of, or approval (via a vote) of home owners.  Below is the most current correspondence issued by the Colorado HOA Forum www.coloradohoaforum.com to State legislators and to our members.  Colorado is not alone in home owners pursuing legislative reform on limiting the authority of HOA Boards.  I can't go without apprising you of the fact that the Community Association Institute (CAI) opposes our recommended legislation (it would greatly reduce the opportunity for litigation). 

 

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To our members:

 

The below was sent to all legislators.  A construction defects Bill will most likely again be worked on in the next legislative session.  Our perspective on this is to protect home owners from bankrupting and/or using HOA funds on law suits when home owners are not aware of, provided justification of, or approve of such actions.  This would also allow litigation in construction defects when approved of by home owners.  Note, the CAI, whose interests with the legal industry, objects to our proposed legislative Bill and appears to promote law suits over home owner's rights.

 

To legislators:

 

The issue of construction defects litigation is directly impacting on HOA legislative reform.  The Denver Post's most recent article on this issue prompted our below letter to the editor.  We know that a Bill that would limit the authority and ability of HOA Boards to embark on costly law suits without the knowledge, awareness, and approval of home owners would resolve many construction defects litigation issues.  It would not preclude legal action but require home owners, who pay the tariff, to make decisions on these costly and potentially financially disastrous.  It would seem to satisfy the want of the construction industry and protect and empower home owners.  This HOA legislative reform is needed regardless of construction defects.  I ask your sponsorship for such a Bill should you continue to serve in the State legislature.  Thank you.

 

Email to Denver Post:

Construction defects litigation proposals hit at the core of problems in Homeowners Association (HOA) governance.  Passing legislation to empower HOA home owners by limiting the ability of an HOA Board to use HOA funds for legal actions without their approval will be a win-win on this topic.  HOA Boards can (legally) embark on costly law suits without justifying or informing home owners of their intentions and without their approval.  Legal costs have financially drained and/or bankrupted many HOA's.  HOA legal actions can and have resulted in draining HOA reserve funds and costly special assessments on home owners.  Opposition to limiting HOA Board authority comes from the legal community and the Community Association Institute (CAI).  Their constituents prosper with an ability to access HOA funds to pay for costly litigation without having to "bother" with home owner approval.  Legislation to limit HOA Board authority in spending on legal actions would empower and protect home owners from costly, baseless, and home owner "unsupported" legal cases.  Such a Bill would not preclude legal actions (in construction defects and other areas) but ensure that those who pay the tariff, the home owner, know who is spending their money, on what, and how much. 

Why HOA State Law and Governing Documents are (not) enforceable

There are plenty of definitive and comprehensive State HOA laws.  HOAs have their own governing documents defining controls, covenants, and restrictions.  HOA Boards ensure compliance of covenants through their authority by issuing fines, court actions,  and/or foreclosing on property for unpaid fees, fines and special assessments:  This is part of living under HOA governance and home owners must understand the HOA governing documents were developed with the intention of enforcement.
 
Now that takes care of enforcement of home owner compliance.  What about when an HOA Board violates the governing documents or even State HOA law?  The rules of enforcement change and home owners begin to understand that enforcement may be a one way street and they are running into oncoming traffic.  The only means of enforcement from the home owner's perspective is our costly, litigious, and time consuming court system.  Most home owners simply can't afford or compete with the unlimited funds of the HOA and their paid attorneys in even the most simple court case.  Yes, lawyers are allowed in Small Claims court.  Furthermore, if the home owner loses they most likely will pay the HOA legal costs.  Under the current environment of HOA litigation most home owners quickly understand that the cost of pursuing a violation by their Board, management company, or HOA attorney far outweigh the benefits and their chances of justice in a "pay to play" court system preclude pursuing their complaint.

HOA home owner complaints simply don't belong in our court system.  They mostly involve violations of HOA governing documents and when pursuing financial losses the amounts are low.  The cases are not complicated and should not require lawyers.   Such cases unnecessarily add to court work load and costs.  What is needed, and has been endorsed by a State sanctioned study on HOA dispute resolution, is the implementation of an out of court binding dispute resolution process.  This venue is affordable, accessible, and provides an environment in which facts and fairness trump financial resources.  It is also a process that is easy to understand, is expedient and simply involves filing a complaint with the State, the complaint is vetted for substance, and a hearing is completed by a State sanctioned med-arb (mediator with arbiter (decision making) authority) trained in HOA law.  If the parties in the complaint can't come to a binding agreement the med-arb will make the binding decision.  In affect, this is what happens in a court venue: someone, the judge, makes a decision and it is enforceable.  The process has a beginning and end all out of court and affordable.  Placing this process into law only awaits legislative sponsors (and overcoming objections from the Community Association Institute (CAI) and lawyers who profit by HOA court actions).

Colorado HOA Forum Begins it's Legislative Initiative

The Colorado HOA Forum has begun its' efforts on HOA legislative reform for the 2014-15 legislative session.  Our approach on changing Colorado HOA law is to gain legislative sponsors for our proposed initiatives through email and telephone campaigns, meeting with our law makers in person, and getting media coverage to promote our efforts.  Emails and notices sent to our legislators and the media.

We again will face the opposition of the Community Association Institute (CAI), legal community, and property managers in our efforts.  These are very well funded lobbyist with a history of obstructing HOA reform and they have many legislators in support of their self serving agenda.  Home owner groups must continue in their efforts to dispel the belief in State legislatures that the CAI somehow represents home owner interests: this is the current environment.  Once legislators consider home owner organizations opinions and initiatives equal to those of the CAI we can begin to implement HOA reform. 

We encourage HOA home owner organizations and individuals in Colorado and throughout the U.S. to continue lobbying their legislators and the media on the need for HOA reform. 

HOA Transfer Fees Still Burden Home Owners

HOA Transfer Fees will continue to financially burden HOA home owners despite new disclosure guidelines in the Colorado HOA property manager (Community Association Manager, CAM) licensing Bill effective July 2015.  This is a fee imposed on home sellers to subsidize the CAM industry, is not mandated by law, and funds are retained by the CAM not the HOA.    The fee, ranging from $100 to over $1,000 has never been justified by work performed, must be paid or the home sale can't be completed, and is not negotiable in amount (it's whatever the CAM decides, no if's, and's, or but's).  The cost to Colorado HOA home owners is over $10 million a year and nationwide the tab runs to several hundred million dollars a year.
Colorado began a road to reform on this fee with the introduction of a Bill in 2014 to limit the fee in amount, require CAMs to justify the reason and amount of fee, and show how they were not already compensated for all Transfer Fee work in their contract with the HOA (which to date they have never done).  The Community Association Institute (CAI) effectively killed the Bill and our legislators allowed them to re-write the Bill to preclude any dollar limits, negotiation of fees, or require justification and itemized disclosure of amounts charged.  Instead, HOA home owners got the issue pushed to the CAM licensing guidelines in the form of "requesting" the fee be disclosed ensuring nothing will change and it will continue to be a "pay it or you can't sell" situation.  The detail of disclosure can be a one liner "Transfer Fee" on a closing statement with no specific explanation or justification.    Also tacitly supporting this abusive fee was the Colorado Association of Realtors who refused to take a stand on the fee to help the folks who put bread on their plates: home sellers and buyers.
Our organization, Colorado HOA Forum, will again in 2014-2105 seek legislative sponsors to limit or end this fee.  The CAI will also be there to peddle their influence and kill any home owner efforts to end/limit this fee.