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.

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 Property Manager Licensing Nabs First Culprit, but.....

Colorado implemented an HOA Property Manager (PM) Licensing Program July 1, 2015.  The intent is to provide home owner protections against unscrupulous business practices in the HOA property management industry.  DORA, the agency managing the program, nabbed its' first culprit this past week after the program has been functioning for nearly six months.  This is some good news for home owners and a flag waving and press release event for DORA.   The Colorado HOA Forum, Colorado's largest and most recognized HOA home owner's advocacy organization, was a force to promote licensing and applauds this single event.

As always seems to be the case with DORA and HOAs and HOAs and legal enforcement of HOA related law, all that glitters is not gold.  Let us bring the home owner up to date on what has and is really happening with the licensing program:  serious backlog in processing complaints; known unlicensed PMs to DORA have gone months without any corrective action; although the recent culprit was prevented from practicing there should have been accompanying fines and recommendations for criminal prosecution; DORAs feedback to complainants (home owners) is slow, inadequate, or non-existent; DORA implemented licensing rules that favor the industry it is supposed to regulate thus making PM responsibilities and accountability more difficult to prosecute;  the web site makes filing complaints and looking up licenses less than an easy and accurate experience ignoring suggestions for improvement;  the law needs to be changed to provide financial and credentials relief to the smallest of PM's that in some cases the cost to acquire a license is more than a year's income; and requirements for full disclosure of HOA Transfer fees charged home owners by PMs involves an insulting definition of full disclosure, a one liner on a home closing statement, that ensures home owners can't challenge the legitimacy of this abusive and illegal fee that cost home owners nearly $10 million a year.

The licensing program to date has been more a fees collection, business cost imposition, and tool for special interests to sell educational classes than one of consumer protection.  The licensing law and DORA rules have been unduly influenced by interest groups representing the PM industry,  the Community Association Institute (CAI), with home owner input scant.  DORA has had well over a year to implement this program and home owners deserve more.  The law can and must work and home owners will benefit.  Legislation is needed to rectify deficiencies in the law to make this program provide the consumer protections intended.  Our organization will continue to work with legislators to have the voice of home owners and small businesses heard.

Questionable HOA Fees Costing Home Owners Millions

If you closed on a home in an HOA you most likely noticed a few line items that are, well, just there.  Ask for an explanation of the fee and your Realtor in many cases has no idea what it is for, how the fee was determined, or who is charging and retaining it.  Worse yet you get no receipt or detailed invoice but are simply instructed to pay it or the home sale will not be completed.  Then there is another fee home owners pay and have no particular details about it: a Document Processing Fee.  You might be told it is a cost incurred by the Title company to provide the buyer documents about the HOA.  Still no receipt on who "really" receives the fee and what work was completed to earn it.  This practice robotically continues on tens of thousands of home sales each year not because it is all legal or mandated but "because it can" and our legislators dodge the issue at the cost of millions to home owners
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The first fee is an HOA Transfer fee retained by and amount determined by the HOA Property Manager (Community Association Manager (CAM)).  The HOA doesn't require it and in most cases has no idea about this fee.  The fee is in actuality a "double" billing for services already paid for by the home owner via their HOA dues to the CAM: issuing a final bill (Status Letter) to the home owner showing any outstanding/delinquent dues or other obligations: providing copies of HOA governing documents (mostly in electronic form); and charges to change names on administrative records.  The fee is actually illegal based on State law, SB 11-234.  The law states this fee can only be charged to recover unreimbursed expenses by a CAM in the sale of a home.  Thus, why are home owners paying on average $300-350 in Transfer Fees when all the "justification" (based on work performed) for the fee has already been paid for by the home owner?

The Document Processing Fee, charged by the Title Company, makes some sense as it is charged to mostly cover the costs of acquiring from the CAM and providing to the home owner the Status Letter and governing documents.  Title Companies must register this process and fee with the State.  In some cases the CAM charges the Title Company a fee thus hitting the "trifecta" by being paid three times for the same services.

The Colorado legislature, along with the consent of DORA (Dept of Regulatory Agencies), passed a CAM licensing law and HB, 1254 Disclosure of Fees, to rein in this abusive fee.  The sponsors of both laws (highly influenced by CAM lobbyist) and DORA in writing licensing rules avoided requiring CAMs to justify the Transfer Fee.  No requirement to identify exactly what the unreimbursed costs related to the sale of a home were that justified the fee; did not require CAMs to document their services justifying the fee by other than a one liner on a home closing statement with amount; did not provide home owners a means to dispute the cost; allowed for unlimited amounts in the fee to over $1,000 without any means for home owners to contest; and didn't address the deceptive practice of CAMs duplicate and triplicate billing home owners.  In summary, home owners to continue to pay, CAMs continue to be enriched, and our legislators will again be asked to pass legislation to require legal justification of the fee and to limit the amount.

HOA Transfer Fees Costing Homeowners and Businesses Millions (Colorado)

The HOA Transfer Fee is assessed HOA home owners upon the sale of their home.  The fee ranges from under $50 to over $1,000 with no requirement to justify the fee based on work performed.  It's pay it or you can't sell your home.  Misunderstood is the fact that the fee is not retained by or amount determined by the HOA but by the HOA's property manager.   The fee is not negotiable nor can the services it supposedly provides be shopped for in the market place.  Worse yet the fee is not legally mandatory like taxes and filing fees but unquestionably entered on closing documents.   The fee costs Colorado home owners upwards of $10 million a year.

The fee was made illegal via SB 11-234 on all residential home sales except those with community associations such as HOAs, condominiums, mobile home parks, and time shares.  The fee can be assessed home owners for unreimbursed costs incurred by property managers related to the sale of a home in an HOA.  Thus only extraordinary costs apply. At no time in the debate to allow this fee has anyone from the property management industry and their trade group, Community Association Institute (CAI), offered evidence of what these unreimbursed expenses were to warrant any fee let alone fees averaging $350+.  Home owners pay HOA dues to cover updates to administrative and billing records, changing and exchanging security codes and cards, creating monthly billings and home owner financial status documents.  The dues also pay for updating and making readily available copies (for a small fee) of HOA governing documents.  So why are home owners being charged $350 on average to do what they are already paying for?

There is more.  Title/home closing companies charge a document fee averaging $150.  This in part/full is to cover costs associated with ensuring the buyer receives copies of the HOA governing documents and a Status Letter (no more than a final billing statement indicating the home owner's financial status with the HOA).  The property manager, not the HOA, can bill the Title company a fee in any amount to provide this information.   Thus the Title company may or may not use the fee in total to cover their own costs.  As mentioned, the HOA official documents can be obtained free by the home owner/Realtor via the HOA's web site and hard copies cost no more than $25 and the home owner has already compensated the property manager to complete these ordinary tasks with their HOA dues.

Then there is the Transfer Fee on home refinancing.  Yes, you buy a home then refinance a year later and pay the fee again.  The administrative and billing records remain the same and your security codes/cards don’t change.  The Status Letter (current billing) and HOA governing documents are emailed to the Title company and this costs you hundred’s of dollars in a Transfer Fee and "for what"?

Legislation to end this abusive, excessive, and illegally applied fee was pursued in Colorado several years ago but was watered down and then killed by HOA property manager interests.  The HOA property manager licensing bill was supposed to address the disclosure of the fee but not ending or limiting the amount or ability to challenge the fee: basically allowing things to continue as is.  Then the State Agency overseeing licensing endorsed disclosure to be a one-liner on closing documents ("HOA Transfer Fee") with no detail, invoice, limit on amount, or justification required.   

The Colorado HOA Forum, a Colorado home owner advocacy organization, will continue to lobby legislators to support a Bill to end or limit this fee. 

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 Home Owners Snubbed Again Over Ending HOA Home Sale Transfer Fees

Our legislators can pass a bill naming the State Pet but treat HOA home owners like feral cats.  The Colorado HOA Forum, the State’s largest home owners advocacy organization, has lobbied legislators for  the past eighteen months to limit/end the illegally applied and costly (upwards of $10 million a year) HOA Transfer Fee on the sale of HOA homes.   Last year lobbyist killed a bill to limit this fee.  Realtors, legislators, many property managers (PMs), and home owners voice objections to this abusive and excessive fee.  Many believe the fee is a mandatory fee for expenses incurred by the HOA/PM in the sale of a home: not true.  The fee has been called extortion and highway robbery by PMs and legislators.  When interviewed, The Colorado Association of Realtors didn’t understand the fee and wouldn’t object to having their clients pay it at home closing.   A Denver News Channel 7 consumer reporter indicated if home owners are stupid enough to pay it they only have themselves to blame even if not paying it means no home closing.   The fee is deceitfully presented to home sellers on sales documents as levied by the HOA, the amount determined by and pocketed by the HOA, and benefits the HOA by their recovering additional expenses due to the home sale:  all not true.  The law states the fee is assessed for expenses uniquely incurred by a PM in relation to a home sale else it is illegal.  However, homeowners are never provided with an explanation or detailed invoice of transfer fee charges.   The fee is well known to supplement PM income, charged “because it can” be, and used to low bid HOA contracts with the expectation of subsequent Transfer Fee income.  Fees range from zero to over $1,150 with no relation or justification for work performed.  The fee can preclude approval of FHA/HUD loans if part of the home sale transaction.  The state agency in charge of real estate transactions (DORA) places no requirements for justifying the fee based on the law or even suggests a detailed receipt be provided the payee at closing thus enabling the fee to continue.  Finally, the main justification for charging the fee by some large PM companies is that if home buyers want accurate information upon closing on a home as to any amounts owed the HOA they must pay extra for it.  Otherwise, they will simply get the regular monthly billing produced for the home owner that has the same information: what is on the regular billing, inaccurate information!  What else need be said to end this abusive fee!

Yes, this fee is a big deal.  It is costly, abusive, unjustified, and amounts to an unwarranted tax on HOA home sellers.  It should be easy to end/limit through HOA legislative reform but is viewed less important than identifying the State pet which passed without objection.  The Colorado HOA Forum will continue to fight to end this fee.

Your Voice: FHA May Resolve Insult to Colorado Home Owners by Realtors, Property Managers, and the CAI on HOA Transfer Fees

Realtors, more specifically, the Colorado Association of Realtors (CAR), is not only misrepresenting but insulting home owners with their support of the abusive HOA Transfer Fee .  This is the fee charged by HOA property managers that has never been justified by work completed, is not mandatory but if not paid you won’t be able to sell your home, the fee amount can range from $50 to $1,100+ and is not negotiable or even supported by a detailed invoice, and  the money is not pocketed or benefitting the HOA but is retained by the property manager to enhance profits off the backs of home sellers.  This fee costs home owners in Colorado upwards to $10 million a year
During its’ push for legislation to end or limit this fee in early 2014, the Colorado HOA Forum, www.coloradohoaforum.com ,  interviewed CAR.  Not only did CAR have a deflective non-opinion status on this fee but had the facts as stated above all wrong concerning this fee.  They didn’t realize the excessive amounts charged, who determined and retained the fee, and that the fee was not mandatory.  CAR apparently got its’ information not from its’ members but from the Community Association Institute (CAI) whose members pocket these fees each year and worked to oppose, change, and make ineffective this proposed legislation.  In an interview with the Denver Post in 2014 CAR couldn’t define its’ stand on Transfer Fees.  CAR’s position is a costly and insulting blow to their customer’s bank accounts.
Now the FHA is stepping forward with anticipated new guidelines for approving FHA home loans that would in part put an end to the abusive transfer fee.  Specific in their proposal is ending FHA home loans when transfer fees are involved.  Let’s hope influence groups such as the National Association of Realtors, CAR, and the CAI don’t get this positive action stopped.  These groups have petitioned the FHA to allow transfer fees on HOA home sales.  Note, a few years back it appears that the CAI worked to get an exception in Colorado law that made transfer fees on all residential home sales illegal except on, you guessed it, HOA home sales (CAR never objected).  Don’t these interest groups whose income depends on home owners understand how insulting it is to continue raiding people’s pocket books with these unjustified fees for their own selfish benefit?
The FHA proposal to end this unwarranted fee on FHA home loans is a beginning to rectifying this financial wrong in the real estate market where the customer (home owner) is not defended by the very folks (Realtors) who depend on them the most and who butter their bread.  The Colorado HOA Forum will again work this legislative session to pass a Bill to end or limit this fee.

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.”

HOA Transfer Fees Still Burden Home Owners

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