Construction Defects Legislation: Denver Post gets it wrong AGAIN!

Re: Construction - defects bill hits snag, May 6, Denver Post

 

Our letter to the Denver Post concerning their problem of excluding HOA home owner's input into the Construction Defects Legislation issue and including the Community Association Institute (CAI) that represents HOA property managers and lawyers (NOT home owners) into the discussion. No matter how many times the post reporters are apprised of this concern they continue to seek out the CAI to represent home owners.

Letter to the Editor:

Each of the past several years legislation on construction defects litigation is introduced and each year the Denver Post reporters get this wrong.  They continue to identify the Community Association Institute (CAI) as representing those living in home owners association (HOA).  Wrong!  This organization represents HOA property managers and HOA lawyers.  There membership has nothing to do with home owners, HOAs or home owner centric interests.  They oppose empowering home owners to vote on the use of their own funds on litigation and promote court cases vs out of court, accessible, and affordable venues for dispute resolution(the issues in the legislation).  In fact, home owner's organizations have been excluded from input on this legislation.  Maybe the Post can get this right next year. 

 

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 Home Owners to Continue to Pay Fees with no Justification or Receipt

HB 16-1133 was defeated in Committee, February 22, 2016.  This Bill was simple, no burden on businesses or taxpayers, and only required HOA property managers (PM), also known as Community Association Managers, to provide a detailed receipt to home owners when fees are paid.  The Bill did not preclude any fees from being charged or limit amounts:  just provide a detailed receipt of work completed.  The Bill was intended to mitigate the practice of HOA PM's duplicate and triplicate billing for services already paid for via HOA dues or HOA Transfer Fees and/or Title Companies: happens all the time.  It also was intended to reveal the practice of excessive billing whereby PM fees for the same services ranged from $50 to $1000 and home owners were required to pay without a receipt or a lien could be placed on their property or stop their home sale.  Finally, a receipt was to be required to justify that the HOA PM Transfer Fee only represented expenses unique and incurred in the sale of a home which otherwise would make them illegally assessed as defined under State and Federal law.  This all proved to much help for home owners in the eyes of the legislators.

The Community Association Institute (CAI) and property managers testified before Committee hearing this Bill.  If you weren't in attendance their objections to this Bill will be difficult for you to believe but our legislators absorbed the misinformation to reinforce they NO vote.  Testimony contended that providing a receipt would impose an excessive cost and that it was impossible to detail the work done to earn the home sale Transfer Fee.  If they can't identify what they did to earn the fee what evidence is there that they did anything and why are they charging it?  CAI folks also argued that a one line statement in a PM's contract with the HOA (that home owners never see) and a one liner with amount on a home sales contract was enough disclosure and no need to justify the fee based on work performed or provide a detailed receipt to any home owner.  Do you think COMCAST, Xcel Energy, or Master Card can get away with billing you without providing a detailed invoice of work completed?  There is no legal basis except with HOA PM fees to demand payment without proving services rendered!

HOA home owners will continue to pay PM fees in an environment of "pay it, shut up, or else".  No other business would endorse such a practice but our legislature must be thanked for enabling, protecting, and approving this deceptive and abusive situation with their veto of Colorado HB 16-1133.

Triplicate Billing Tolerated With HOA Transfer Fees

Not that one needs another reason to dislike Homeowner’s Associations (HOAs), but try this one: paying for the same services three times.  The abusive and illegal practice of charging HOA Transfer Fees on the sale of a home in an HOA is well known to our legislators, the press, Title Companies, Realtors, property managers, and home owners.  Except for home owners all others ("tacit enablers") turn a blind eye to this deceptive practice that costs home owners upwards of $10 million a year in Colorado.  Here’s how it works and why it is also illegal:

a) HOA home owners pay monthly dues.  The dues cover such community expenses as snow removal, landscaping, and expenses for maintenance of common areas.  They also pay for  administrative costs such as the HOA directory, billings and collections, covenant enforcement, routine legal costs, maintaining a web site, posting HOA governing documents on the web site, administrative staff, and other operational costs.  In most cases the money is well spent contributing to the aesthetics and positive property values.
 
b)  When an HOA home is sold the HOA property management company (PM), charges the buyer a Transfer Fee.  The fee doesn’t benefit the HOA but is pocketed by the PM.  The fee amount is determined by the PM without any justification required or need to provide a receipt to the payee, it ranges from $0 to over $1,000, has little if any relation to “claimed” work performed, and if not paid the home can’t be sold.  The “claimed” justification is that the sale of the home caused the PM extraordinary and uncompensated expenses.  The “claimed” expenses specifically relate to updating administrative and financial records, providing a copy of the HOA governing documents to the buyer, and issuing a Status Letter to the buyer indicating the financial status of the home seller with the HOA on the date of sale (are HOA dues current, any owed special assessments or fines, or other obligations).  Average Transfer Fee in Colorado: $350.  Here's is the problem and why this is a duplicate billing:

     1. Updating administrative records doesn't result in additional charges to the home owner.  Think in terms of divorce, marriage, death, someone moving in or out, changing a bank account for payments, change of contact information, etc.  A home sale is not unique or extraordinary in this respect thus no fee is justified. 
     2. The Status Letter in any other business in referred to as a final billing.  This is no different than what one receives when terminating their TV cable service, utilities, or health club membership: it’s called the final bill, is routine, has all the detail and is official, no charge to the customer, and already paid for with HOA dues.
     3. Providing HOA governing documents to the buyer?  These are mostly available free of charge on the HOA web site.  The PM doesn’t maintain these legal documents nor are they changed upon the sale of a home.  The cost provide these to a home buyer or Title Company via email or compact disc is no cost to nearly unmeasurable and considered routine services paid for via HOA dues.

c)  When a home is sold in an HOA the Title Company is required to provide the buyer with a Status Letter and a copy of the HOA governing documents.  The PM charges the Title Company that passes the charges onto the buyer/seller: average $175.  See items “a” and “b” above.

d) HOA Transfer Fee can only be legally charged if such charges are justified to compensate the PM for uncompensated work in relation to the sale of a home:  SB 11-234. The HOA Transfer Fee fails this test.

Thus the HOA Transfer Fee represents a triplicate fee for services rendered as described in items a, b, and c.  All true and never refuted by the PM industry.  Why does such a deceptive and illegal business practice continue to be met with silence by the “tacit enablers”?  It’s called legislative lobbyists with the prize to the PM industry of $10 million a year. 

Denver Post Article Again in Error on Construction Defects Issues

"Climate for construction-defects reform in Colorado much changed", Jan 12, 2016
They simply refuse to get input from any HOA home owner's organization


The Denver Post again allows those making millions from HOA Construction Defects (CD) litigation to represent the voice and rights of home owners and distort the debate in CD legislative reform. No input from any recognized HOA home owner’s organizations. Their point person again on home owner’s rights is isolated to none other than the Community Association Institute (CAI). The CAI represents the interests of property managers and HOA lawyers, NOT HOME OWNERS.  If CD legislation is ever be explained in a truthful, balanced, and productive manner it must first get by the CAI smoke screen that is all too pervasive in this issue.  

First, almost all HOAs created in the past 15 years mandate in their Declaration that arbitration vs our court system be used in CD dispute resolution. Of the 8,500+ HOAs in the State most are beyond the statute of limitations to sue over CD. As a percentage or relative number of all HOAs, those that changed their Declaration (at the encouragement of HOA lawyers) is very, very small. Thus precluding HOAs from changing their declaration and infringing upon homeowner’s rights is a weak argument. Furthermore, a recent Colorado court case has ruled HOAs can be prevented from changing their Declaration. The CAI would have the public believe the inability to change the Declaration will have a profound impact on home owner’s rights but the reality is that it would mostly impact the ability of HOA lawyers to promote litigation in our costly court system.

The other issue involves requiring home owners to vote on the approval of the use of their own funds on CD litigation. Currently, any HOA Board at the encouragement of their attorney can spend unlimited HOA funds on litigation without the knowledge or approval of home owners. The CAI opposes this empowerment of home owners as it would effectively reduce litigation.

We at the Colorado HOA Form offer the following CD legislative proposal to mitigate litigation and empower home owners: "HOA home owners are required to be apprised of and vote on the use of HOA funds in all litigation". Why is this so difficult!

Join us for our Colorado Springs HOA Town Hall Meeting, Feb 13, free admission-open to the public

The Colorado HOA Forum will be holding another of its’ HOA Town Hall Meetings, this time in Colorado Springs, CO. The Meeting is open and free to the public and is the only HOA presentation from the home owner’s perspective. The Meeting includes an HOA home buyer’s seminar (9-10 am) followed by an array of HOA topics ending with an extended question and answer session for attendees. Find out about HOA legislation, HOA property manager licensing and responsibilities, HOA Transfer Fees on the sale of homes, and other issues affecting the home owner’s living environment, quality of life, and finances. BROCHURE ON OUR WEB SITE

The Colorado HOA Forum is Colorado’s largest and most effective HOA home owner’s advocacy organization working to improve HOA governance through legislative reform. The Forum is a pro-HOA organization and the only Colorado home owner centric organization with nearly 1,000 members located in 80+ cities/towns throughout the State. It strives to ensure a balance in HOA governance that promotes openness and inclusion in HOA governance, protection of home owner’s rights, and address abusive and costly practices that are costly to HOAs and their home owners.

Questions: contact us at www.coloradohoaforum.com or email coloradohoaforum@gmail.com

Pikes Peak Public Library, Library 21C
1175 Chapel Hills Drive
Room: Venue 21C
Colorado Springs, CO 80920
Saturday, February 13, 2016
9 am—12:45 pm
Plenty of free parking
Free to the public

Invited are all home owners, your legislators, HOA property managers, Realtors, the Community Association Institute (CAI), representatives from the State's HOA Office and DORA, and the media

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 Forum's Winter Edition Newsletter Posted on Web Site

The Colorado HOA Forum, www.coloradohoaforum.com, Colorado's largest HOA home owner organization has posted its' Winter 2015 newsletter on its' web site.  This edition focuses on the implementation of the new HOA Property Manager (aka Community Association Manager (CA)) licensing program, HOA Transfer Fees, HOA and CAM dispute resolution and complaint filing with the State, and a host of other HOA issues.  An overview of the Forum's latest HOA Town Hall Meeting from November 12 in Aurora, CO is presented indicating what is of concern to HOA home owner's.  Keep in touch with HOA current events, HOA legislation, and home owner's issues with this easily accessed newsletter.  This is Colorado's only HOA periodical presenting HOA issues from the home owner's perspective.  Those wishing to subscribe to this free newsletter can join on the Forum's web site. 

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.

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. 

HOA Foreclosures Allow for Selling Your Home for Pennies on the Dollar

Homeowner's Association (HOA) legislative reform has proven to be extremely difficult in Colorado. Whether the recent HOA manager licensing law, HOA debt collection policy, limiting HOA Transfer Fees, or requiring the justification of HOA fees the result has been watered downed or "killed" Bills by interest groups such as the Community Association Institute (CAI) to the detriment of home owners.


Possibly one HOA issue can gain success in our legislature with support from home owner's groups and the CAI: HOA foreclosure reform.   The abusive and not uncommon practice of HOA's foreclosing on properties for pennies on the dollar is financially devastating to home owners and financial institutions. Too often HOA's foreclose on a property and questionably, but legally, sell the home to speculators, investors, and sometimes privileged parties for a fraction of the home's value to gain payment of HOA debt. The buyer pays off all liens and obligations encumbered on the property, gains title to the property free and clear, and can then proceed to sell the home for fair market value. No requirement to for the HOA to pursue or accept fair market value offers. No net proceeds on the sale go to the bank to mitigate the loss on the defaulted loan nor will any proceeds be used to pay down the home owner's mortgage balance. Too often these foreclosures turn into absentee landlord rentals to the detriment of the community. All this courtesy of Colorado's HOA "super lien" law.


Nevada has recently addressed this problem with legislation. Basically, when an HOA sells, for example, a $400,000 home for $25,000, the mortgage company will have a 60 day period after the sale to intervene and pay off all previous liens, reimburse the purchaser of the property for the sales price plus identified costs incurred. Home ownership would be reverted back to the mortgage company and placed on the market for sale at or near its' fair market value. The net proceeds from the sale would reduce the outstanding mortgage balanced owed by the home owner, reduce the banks losses, and most likely result in a full-time home owner in the community. Thus the practice and incentive of foreclosing/selling HOA homes for pennies on the dollar is mitigated.


Colorado has an HOA "super lien" law promoting this predatory practice. In general, the law allows HOA's to foreclose on homes ahead of first-mortgage providers, giving HOA assessments “super-lien” status that extinguishes first deeds of trust upon foreclosure. Thus if the HOA lien is not paid and HOA foreclosure is completed the buyer is free and clear of any mortgage obligation. HOA legislative reform similar to the Nevada law would address this abusive practice. The Colorado HOA Forum, www.coloradohoaforum.com, will be asking our legislators to sponsor a Bill similar to the Nevada legislation to mitigate this abusive and destructive foreclosure practice

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.

Colorado HOA Manager Licensing Program Flawed

"HOA Exams Prove Tough", Denver Post May 17

HOA Exam Difficulty Related to DORA Incompetence

Exams based on educational requirements would not have this failure rate.  The educational courses promoted on the DORA web site and in State licensing legislation, HB 1277, have never been reviewed for content and relevance to the State exam. In fact the courses offered by the Community Association Institute (CAI), that represents the property management industry and makes a lucrative business by selling educational courses, got DORA and State legislatures to promote their courses (highly inappropriate) even before the final rules of conduct, requirements, and test exams were completed.  Property manager candidates believe endorsement indicated the proper study material.  Further, DORA has never completed an official review of CAI courses (that most candidates purchase to fulfill their educational requirements and acquire exam related knowledge) to ensure new HOA laws are even included in CAI material.

 

In our most recent legislative session a few legislators put together a successful Bill, HB 1343, to supposedly "streamline" and fix" the licensing process even though no known problems have been reported and no experience officially existed in the program (it is not effective until July 1, 2015).  The Bill was created with direct involvement of the CAI and DORA and once again it promoted only CAI courses that have never been officially approved for Colorado State testing relevance, it included licensing exemptions for executive types that surely need the training, and didn't "streamline or fix" any known problems officially reported by DORA with the educational courses or testing program. 

The actions by DORA and our legislators have resulted in property managers spending their time and money taking courses that doom them to failure in the exam and will drive many out of business.  The program has turned more into a fees collection and test taking initiative than a law about consumer protection and promoting competency and accountability in the industry.  Until DORA completes an official review and approval of course material that ensures educational material is relevant to testing the licensing program should be put on hold.   

HOA Manager Licensing Law Empty on Content and Enforcement

HB 13-1277, requiring HOA property managers (PMs) to be licensed by July 1, 2015 has fell victim to special interests.  As implemented, the law has turned into more of a fees collection, license testing and issuance business, and a promotional tool to sell educational courses than addressing abusive industry practices and providing consumer protection. The law fails to explicitly require any PM to follow State HOA laws and the governing documents of the HOA managed.  It doesn’t require a PM who observes unlawful practices to pursue corrective action.  Licensing was intended to address abusive and unjustified fees charged by PMs through “full disclosure”.  DORA has defined as acceptable “full disclosure” to be a one line statement on home closing documents or a one liner buried in an HOA contract.  PMs will not be required to explain or justify fees or to issue a billing statement detailing charges.  Home owners, however, will continue to be required to pay fees no questions asked.  A further failing of this law is the resulting financial burden on the smallest of HOA PMs that has already resulted in business owners deciding to quit the business leaving such services unavailable to many smaller and rural HOAs.  As written and implemented, licensing will change little it was intended to correct and continue that which special interests did not want changed.

Footnote: even before the licensing law was fully implemented the Community Association Institute (CAI), whose members are the impetus for licensing, had private meetings with leadership in DORA and with legislators to craft a Bill to revise the licensing requirements. Not one thing in this proposed Bill addresses the deficiencies in ethics and rules, operating standards, disclosure of fees, or helping small HOA managers. It does include special exclusions for property manager licensing in some supervisory and executive positions (the very folks at the epicenter of industry abuse will now be immune from even the little accountability in the licensing law).

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. 

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.

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.

HB 15-1040 Would Remove Protections under Property Manager Licensing

A Bill, HB 15-1040, was introduced for legislative consideration and could have the affect of derailing HOA home owner protections from abusive practices in the property management industry.  The Colorado HOA Forum has reviewed the Bill in its' original form and we urge legislators vote against it.  The Bill would effectively reduce the number of HOA property managers (aka Community Association Manager (CAM)) required to be licensed by about 80% thus nullifying HB 13-1277 (the CAM Licensing Bill).  HB 15-1040 would require only those  CAMs in HOAs with 200 or more homes to be licensed.  Thus approximately over 7,700 of the 9,600 registered HOAs would be exempt from their CAM being licensed and allowing the CAM to operate without any oversight, guidelines, and with little accountability: the very problems that prompted licensing. 

Licensing was implemented to provide oversight and prevent abusive practices in the CAM industry in ALL HOAs and improve the skills and credentials of ALL CAMs.  There is no relationship between the size of an HOA and vulnerability to abuse.  In fact the opposite may be true as smaller HOAs more heavily rely on the CAM for all facets of asset and financial management  The reasons prompting this Bill have not been mentioned but surely won't be corrected by simply excluding smaller HOAs which is an arbitrary solution to an undefined problem in the licensing law.  As with any law there can be improvements when it causes unintended problems.  Minor changes to the law may be needed as we suggest below but NO consideration should be given to excluding CAMs from operating rules and guidelines simply because they manage a small HOA, 

A very important feature of the licensing law is that it provides for HOAs and home owners in small and large communities with an out of court dispute resolution process that otherwise requires complaints to be resolved in our costly, time consuming, and litigious court system.  The out of court dispute resolution saves HOAs and home owners on legal costs and allows an affordable and accessible venue for home owner and HOA problem resolution.  This right should be afforded to ALL HOAs but this Bill would exclude this process to home owners in smaller HOAs.

Smaller HOAs deserve the same protections afforded to those in larger HOAs and this Bill would do the opposite.  The educational requirements, cost to acquire a license, and/or type of license for those serving small HOAs (under 50 homes) might be revisited with just cause based on experience with the law but under no circumstances should CAMs serving smaller communities be allowed to operate outside of and not accountable under the CAM licensing law.

HOA Property Manager Licensing: Fees Transparency is a License to Abuse

The Community Association Institute (CAI), HOA lawyers, and large property management companies know one thing is certain: laws on transparency and disclosure will not inhibit abusive practices in the HOA property management industry.  In 2014 these groups combined their legislative, political, and financial efforts to kill a Bill (HB 14-1254) that would have ended or limited the dollar amount of the illegal and unjustified HOA home sale transfer fee.  They legislatively completed this by changing the Bill to address the transfer fee as a "disclosure item" in the upcoming property manager licensing law.  This was completed to avoid any direct oversight, scrutiny, or rules to ensure no change took affect.  Even the idea of real disclosure and accountability on justifying the legality/use of the transfer fee were so feared in the watered down Bill that ALL definitive language was removed:  no requirements to disclose why the fee was charged, who determined the amount and pocketed the fee, who benefited from the fee, what work was performed that was extraordinary/unique due to the sale of a home that was not already paid for by HOA dues, that the HOA did not mandate the fee and it was neither a mandatory or legal requirement, and that if not paid could hold up the sale of a home.  The modified Bill also avoided stating that that any excessive and unjustified fee COULD NOT be challenged by the home seller/buyer and if found to be inappropriate by the State property manager licensing authority COULD NOT be directed for refund or reduced in amount .  Thus the crafted disclosure Bill had nothing to do with justifying the fee or reining in abuse but only to ensure its' unabated continuance.

So the lesson in Disclosure and Transparency Legislation 101: A Bill portrayed to rein in abuse and misuse through disclosure will present the illusion of change, enforcement and consumer protection but change nothing with the most significant impact being that the abused be informed (and only minimally) of how they are to be abused.

The Colorado HOA Forum will continue its' efforts to educate the public and legislators on HOA issues and to legislatively end/limit the HOA Transfer Fee to save Coloradans millions each year.

Misrepresenting who Represents HOAs and HOA Home Owners

The latest misrepresentation of who represents HOA home owner's interests comes by way of Colorado Public Radio (CPR) and their article "Could limiting defect lawsuits bring more condos to Denver?" .  The article's point person for an opinion on what is best for HOAs and thus HOA home owners is no less than the Community Association Institute (CAI).  The problem is that this organization doesn't and never has represented HOA home owner's interests.  Their members are property managers (PM) and lawyers not HOAs or home owners:  let's get it right!   The CAI spends time and money in State and Federal legislatures lobbying to ensure legislation promotes their interests and mostly at the expense of HOA home owners rights and wallets:  against ending/limiting of the unjustified and illegally applied HOA home sale transfer fees costing HOA home owners millions each year (pocketed by CAI members not HOAs);  oppose limits on fees, fines, and add-on charges on HOA home owner debt (a million dollar+ income supplement to property managers and HOA lawyers and not a dime to the HOA);  blocking efforts to implement a recommendation in a Colorado State study that supports out of court dispute resolution for home owner complaints that would save HOAs and home owners in legal costs and not require lawyers to settle disputes;  and opposing legislation that would require home owner approval prior to using HOA funds on costly litigation or major capital expenditures.

When our State legislature and regulatory agency required guidance on writing legislation, guidelines, and ethical standards to implement a new law to mitigate abusive practices in the  (PM) industry they relied on the CAI for expertise.  Licensing is implemented to protect homeowners against the abusive practices of PMs (the CAI's members) so why the undue influence in writing rules from the very industry that caused the problem in the first place?  This is what happens when an organization is accepted to incorrectly represent HOA home owners.
Then there is the CAI's objection to a requirement in the proposed construction defects legislation that mandates home owners vote on the use of their HOA funds prior to the HOA entering into costly litigation.  This would effectively decrease the number of HOA law suits, ease of access to HOA bank accounts enjoyed by HOA lawyers, and save HOAs millions each year in litigation costs (but the CAI is only protecting home owner interests, right!)

Just one more example to seal the case on misrepresenting the CAI to be home owner centric.  This involves their lobbying efforts with FHA/HUD and the State legislatures to allow the continuance of the abusive HOA home sale Transfer Fee.  The fee is charged by, amount determined by and retained by property managers in the sale of a residence in an HOA to prop up PM income: no benefit to the HOA.  If not paid at home closing it can preclude the home sale.  What else it can preclude is FHA/HUD loan approval/insurance on home sales as HUD doesn't allow the presence of these fees in the home sale transaction.  Thus this fee can dampen home sales and the building of affordable housing that benefits from  HUD loans.

CPR is not alone in getting who or what the CAI is wrong.   The Denver Post, our legislators, television, and other media outlets are all equally wrong.  When confronted they seem to be unaware of who or what the CAI represents, their legislative actions, how they make their money, and who are their paying members.  Informed and accurate reporting and legislating would ask these questions. Interesting to note that when the media indicates the CAI represents HOAs and home owner's organizations they can't or don't try to identify just one: there aren't any!  This ongoing, unquestioning and inaccurate practice of who or what represents home owner's interests is problematic and detrimental to home owner interests and ensures the governance and oversight of HOAs will continue to be skewed against home owners until the media and legislators get it right.