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 Law and Enforcement: the Illusion of Home Owner's Rights

HOA home owners are locally governed by the HOA's covenants, controls, and restrictions (CCRs) and by-laws.  There are also State laws that describe and establish a clear, comprehensive, and uniform framework for the creation and operation of common interest communities (HOAs).  So it appears we have plenty of laws both within the HOA and in State HOA law to protect home owners from abusive Boards and property management companies, inappropriate and illegal practices, and to promote open governance.

A reality check from the home owner's perspective will shock most HOA home owners.  If you read these laws you will find that enforcement verbiage from the home owner's perspective is missing, lacking, or unworkable.  The main and most widely used means of HOA home owner's rights suggested in Colorado law are mediation and our court system.  To date, and from the thousands of inquiries and complaints received by an unknown State HOA Office, these two remedies in dispute resolution have been a failure.

Mediation has been practiced for decades and has at best not served home owners well.  Think about it.  A home owner must gamble hundreds of dollars on a mediation session (if the HOA is willing to mediate) and there is no guarantee a solution will be reached.  Even when there is an agreement an HOA can ignore the agreement and that leaves the home owner back to our court system attempting to gain enforcement or re-litigate their case.  Most home owners simply can't gamble hundreds of dollars on a process that has no guaranteed outcome.  The Colorado HOA Forum's web site has an extensive discussion on mediation vs other methods of dispute resolution.

Then there is our litigious, time consuming, costly, "pay to play" court system.  Most HOA complaints simply don't belong in court.  They are simple matters related to such issues as non-compliance with HOA governing documents or State law and complaints against the HOA property management company.   HOAs are not adverse to going to court.  The HOA understands they use their unlimited funding from HOA dues to fight your limited personal means.  The HOA lawyers get paid win or lose.  No HOA Board member will be held personally accountable in the event you win.  If you lose you end up paying for your lawyer and most likely the costly HOA legal fees.  This is a sad venue for justice for home owners and thus most home owners simply don't pursue enforcement of their rights.  The track history of too many home owners in court is financially disastrous and thus court should be avoided.

Another means of enforcement is through arbitration and this is mentioned in State law but rarely pursued and not understood.  A form of arbitration called med-arb (mediation-arbitration) allows for conducting a mediation session with a definite and enforceable outcome: a beginning and end in the complaint process.  Basically, if the parties can't agree to a solution the empowered mediator - arbiter will decide for them.  Actually this not different from our court system in which the judge decides for the parties but avoids the high cost, litigious processes and procedures, mitigates the time to litigate, and doesn't require lawyers.  It ends the "pay to play" legal venue and saves both home owner and HOA the expense of litigating and saves taxpayer money by removing these cases from our already over burdened system.  No legal rights are forfeited by home owners as they can still opt to go to court.  This process is being pursued in several States and most recently has been advocated in a Colorado State mandated report on HOA dispute resolution.  Implementation only requires legislative sponsorship.   Med-arb is a recognized legal process and in fact a similar process will be used in handling home owner complaints against Colorado HOA property managers upon implementation of the property manager licensing law in 2015.  If this is good enough for property manager complaints why not for home owner vs HOA complaints.

Until HOA home owners get an out of court binding dispute resolution process such as med-arb our State HOA laws remain more of an illusion of home owner protection than realtity.

FHA Loans, CAI, and Transfer Fees

The CAI is continues to attack home owner wallets in their defense of transfer fees assessed on HOA home sales.  If you recall it was the CAI that led the effort to kill the Bill in Colorado that would have limited/ended transfer fees.  That cost home owners over $10 million a year and fattened their constituent bank accounts.   

The FHA will be issuing new rules to limit or end transfer fees assessed by third parties.  Basically, any home sale involved with assessing buyers transfer fees will not be eligible for an FHA loan.  This supports what we advocate and maybe our legislators will get it this time around and vote for home owners and not property managers and lawyers with legislation limiting HOA transfer fee. 

The National Association of Realtors has come out to oppose transfer fees that developers and others assess home buyers to generate private revenue and profit.  They still are not on board with prohibiting or limiting HOA transfer fees assessed by property managers that our group has written extensively on and lobbied our legislators in Colorado.  When will the Colorado Association of Realtors (CAR) and our State representatives stand up to the lawyers and the CAI to end transfer fees and defend the folks who put bread on their plate: home owners?  Ask CAR?  Email: communications@ColoradoREALTORS.com 

If the new FHA guidelines limit or prohibit the assessment of transfer fees on their loans this would be a good first step and help in promoting legislation in Colorado to end this abusive and unjustified fee.  The new rules will be published later this year.  

 

 

Colorado HOA Forum's 2014-2015 Legislative Initiative

The Colorado HOA Forum’s legislative Goals and Objectives for 2014-2015.  If you support a goal (s) please take time, using our web site, to write your State legislator asking them to sponsor legislation to make it the law.

1. Include an out of court binding dispute  resolution process in all Colorado HOA laws (replace courts and mediation).

2. Improve upon Colorado legislation that licenses HOA property managers

3. Limit fees and administrative assessments on HOA debt.

4. Increase the roles, responsibilities, authority, and enforcement capabilities of the Colorado HOA Information Office and Resource Center including involvement in administering an out of court binding dispute resolution process

5. Restrict/limit transfer fees in the sale of HOA homes

6. Require realtors and HOA home buyers to be provided with the following information and certify they received and read them: a copy of the HOA's governing documents; information on insurance coverage provided via the HOA; any HOA homeowner debt or HOA liens associated with the home; a current HOA financial statement;  the amount of HOA dues; any current and/or planned special assessments; status of the HOA reserve fund; the number of rentals and foreclosures in the HOA; rental restrictions and other items identified in our HOA Home Buyers Guide.

7. Term limits on HOA Board members when others are willing to serve. 

8. Include as part of the HOA registration process a certification that HOA Board members read their own HOA governing documents and applicable information posted on the State's HOA Office’s web site concerning State HOA law.

9. Limit the amount of special assessments an HOA Board can levy without approval of home owners.

10. Require HOA Boards to gain home owner approval prior to entering into law suits using HOA funds.

 

 

 

 

 

HOA Home Owners Push for Workable Dispute Resolution

Colorado home owners mostly live under Homeowners Association (HOA) governance. This living environment has many advantages but one trait currently gives HOAs a deserved bad name.  If a home owner has a dispute with their HOA Board or property management company (PMC) they are mostly left with our costly, litigious, and time consuming court system which doesn't work for home owners.  The State's HOA Office completed a mandated study on dispute resolution offering several out of court solutions.  One recommendation was an out of court binding dispute resolution process whereby complaints are filed and settled in an out of court venue at an affordable cost.  Home owners don't want a costly dispute resolution process (court) or discussion of their complaint with the hope of a solution that costs them hundreds of dollars without any guarantee of a decision (mediation).  Home owners deserve a process already used in Colorado for some professions and is planned for HOA PMC complaints: out of court binding dispute resolution. It's quick, fair, low cost, non-litigious, doesn't require high cost lawyers, no cost to taxpayers, and renders finality to a complaint.  It's time to provide HOA home owners with a workable, affordable, and accessible dispute resolution process that promotes vs hinders problems resolution.  www.coloradohoaforum.com

HOA Special Assessments: Costly Without Home Owner Oversight

If you live in a Homeowners Association (HOA) you are subject to special assessments with or without your knowledge or approval.  Your HOA Board is empowered to levy a special assessment for most any reason at any amount, at any time on each property owner.   Special assessments can occur when HOA Boards approve self-interest projects or community beneficial capital improvements, to pay for costly law suits approved by a Board, or to replenish depleted reserve funds due to mismanagement or unexpected expenses.  Special assessments can range from hundreds to thousands per household and must be paid.  Don't pay the assessment and your financial obligation can compound through interest and administrative charges.  Wait too long to pay and your property can be foreclosed.  Special assessments can happen without home owner knowledge or approval and without  dollar limit and it is all legal.

Colorado State HOA law and HOA governing documents empower Boards to financially manage the community and only indicate they must act in a fiduciary capacity (a statement that is open to a wide range of interpretation with little accountability).  Nothing in HOA law requires a Board to discuss, notify, or gain approval through a vote of residents when spending HOA funds on costly endeavors .  Boards are also empowered to create enforceable special assessments, no questions asked.  Problematic in this issue is that even when special assessments result from Board financial mismanagement, extravagant spending, or reckless decisions home owners only find out about the dire financial consequences after the fact and through their wallets.  Unless criminal intent is involved, no Board member will be held accountable

Reining in the independent authority of HOA Boards to spend without the consent of home owners that often results in special assessments will require legislative action.  Until this happens, home owners are left with our costly, litigious, and time consuming (pay to play) court system to challenge HOA Board actions and this simply doesn't work for home owners.

 

HOA Home Owner's Wallets Emptied Over Fees

HOA dues, transfer fees, debt collection fees, special assessments, legal fees (law suits and HOA lawyers) can become overwhelming and home owners have little control over any of these financial obligations.  Worse yet, if these fees and assessments aren't paid on time you can be fined without limit and have your home foreclosed for the smallest amount.  Add to this the infamous $100 a month debt notification letters from the HOA lawyers that are not contestable.  Try to sell your home in an HOA and you can be assessed a transfer fee ranging from $150 to over $1,000 without any justification or explanation.  If you don't pay it you can't sell the home.  Then you can be stuck for the cost of your HOA Board entering into costly litigation or a capital improvement projects without home owner knowledge or approval resulting in thousands, if not tens of thousands, of dollars in special assessments.  If the HOA Board is reckless with finances and drains the reserve funds all home owners can be assessed an amount to replenish the fund and this can be very substantial: don't pay it and the amount owed will compound and also can lead to foreclosure.  Your monthly HOA fee can also increase without home owner approval and without limit and it's pay it, pay it on time, or more excessive fees and assessments.  One more thought about all these HOA fees if you live in a gated community.  Even though you pay county and other state and local taxes for street maintenance and snow removal, the local governmental entity will not provide snow removal or street maintenance and repair in your HOA (you pay through HOA dues).
Most HOA dues and assessments are legitimate and support the operations and maintenance of the community.  It is also true that what one home owner doesn't pay in dues others must make up for so reasonable penalties are appropriate.  However, the abusive and reckless authority of some HOA Boards in (mis)managing a community are weakly constrained by HOA governing documents or State law.  These ruling documents mostly require home owners to contest HOA Board behavior and burdensome assessments in our costly, litigious, and time consuming court system.  Thus HOA law enforcement from the home owners perspective involves the limited financial resources of a home owner against the unlimited bank account of the HOA: a pay to play legal system favoring HOA Boards.
The HOA living environment can provide home owners with a rewarding life style.  Most communities involve some form of HOA governance and it is mostly impossible to buy a home in a new development without an HOA.  Understanding HOA governance and home owner's rights and financial responsibilities prior to moving into an HOA is incumbent upon the home buyer and will mitigate post purchase problems.

State HOA Office Study Recommendation Avoids Costly and “milk toast” HOA Dispute Resolution

The Colorado State HOA Office completed its’ study on HOA dispute resolution.  One of the recommendations deserves actions:  “Implementing a binding arbitration program would be a cost-effective and expeditious means by which many of the disputes between homeowners and HOAs can be resolved”.  This would be the single most important and effective piece of HOA legislation passed in decades.  Cost savings to HOA’s and home owners will be millions of dollars a year in legal costs. The proposal can level the legal playing field that currently pits the limited funds of a home owner against the unlimited funds and legal resources of the HOA.  The program would resolve problems based on HOA law and HOA governing documents vs. legal proceedings and manipulation.  Complaints would be resolved in a timely manner before compounding.  HOA complaints would begin and end out of court through an initial inexpensive filing fee and end with a binding decision rendered by a trained HOA arbiter.  Home owners could still choose to go to court vs using this process thus no legal rights are forfeited.  The process is not complicated, doesn’t require lawyers, will not cost taxpayers, and is easy to implement.

HOA complaints mostly don’t belong in a court room and such proceedings cost taxpayers in court costs and unduly overload our court system with cases. HOA complaints mostly concern non-compliance with State law and HOA governing documents and certainly don’t require lawyers and complicated and costly legal proceedings in a court. 

This solution is NOT the flawed mediation process that requires home owners to gamble hundreds of dollars on a mediation session in the “hope” of gaining an agreement on dispute resolution.  Mediation has been a recommended dispute resolution for decades in HOA legislation and is minimally effective.  Mediation adds time, process, and cost for home owners on dispute resolution with no guarantee of finality.  The agreements in mediation can be “walked away from” by either party without prejudice thus sending the parties back to court:  the very thing trying to be avoided.  Mediators are not licensed and don’t require any HOA educational or training standards. Mediators hearing your case can thus be anyone.  This “profession” has less standards and rules than beauticians, plumbers, manicurist, etc. Mediators claim to resolve up to 50-60% of cases heard but what about the other 40% who are thrown back into court and the uncounted complaints that are never filed due to an inability of a home owner to gamble hundreds of dollars on the uncertainty of mediation? 

The recommendation of the State study can resolve the flaws of dispute resolution through the courts and mediation.  The out of court process involves using trained med-arbs (mediators with arbiter decision making authority) in an out of court venue. The cost to taxpayers is zero as the system would be self-funded.  The State’s HOA Office would oversee this process.  It already has an infrastructure in-place for filing complaints and collecting fees.  The process is similar to handling home owner complaints with HOA property managers through the Department of Regulatory Agencies (DORA).  Thus, DORA has administrative models, precedence, and experience to implement this system. 

Objections are surely to come from lawyers, the Community Association Institute (CAI), and mediators who have spoken against this process based on their economic stake in continuing the current litigious and costly dispute resolution process.  However, with thousands of complaints and inquiries received by the State’s HOA Office and legislators it is time to focus on solutions and problem solving vs continuing on the current path that has tainted HOA governance and made HOA laws ineffective for home owners.

Out of court binding dispute resolution is affordable, simple, fair to both HOA and home owner, provides cost savings to home owners, HOA’s, and taxpayers, provides timely complaint resolution, is accessible, doesn’t require anyone to give up their legal rights, and results in decision and finality in disputes.  The State’s recommendation awaits legislative sponsors.

Colorado HOA Forum   www.coloradohoaforum.com

 

 

 

Who or What is the Community Association Institute (CAI): You May Be Surprised

 

Who or What is the Community Association Institute (CAI):

You May be Surprised (a Colorado and Nationwide Perspective)

 

For decades the sole source for Homeowners Association (HOA) information for the media and State Legislature has been the Community Association Institute (CAI).  Why not?  Their name implies they represent the concerns of community associations and home owners: aka HOAs.  They have been the main/only source sought and invited to the table for input and wisdom on HOA matters by Government Agencies, legislators, and the media.  This group is so well “respected” it has been asked to write or participate in writing HOA legislation to ensure participation of a knowledgeable and “unbiased” authoritative source.  Government regulatory agencies invite this group to write industry rules and regulations and mostly adopt without challenge.  The media goes directly to the CAI whenever an HOA problem surfaces to get the reason why and for them to provide a “correct” solution.   HOA legislative proposals will see this group’s lobbying machine swarm and be welcomed at the Capitol to ensure the “right” and “workable” legislation is crafted.   Visit this organization’s web site and read their literature. Unless you do so carefully you would think they altruistically represent home owners vs being the trade group that represents HOA property manager interests.  This group is often invited to Legislator’s Town Hall Meetings (without the same courtesy extended to home owner groups) and represented as the expert and protector of home owner’s rights. 

The actions of the CAI, however, reveal it is a well-financed and marketed machine that is the most anti-HOA home owner group in the country.  In Colorado,  and in other States, over the past decades this group has legislatively intervened to ensure HOA laws proposed or passed have been watered down to be ineffective from the home owners perspective and/or written to ensure CAI’s profitability and increase costs to HOA home owners.  This group represents property managers, HOA Boards, legal and real estate interests, NOT home owners.   Recent examples:  killing an HOA Transfer Fee Bill that costs home owners $15 million a year in unjustified and unauthorized fees; direct intervention in a property manager licensing Bill to ensure it served to sell their educational courses, increase membership and dues and ensure licensing rules and regulations were reflective of their own legislative proposal that protected HOA Boards and property manager interests;  opposed any legislation to provide HOA home owners an affordable and accessible venue to dispute complaints out of court;  supported a Bill to authorize HOA’s to levy fees against home owners even when not authorized to do so in the governing documents;  opposed limiting fees and add-on charges to HOA home owner debt;  opposed full and detailed disclosure of property manager fees assessed on home sellers; obstructed legislation to minimize home owner protections against liens and foreclosure for HOA debt;  and the list goes on and all anti-home owner. 

The beginning to HOA legislative reform and improved governance begins with dispelling the belief that the CAI represents home owners; revealing their history and actions in HOA legislative reform; curtailing the CAI’s influence with our Government agencies, media, and legislators; and having HOA home owner groups recognized in our legislature and in the media to offer a home owner centric perspective to improving HOA governance.     

 

Colorado Empty Disclosure Legislation Remains Popular (HOA's not exception)

Our Colorado legislature will pass more "disclosure" laws in 2014.  Disclosure laws are intended to ensure all information about a transaction is exposed guaranteeing the parties involved in the event are not deceived and have all information to make a sound decision.  In law making, however, disclosure Bills can present a false sense of accomplishment.  They appear forceful, problem solving and protective of rights but in reality are meant to preclude change.  They are too often the result of Bill sponsors caving into interest group pressures to remove that which could affect change or provide a means of enforcement.  Disclosure Bills are more often than not ornamental, administrative, and provide a false sense of accomplishment.  These laws require documenting the problem to be solved but do little to end abusive practices. 
Two Bills, HB 14-1254 and 14-1285 (and more to come), regarding HOA Transfer Fees and Tax Preparer respectively, exemplify the illusion of effectiveness through disclosure.  Both Bills require fees to be disclosed but there is little expectation that documenting abuse or deceit will mitigate abusive practices.  Think in terms of disclosure on the back of a ticket to an event, credit card disclosures on interest charges and privacy act data usage, or those unintelligible real estate purchase contract documents that “disclose” only what the person writing the documents understands.  Has disclosure helped the consumer?  Then think about how you pursue your rights when that which has been disclosed is violated?  Really, can we afford an expensive court case?  Disclosure Bills don’t include enforcement provisions (purposely!). 
Legislators can feel good and boast about their vote for “disclosure” but such Bills change little if anything.   

Property Managers Continue Taxing Authority in Colorado

So you think only government entities have taxing authority?  Thank the Colorado legislature and the Community Association Institute (CAI) for bestowing this authority on HOA property property management companies (PMCs).  The definition of a tax is "a compulsory contribution to state revenue, levied by the government on workers' income and business profits or added to the cost of some goods, services, and transactions".  Similarly, PMCs have the authority to levy a compulsory "exit tax", better known as a transfer fee, on the sale of homes in HOAs. for no other reason than "because they can".  Making this worse, this is a no questions asked fee, no rules or amount limits, sellers can't shop for a better rate, no means for home sellers to protest the tax because if you don't pay you can't sell, the fee is used by private companies (PMCs) to enhance profits, and no one in or out of government has oversight authority over the abusive use of the fee: worse than any tax.  This taxing authority to a private firm is unprecedented and ignored by our legislature costing home owners $15 million a year.  This year HB 14-1254 attempted to rein in this abusive practice but the CAI (trade group for PMCs) not only road blocked the Bill but re-wrote it to ensure the transfer fee continues unabated.  When will our legislators end this extraordinary and improper practice?

HOA Issues: 2,500 members, thousands of emails/telephone calls, personal visits vs high paid lobbyist visit

It's not like the legislature and State Agencies aren't aware of HOA issues and problems its' just that they listen to a sole source (lobbyists from the CAI) that is the root of problems.  The State HOA Office has received thousands of HOA complaints against HOA Boards and property management companies.  This legislative session is once again exemplary of the fallacy of people power.
Our group and other HOA home owner advocacy organizations have sent literally thousands of emails, made hundreds of phone calls, and completed personal visits to legislators this session concerning one issue: HOA Transfer Fees.  This is the fee imposed on all HOA home sellers at the will and without dollar limits by property management companies: you don't pay it you don't sell your home.  We home owners worked hard to find legislative sponsors to end the abusive use of this fee that costs home owners $15 million a year.  We interviewed scores of realtors, property managers, and home owners and collected official closing documents on home sales to support reform.  A Bill was actually sponsored to limit this fee and mitigate the illegal and abusive use of the fee.  That took months.  Two week of the presence of Colorado and Virginia lobbyists from the CAI and large property management companies spreading misinformation (there's a better word for it) got the sponsors of the Bill to flip and basically allow them to rewrite the legislation to ensure no change would take effect, to silence home owner concerns, and protect the taxing authority of property managers on home sellers.  The next time someone complains about voter apathy or lack of involvement by citizens in their government let them know how their government really works.

The Privatopia Papers: Homeowners group targets HOA transfer fees in Colorado - The Denver Post

The Privatopia Papers: Homeowners group targets HOA transfer fees in Colorado - The Denver Post

CAR Remains Silent on HOA Transfer Fee Bill?

The Colorado Association of Realtors (CAR) has been oddly silent on a Bill before the legislature that would benefit the folks that pay their salary: home sellers and buyers.  The HOA Transfer Fee Bill, HB 14-1254, was intended to place a dollar limit and restrictions on the transfer fee imposed on home sellers by property management (PM) companies when a home is sold in an HOA (Homeowners Association).  The non-negotiable fee must be paid by HOA home sellers or they can't sell their home.   The fee is not limited in amount, ranges from $50 to over $1000 with no relation to additional costs incurred due to the sale of the home, and is not a legal requirement.  The real estate industry has tacitly approved of this abusive practice. .  The fee costs HOA home sellers/buyers $15 million a year.  The transfer fee is supposedly for services related to: 1) Issuing a Status Letter indicating the sellers outstanding financial obligations with the HOA that is mostly a reflection of their routine monthly bill and already paid for by the seller through HOA fees.  Many HOAs complete this for $50 or less or for no fee.  and 2) Changing records in the HOA data base similar to when someone gets divorced, marries, or dies and also already paid for by HOA dues.  So what is this fee really about?  PMs use the fee to supplement income, increase profits, and it allows them to under bid and win HOA contracts with the anticipation of transfer fee income.  Unfortunately, all the verbiage in this Bill that would rein in this abusive fee has been taken out at the request of those who pocket the money and CAR has remained silent.  If CAR understands who pays their bills and puts bread on their table they should stand up and defend home owner interests and work to change this Bill to rein in abuse. 

Transfer Fee Bill Ignores Homeowners and Endorses CAI Demands and Fees

You won't be surprised at this but the CAI has managed to get the transfer fee Bill watered down.  They appear to owe many thanks to Senator Balmer whose involvement to favor CAI proposals and property managers over home owner interests is no surprise to our group.  The CAI and their well financed lobbyist from Virginia/Colorado spent much time and money spreading misinformation to salvage $15 million a year in fees assessed on home sellers and into their members pockets.  Thus, this Bill allows property managers to continue to extort transfer fees from home sellers for no other reason or justification other than "it can".  It allows them to use the fee to low bid contracts and use the fee to make up for low bids: very anti-competitive and anti-small business.  It endorses the illegal use of the fee for supplementing income by property management companies.  Note, no reason justifying this fee has been given by the CAI or legislators, NONE, and they don't have to because they can.

 

HB 14-1254 was stripped of any effectiveness by simply directing the profiteering property managers to document their bogus charges but not to limit them (that will work!).  Yes, a $1,000 transfer fee is still endorsed by the legislature, the Real Estate industry, and DORA.  Worse yet DORA has stuck its' nose in the picture to advocate no restrictions other than to document the fees (this at the apparent request of the CAI).  The involvement of DORA and the Division of Realty is another example of how the CAI and monied interests direct activities of these government agencies.  DORA was not directed to get involved in transfer fees with the licensing of property managers and this action on their part is deplorable.  Don't expect the licensing of property managers to help one home owner at this point as DORA will be directed by the CAI on requirements.

 

The CAI must support this Bill as they got legislators to re-write it and stick it to home owners.  This is a great example of why citizens can't stand/distrust politicians, lobbyists, and well financed groups.  Now add to that the distrust of government agencies like DORA who take orders from private industry.

 

The final version of this Bill will most likely be further weakened.  You will hear more about our plans for public hearing testimonies.  No Bill is better than one that advocates unjustified fees and taxes.  Your legislators that are supposedly against fees and taxes should be chastised if they support this Bill in its' current form. 

HOA “exit tax” will surprise home sellers

Selling your home in a homeowners association (HOA)?  Open your check book to the sum of $50 to $1,150 to pay the HOA “exit tax” better known as the HOA Transfer Fee.  If you don’t pay it you can’t sell your home.  Sell the home yourself, you still pay the tax.  The amount is not negotiable, can’t be shopped for in the market place, is not limited in amount, relates not to work performed but is mostly used as supplemental income and profiting by property management companies and doesn’t benefit the HOA.   Worse yet you won’t know about the fee until you’re closing on your home, the charges will not be documented or explained, you will not have any venue to contest the fee, and your REALTOR and Title Company will just direct you to pay it or you can’t sell.  Yes, this is worse than the dreaded “tax man” that so many hate but with no rules or limits.  This fee costs home sellers and buyers $15 million a year.   The legislature will be considering a Bill, HB 14-1254, to limit this abusive practice that was made illegal in 2011 except on residential home sales in HOAs, mobile home parks, and timeshares.  It’s time fix the law, remove the exception, and end another unwarranted fee.

Transfer Fee or Taxes: I’ll Take a Tax Any Day of the Week

If you are against excessive and unjustified taxes, fees, and assessments and would be infuriated to see this power extended to a private company please consider my comments below when the HOA Transfer Fee Bill is considered this legislative session:

Governments at all levels can legally levy taxes, fees, and assessments on citizens, services, and things.  All such actions must be defined legislatively as to application and purpose and how the levy is computed.  Taxes and fees must be applied without bias, consistently, and their use well defined.  Penalties for non-compliance are defined.  This powerful tool of government must be selectively, cautiously, and judiciously used and periodically reviewed for relevance, need and continuance.  This authority over commerce and citizens should be limited to government entities and not extended to private companies.

NOW CONSIDER THE HOA TRANSFER FEE (TF).  IT EXTENDS THIS TAXING POWER OF THE GOVERNMENT TO HOA PROPERTY MANAGEMENT COMPANIES AND MAKES TAXATION LOOK BENIGN.  AN OUTRAGEOUS STATEMENT BUT PLEASE READ ON.

SB 11-234 makes it legal for a property management company (also known as a Community Association Manager (CAM)) with a contract with a Homeowners Association (HOA) to charge the home seller a TF upon the sale of their home.  It doesn't make the TF a legal requirement nor does it extend a legal right for the CAM to force this fee upon a home seller without their acceptance and to impose penalties upon the seller if the amount is not paid (by precluding sale of the home).

The real estate home closing environment, however, enables a CAM to act as a tax agent exercising a self-assigned authority to compute and collect a TF with mandated payment and penalties for non-payment and with no ability for the home owner to challenge the assessment.  This is done by the CAM with: 1) no oversight, rules, limits on amounts assessed, or consistency in levying the fee, 2)  no statutory/legal authority to impose a TF without acceptance by the consumer and 3) no authority to impose a penalty on the seller if they object to the TF (if they don't pay the sale is suspended). 

Why does a CAM essentially have taxing authority over HOA home sales?  The legislature found this de facto taxing authority illegal on all residential home sales  in SBF 11-234 except for community association properties (HOAs).  This exceptional and questionable power extended to CAMs is and has been open to abuse and misuse.  Mandatory TFs range from $50 to over $1,000 with charges having little if anything to do with the described use of the TF in the law and work completed. 

It is time to limit the ability of CAMs to act in the capacity of taxing agents and rein in the use and abuse of TF's.  If I had to choose between a tax and a transfer fee, give me the tax as at least I know the rules to play and can understand the why's, what's, and amounts involved in the financial obligation:  NOT SO WITH TRANSFER FEES. 

I urge you to support limits on HOA TFs (that also includes mobile home and timeshare sales) to save Colorado home sellers/buyers $15 million a year in unwarranted fees and assessments.

CAI Continues to Misrepresent Costly HOA Transfer Fee

CAI Continues to Misrepresent Costly and Unjustified Transfer Fee

Denver Post Article:  Dec 24, "Homeowners grouptargets HOA transfer fees as costly, unjustified"

Transfer fees exemplify an abusive fee (tax) on HOA home buyers that continues "because it can" and not because it adds value or integrity to a real estate transaction. Molly-Polly from the CAI has no pride in defending this fee on HOA home sales. She says others, not current HOA home owners, should pay for tasks associated with the conveyance of property such as administrative tasks and confirming the financial status of a homeowner with the HOA . Think about this. When someone dies, gets married, has someone else move into a home, gets divorced, or requires a routine status letter on a credit check there is no separate fee: this is part of what an HOA does and pays the property management company to do. Are there separate fees for each resident who uses the swimming pool, billiards tables, or clubhouse lounge? NO! She also mentions that DORA will take this issue up when licensing property managers. No it won't! DORA can't change the law and the law states the fee can be charged and in any amount. DORA can make any guideline it wants but it can't make or change laws, it follows the law. Her claiming that the transfer fee is high because a month's HOA dues are in the fee is unsupported.  In fact the law, SB 11-234, states this is not an appropriate use of the transfer fee and the fee is retained by and charged by the management company. If it includes dues why does the property manager retain the money! This fee is illegal on most all other residential home sales except for HOA's due to a "one-liner" in the law without any justification other than "it should continue because it can". Home buyers believe this fee is legally imposed, mandated by the HOA, and the amount set by the HOA, all not true. What a tangled web some continue to weave on this issue and unfortunately to date have gotten away with it.

 

The Colorado HOA Forum   www.coloradohoaforum.com  will continue in its' effort to end this abusive and costly fee on HOA home buyers.