Proposed Colorado HOA Legislation to have Immediate Benefits to Home Owners and Small Business

The Colorado legislature will consider three home owner's association (HOA) Bills this session.  Two will be mostly administrative and one could serve to be the most impacting HOA legislation of the past 20 years improving upon responsibilities and accountability in the HOA property manager industry and the potential to save HOA home owners millions of dollars annually.

SB 16-082, HOA Whistleblower (intimidation) Protection, and HB 16-1149, Remove Budget Reporting Exemption HOAs Predate Act (CCIOA), have admirable goals and provide great expectations but will accomplish neither (for now).  These Bills have the same ole' problem that characterizes HOA legislation over the past decades: they lack enforcement from the home owner's perspective except through our costly, litigious, time consuming court system matching HOA funds and lawyers against the very limited resources of the home owner.  Lacking an accessible and affordable venue to enforce these Bills home owners will more feel good about the Bills than experience any change.

HB 16-1133, HOA Manager Professional Responsibility and Disclosure, can positively affect home owner's rights and their wallets and provide financial relief to small businesses serving HOAs. This Bill modifies the HOA property manager (PM) licensing law.  The Bill addresses the abusive and costly property manager HOA Transfer Fee that involves duplicate and triplicate billing of home owners for services already paid for with HOA dues, requires home owners to be provided a detailed receipt of charges for Transfer Fees, and requires that all Transfer Fees be in compliance with authority to charge as stated in State and Federal laws.  This fee costs home owners upwards of $10 million a year.  The Bill provides the smallest of HOA property managers financial relief from requirements to obtain a license that can cost them more than a year's income.  Also, the Bill improves upon requirements for property managers to comply with State laws and HOA governing documents.  The reason this Bill will immediately impact home owners is that when non-compliance with this Bill occurs  a home owner can file a complaint with DORA (Dept of Regulatory Agencies) free of charge, have the complaint investigated, violators (HOA property managers in this case) can be fined and/or have their license revoked. and it will directly affect abusive PM Transfer Fee practices by requiring justification and documentation of to payees.

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.

HOA Home Sellers/Buyers Improperly Paying HOA Transfer Fees

The HOA Manager Licensing Law effective July 1, 2015 provides HOA home buyers/sellers the opportunity to challenge their payment of the HOA Transfer Fee.  The Law is very weak on home owner consumer protections and purposely avoided requiring HOA property management (PM) companies to provide justification and documentation of fees assessed home owners.  The law does, however, require all fees, charges, and assessments imposed and collected between a PM and an HOA and its' home owners to be authorized and fully disclosed in their contract with the HOA and/or in the HOA's governing documents else the fee is illegal.  Yes, this is a big deal as HOA home owners shell out upwards of $10 million a year with this erroneous fee.

The authority of an HOA to assess and collect dues and special assessments are defined in HOA governing documents and State Law and are legal financial obligations of the home owner and should be disclosed to home buyers.

Fees assessed HOA home owners by a third party (PM) but not authorized in an HOA's governing documents/declaration or defined in an HOA contract are illegal.   Thus, PMs are not legally justified to assess home owner fees simply because the home owner's dwelling is in the HOA they service.  The new licensing law requires all HOA fees collected and retained by the PM (including the HOA Transfer Fee) to be documented with the HOA.  State HOA law does allow PM's to bill home owners for unreimbursed expenses related to the sale of a home if such action is authorized in HOA documents.  The key point is reimbursement of only additional and extraordinary expenses incurred by the PM from the sale of a home and such expenses must be justified by work performed and not otherwise paid to the PM in its' contract with the HOA .

The HOA Transfer Fee is rarely if ever defined, justified, or authorized in any HOA governing document or contract between the HOA and PM or disclosed to home buyers.  The new licensing law makes this fee illegal if not fully disclosed in HOA official documents.  The issue of a legal Transfer Fee based on unreimbursed expenses is also a basis for contesting this fee.  PM's argue the legitimacy of the fee relates to: 1) expenses incurred to provide a copy of the HOA governing documents and a "status letter" (indicating the home owner's financial status on obligations to the HOA such as dues, special assessments, fines) to the buyer and 2) updating HOA records to reflect the change of ownership and issuing credentials to the new owners such as security keys, entrance gate remote controllers, etc.).  PM's charge between zero to over $1,000 for these "extraordinary" services without having to justify, explain, or document charges.  The fact is that these services are not extraordinary and are base line services the PM is already compensated for in their contract with the HOA.  Further, HOA governing documents are free to home owners/Realtors on HOA web sites or for only a small service charge.  The "status" letter is no more than producing a final routine billing to the home owner.  Finally, updates to administrative records are routine and no more labor intensive than when a divorce, death, rental, or marriage occurs and are considered baseline services in the HOA contract with the PM.

Thus the legitimacy of the HOA Transfer Fee can fail on several counts:  1)  if the fee is not for extraordinary and unreimbursed expenses 2) if authority to assess the fee is not documented in HOA official records 3) if the home owner doesn't receive full and detailed documentation of work performed  and 4) the fee can't include charges for work already compensated for in the PM contract with the HOA.  Home owners should protest this fee to the Colorado Department of Regulatory Services (DORA) if any of these conditions exist.  The State complaint form can be obtained from the DORA and the Colorado HOA Forum (www.coloradohoaforum.com) web sites.

HOA Manager Licensing: Heavy on Fees Lite on Consumer Protections

The HOA Manager licensing law goes into effect July 1.  Expect little reform for HOA home owners.  Property managers (PM) will be greeted with new fees, higher operating costs, and costly licensing requirements.  This Law illustrates what happens when the industry trade group for PMs (Community Association Institute (CAI)) writes the law and uses it to promote its’ financial interests.

The law increases PM business insurance costs, requires recurring license renewal and educational costs, imposes new background check and testing fees and for those who want to avoid State educational requirements and testing they will incur CAI membership, educational, testing and seminar costs. These costs have already resulted in PMs that serve smaller (less than 25 homes) HOAs to go out of business.

The fees, business costs and government involvement would be more tolerable if the law accomplished its’ intended goal of consumer protection.  However, the law is vague on the most simple demands and accountability for property managers: 1) there are no direct statements mandating PMs comply with all State laws and an HOA’s governing documents 2) no direct statements that require PMs to advise an HOA when they observe non-compliance with the law or to report to DORA when such advice has been ignored and violations continue  3)  no direct statements that hold PMs accountable when they carry out requested actions of a Board that are in non-compliance with the law or an HOAs governing documents  4) no mandates for PMs to provide home owners with a detailed explanation or legal justification of fees and assessments (such as the HOA Transfer Fee) they independently impose and retain and 5) no requirement to explain and justify in detail all PM fees in their contracts with the HOA.  Repeated requests to DORA (Department of Regulatory Services) and legislators from Colorado’s largest HOA home owner’s group, Colorado HOA Forum, to include these simple specifics have been rejected making reform and enforcement for home owners very difficult.  Legislators also refused to include in the Law assistance to smaller HOA PMs by reducing their licensing costs and requirements.     

Licensing also witnessed an unprecedented and disturbing legislative act.  The Law contains language directly promoting a private entity’s (CAI) sales products and educational courses.  It also allows the industry that is to be regulated (CAI) to develop and complete State educational, testing, and credentialing requirements none of which have been officially reviewed or approved by the State.

Then there is the missing legislative mandate in licensing rules to address meaningful “full disclosure” of all fees and assessments on home owners by PMs.  Specifically, the HOA Transfer Fee that cost HOA home owners millions each year will continue without any limits or justification.  DORA decided a one-liner on home closing documents with no receipt and/or detail of charges is “full disclosure” of this fee. 

Legislation/licensing that is crafted by the interest group to be regulated should be disconcerting to home owners and businesses.  The CAI has dominated the PM industry and HOA legislation in Colorado for decades.  Their influence and leadership has led to the need for licensing and reform.  July 1, 2015 was to be a good beginning on reforming the abuses in the PM industry but HOA home owners will sadly see little change.

Colorado HOA Form: an HOA Home Owner Advocacy Organization

 

Colorado Style HOA Manager Licensing

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

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

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).

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.

Your Voice: HOA Oversight in Colorado Raises Questions: Part II

This is part two of a two part article on HOA governance in Colorado and the role of a government agency in influencing (or not) HOA law.
DORA is also chartered to seek out multiple providers for educational requirements under CAM licensing and to develop testing procedures. To date, and after one year, DORA has not posted on its’ web site the competing educational providers with the CAI remaining the sole source. CAI legislative sponsors promoted the CAI courses and DORA gave tacit approval and to date there has been nothing indicating that DORA has reviewed and certified the courses, that the courses are reflective of current HOA changes in the law, and a process to mandate annual review of such courses will take place. Also, by not early on posting alternative sources for educational classes the CAI can charge what they want and CAMs are left with a sole source of “approved classes?” An unintended (again) promoting of a private company via a government agency.
DORA is now considering allowing the CAI to conduct its’ own testing and grading of exams and granting partial license certification to PMs. This is contradictory to the law that indicates a professional testing company shall complete testing and grading with only DORA granting license certification in part or in full. Furthermore, the oversight, review, and update of CAI class material, testing and grading procedures, and security over such tests have not been reviewed by DORA. We know of no plans to do so. If the CAI request is granted, we will have the same folks (CAI) that have been “leaders” in CAM education and leadership in Colorado for two decades and resulted in the in the need for regulatory oversight be the guiding light in “cleaning-up” the industry. This arrangement (along with CAI involvement in guidelines) is equivalent to allowing a company that is polluting a lake and waterways write their own rules and standards and complete testing of waters for safety, and issue their own licenses. DORA needs to take full control of this program to maintain the integrity of the licensing program.
Then there is the recent event whereby a Bill was proposed to end/limit the unwarranted, unjustified, and illegal (in Colorado) HOA home sale Transfer Fee. Our legislative sources at the Colorado HOA Forum and articles on the CAI legal web site indicate the CAI lobbied hard to defeat this Bill. As a result the Bill was totally diluted into a disclosure law thus ensuring nothing would change and million of dollars would continue into the bank accounts of CAI members. DORA was to address disclosure of all fees and the HOA home sale Transfer Fee in their guidelines for CAM licensing. Not surprisingly, the first release of CAM licensing guidelines included only vague directives on fees disclosure. DORA’s ambiguous and loose disclosure mandates for HOA Transfer Fees don’t require justifying the fee in detail. DORA CAM guidelines don’t mention in disclosure requirements that the HOA Transfer Fee is not mandated by law nor hold up the sale of a home hostage in the event the fee is protested by the seller. Also, with no requirement to justify the fee by cause with an itemized invoice, it will make it difficult for home owners to protest this fee. The opportunity for DORA to protect consumer rights, as their charter indicates, will be missed if fees disclosure of all types are not required to be detailed and justified.
The next test for DORA is coming this legislative session. Our organization will be pursuing legislative sponsors for an out of court binding dispute resolution process for home owner complaints Bill. The CAM licensing program includes a home owner complaint resolution process handled out of court through DORA. Also, a State HOA dispute resolution study completed by DORA endorsed this process. The CAI and legal types, however, oppose this process. DORA will be asked to speak on this issue and if they reject it they are rejecting and invalidating the very work they will be doing under CAM licensing and other licensing programs they administer. DORA should also speak to allegations that this out of court process will result in home owners losing legal rights and the process is as costly as a court appearance: both NOT true.
Citizen trust in our government institutions is at an all time low and HOA home owners need look no further than the examples above to take that trust down another notch. If DORA was fully operating within its’ mission statement (see below) and being an active participant in the legislative and regulatory process there would be no reason for this article:
“DORA is dedicated to preserving the integrity of the marketplace and is committed to promoting a fair and competitive business environment in Colorado. Consumer protection is our mission.”