State HOA Office Requires Exposure and Enforcement Authority

Colorado has a State HOA Office but you would never know it.  The Office was created over two years ago with little fanfare and notice to the public.  The original efforts in creating the Office were to provide oversight of HOA communities, some enforcement of HOA laws, and to provide a comprehensive repository of State HOA information.  Unfortunately, the Office was never granted any oversight or enforcement authority thus only serving as an administrative entity.  To date the Office has provided a valuable service to home owners (those who know about it) by posting on its' web site a very comprehensive library of HOA laws and guidelines and educational sources;  conducting community HOA informational meetings; collecting, compiling, and reporting on the status of HOA housing in the State; administering an HOA registration program; and developing an HOA complaint filing system that has catalogued thousands of complaints/inquiries and surfaced major problems in HOA governance and in enforcement of HOA home owner's rights.  Note, the Office can't advise home owners on legal rights, provide legal opinions on the validity of any complaint, get involved in problem resolution, or provide any referrals to legal counsel.

The importance of this Office can be greatly enhanced and justified by granting it enforcement authority through implementing an out of court binding dispute resolution process.  This would allow home owner's complaints currently filed with the Office to be acted upon: vetted for referral to an out of court entity that would hear disputes and render an enforceable decision.  This process would be accessible to all home owners, affordable, efficient, and not require a lawyer on the most simple HOA issues related to non-compliance with the law.  Home owners could still choose to go to court vs using this process.  Currently, HOA laws and HOA governing documents lack enforcement provisions from the home owner's perspective other than our costly, time consuming, and litigious court system.  This process could be managed by the State HOA Office with no cost to taxpayers: paid for with HOA registration fees and/or complaint filing fees.  Note, much of the infrastructure such as staffing, a web site, complaint filing and review are already in place and paid for via HOA registration fees.  DORA, the State Agency that would implement this system,  already has similar systems in place for HOA  property manager complaints and other regulated professions making implementation familiar territory for DORA.  A State Study has been completed and supports the implementation of an out of court binding dispute resolution process and only awaits legislative sponsorship of a Bill to implement.  Empowering the Office with enforcement authority would immediately make our current HOA laws and HOA governing documents that are ineffective from the home owner's perspective highly effective.

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.

HOA Property Manager Implementation: Problematic

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

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

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

HOA and Property Manager (CAM) Complaints: Speak Out

The HOA Property Manager (aka Community Association Manager (CAM)) licensing law was fully implemented July 15, 2015.  This law provides home owners a chance to help clean-up abusive industry practices and provide a forum for home owners to rein in violations of State law and HOA governing documents.  HB 13-1277 is the licensing law.

The complaint process involves an on-line/web application and is fully explained in our Complaint Guide and should not take more than 15-20 minutes.  Since the State HOA Office has no investigative or enforcement authority we suggest you direct all your HOA problems that you want investigated to DORA under the licensing law.  The State HOA Office can also be apprised.

Several CAM violations stand out and we ask you and your fellow home owners to pursue via a complaint: 1) CAM is not licensed (simple lookup on your part) 2) violations in conducting elections, meetings, extremely poor property maintenance, records release(items a,b,and/or c below)  and 3) charging HOA Transfer Fees (items “a” and “c” below).  All are applicable to CAM complaints.  Each one requires a separate complaint.

The explanation of your CAM complaint involves: 1) a description of your problem including how you understand it violates your rights.  Include one or more of the below statements extracted from the licensing law to support your complaint.  2) Evidence such as you paid a Transfer Fee documented on your home closing papers, your request for documents has been refused, etc.

Supporting all complaints should be your documentation including an email informing BOTH the HOA Board and CAM of your problem, allow 7-10 days for resolution and if not resolved file a complaint. If you need guidance let us know.  Complaints are confidential with DORA.

Let’s all participate to surface problems and hold violators accountable.

Extracts from CAM Licensing Law:

a. KNOWINGLY VIOLATING OR KNOWINGLY DIRECTING OTHERS TO VIOLATE CCIOA (or your HOA governing documents)

b. HAVING DEMONSTRATED UNWORTHINESS OR INCOMPETENCY TO ACT AS A COMMUNI-TY ASSOCIATION MANAGER BY CONDUCTING BUSINESS IN SUCH A MANNER AS TO EN-DANGER THE INTEREST OF THE PUBLIC

c. ANY OTHER CONDUCT, WHETHER OF THE SAME OR A DIFFERENT CHARACTER THAN SPECIFIED IN THIS SUBSECTION (1), THAT CONSTITUTES DISHONEST DEALING.

Colorado HOA 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.

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
.
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.

Denver's Construction Defects Ordinance: make it simple

State construction defects legislative reform has failed so localities do it themselves.  Now it's Denver's turn. The goal for developers is to cut down on the number of and frivolous lawsuits.  However, this always comes with too many caveats at the expense of home owner's rights.  Home owner's (not represented in the debate) would like to be empowered on the use of their funds in litigation.  Too often costly HOA litigation is pursued by HOA Boards and their lawyers without the knowledge or approval of home owners and can result in draining HOA reserve funds and special assessments.  A simple, compromise law that would serve both interests groups can be crafted by State legislators and integrated into State HOA law.  It is no more complicated than this:  All HOA litigation, other than for routine and administrative matters, funded with HOA resources and/or debt instruments requires a majority vote of approval by home owners.  Supplement this by requiring that prior to any vote home owners be made aware of the proposed law suit, its' purpose, total cost and funding sources, and the consequences in the event of an unfavorable decision.  This simple amendment to State HOA law will automatically cut down on law suits, save home owners and developers significantly in legal costs, and empower home owners over the use of their funds.  The issue of requiring arbitration is mostly a moot point.  Almost all HOA declarations over the past fifteen years requires this dispute resolution process and is only changed to promote costly court cases at the encouragement of HOA lawyers. Simple in this case is a WIN WIN for all. 

HOA Transfer Fees Costing Homeowners and Businesses Millions (Colorado)

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

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

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

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

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

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

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

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

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

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

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

Colorado HOA Forum Issues "HOA Manager Complaint Guide"

The Colorado HOA Forum has made available on its' web site a DRAFT copy of its' HOA Property Manager Complaint Guide for use by home owners who want to file a complaint against an HOA property management company under the new Community Association Manager (CAM) Licensing Law.  The Guide will make it easier to complete the State's on-line complaint form and also will help home owners write the justification for the complaint using references to State HOA laws.  For example, if a home owner is denied access to HOA records, has issues with the way meetings and elections are conducted, if their HOA is in total disrepair, or if the HOA is charging home buyers/sellers an HOA Transfer Fee they can file a complaint with the State Office (DORA).  The Guide provides legal references that can justify these issues as a violation of law requiring disciplinary action by the State.


The Forum understands this Guide is an ongoing process to develop additional legal references to support a laundry list of home owner complaints.  It has submitted a list of changes to DORA concerning changes to the on-line complaint process and to add additional features such as allowing complaints and documentation to be submitted via email and U.S. mail and a process to track and give feedback to home owners about filed complaints.


The Colorado HOA Forum also is available to help home owners on filing their complaints by filling a contact form on their web site:   www.coloradohoaforum.com .

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

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


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


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


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

HOA Home Sellers/Buyers Improperly Paying HOA Transfer Fees

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

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

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

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

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

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 HOA Manager Licensing Program Flawed

"HOA Exams Prove Tough", Denver Post May 17

HOA Exam Difficulty Related to DORA Incompetence

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

 

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

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

HOA Group Continues to Block HOA Legislative Reform

The name sounds HOA home owner friendly but the organization has nothing to do with representing home owner interests:  just the opposite.  The Community Association Institute (CAI), the trade group for property managers and HOA legal interests, has thwarted HOA legislative reform for decades.  They have obstructed legislative efforts to promote enforcement of HOA home owner’s rights as stated in State law and HOA governing documents while getting legislation passed to promote their financial interests and ensure continuation of abusive, unjustified, and illegal fees on HOA home owners.  To say this another way, our legislators have allowed this group to write, modify, and suggest HOA legislation that has been detrimental to home owners.
 
Recently the CAI led efforts to kill legislation that would have saved home owners nearly $10 million in abusive and unjustified HOA Transfer Fees; this legislative session successfully blocked legislation that would require home owner approval on the use of HOA funds in litigation;  don’t support an out of court, affordable and accessible binding dispute resolution process for most HOA complaints;  got legislation passed to promote the sale of their costly educational courses and gained exemptions from State testing mandates for those that purchased and completed their courses; didn’t support reduced financial and educational requirements for the smallest of HOAs (20 or less units) to relieve them of costly licensing requirements; and opposed requiring full disclosure and justification of fees assessed home owners by property managers in the licensing rules.
 
Until our legislators place a priority on and listen to HOA home owners who make up over half of Colorado’s population vs the CAI financial interests the complaints to the State’s HOA Office will continue and home owners will be vulnerable to abusive and costly practices.  

HOA Bill Should be Downright Embarrassing to Colorado Legislators

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

Colorado Style HOA Manager Licensing

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

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

HOA Manager Licensing Law Empty on Content and Enforcement

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

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

CAM Licensing Hearings Fall Short For HOA Home Owners

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

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

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

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

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

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

Construction Defects Legislation: home owners await final version, changes required!

To date, the Colorado HOA Forum, Colorado's largest HOA home owner advocacy organization,  has mostly commented on the Colorado Construction Defects Bill, SB 15-177, by refuting empty contentions from the opposition.  We favor the Bill in principle as it could provide protections and empowerment for home owners in the use of their funds for litigation.  This Bill is still in the development stage and our FINAL approval must await the FINAL Bill.

 

It appears the primary purpose of this Bill was to mitigate the number of construction defects law suits and to provide for an environment to promote the building of affordable housing.  This is to be accomplished by changing State HOA law and further defining the rights of home owners and authority of HOA Boards.  Our recommendations, listed below, have been submitted to the Bill's sponsors and Legislative Committees that will review the Bill. Our final support for this bill will be determined by the inclusion/exclusion of our recommendations.

 

1.  This Bill will modify State HOA Law and thus should not limit the requirement for home owner approval on the use of HOA funds in litigation and/or approving legal action to only construction defects litigation but all litigation/court cases.  This will provide home owners with broader protections against using HOA funds on costly litigation without their knowledge or approval and still accomplish the intended purpose of reducing the number of law suits.

 

2.  The process to gain home owner approval through voting on the use of HOA funds in litigation and/or to pursue litigation must include a process of voting similar to that used by the HOA for other referendums and  this includes the right to proxy vote.  Without the use of proxies those not capable of attending a meeting in person to vote on litigation will have their rights violated as described in their HOA governing documents.  The specific groups to be harmed by precluding proxy votes are the disabled, seniors, and in particular military personnel (who quite often are deployed and not available for in person voting.  Additionally, proxy voting precludes using scheduling as a means to control the outcome of a vote whereby a date/time is chosen to conduct the in person vote when most can't attend.  Thus gaining a majority outcome, pro or con, is highly unlikely; this is an anti-home owner practice. We also find no precedence in HOA law to exclude proxy voting.

 

3.  It should be clear in the Bill that both plaintiff and defendant must agree upon the arbiter.

 

4.  A clause indicating that any sole home owner can pursue litigation using their own funds to bring a law suit in their behalf.

 

5.  Defined procedures to give both developer and home owner opportunities to resolve the construction defects issue prior to proceeding to litigation.

 

6.  The Bill indicates that a vote of home owners can't negate/remove the mandate in the original Declaration to use arbitration for construction defects litigation.  Although this is problematic as it limits the right of home owners to change the governing documents it also can serve to keep costly litigation out of the time consuming and costly court system.  There is no evidence that such clauses are changed in significant numbers so the impact of this mandate may be more insightful than have any real impact.  Also, home buyers are made aware of this restriction when they purchase the home like any other HOA restriction.

Colorado Construction Defects, SB 15-177: "protect the home owner" opposition in question

Let's be honest by acknowledging that any proposal on Construction Defects legal reform will not be ideal for either home owner or developer.  The high costs of unrestrained litigation, all fully funded on the backs of home owners without their knowledge or approval, simply needs change. Too often HOAs have their reserve funds depleted for legal costs and too often home owners are left with costly special assessments to pay for legal fees.  Then there is the argument by contractors that the proliferation and high cost of litigation associated with and instigated by HOA's thwarts the building of affordable housing. The system is broken, let's progress towards fixing it.

 

The predictable opposition to the Bill is from the Community Association Institute (CAI) and HOA trial lawyers.  They enjoy the current legal environment that results in a plethora of HOA court cases and unlimited funding of these cases through HOA bank accounts (and all without any involvement, knowledge, or approval of home owners).  The other opposition also comes from legislators on the "protect the home owner" band wagon. Their arguments are simply not consistent with their legislative actions.  Those legislators opposing SB 15-177 under the guise they want to "protect HOA home owners" have continually refused to support or sponsor Bills that would save home owners money, make current ineffective HOA laws effective, and improve HOA governance.  This legislative session they were asked to sponsor legislation to allow for an out of court binding dispute resolution process that would empower home owners in enforcing HOA laws with an affordable, expeditious, and accessible venue to resolve disputes (a process recommended in a State HOA Study);  end the abusive, excessive, and illegal HOA Transfer fee on home sales that costs home owners millions of dollars each year; to limit the excessive collection of fees and lawyer assessments on HOA debt; and most recently provide financial relief to small HOAs in the property manager licensing program.  It is difficult to understand and accept the "protect the home owner" argument when they have avoided every opportunity to do so in the past.  This is called being inconsistent.

 

The latest legislative contention is that this Bill would require a home owner to "seek a majority vote from all other home owners in the HOA to acknowledge their construction defect claim".  This is at best a half truth.  SB 15-177 does not to require home owners to acknowledge the validity of the construction defects claim but requires a Board to inform home owners of their intent on litigation (for any one or all home owners) and gain a majority of home owner approval to use HOA funds for litigation.  Thus, a vote is required if the individual home owner wants the HOA to use HOA funds to sue in their behalf.  This will mitigate the practice of HOA Boards and their lawyers taking on narrow and special interest litigation that is funded by home owners without community approval or benefit.  This is called open governance and protecting home owner interests.

 

Legislators on the "protect the HOA home owner" bandwagon must be challenged as to the validity of their opposition to SB 15-177 and also why, if they are so concerned about helping HOA home owners, they have failed to sponsor any substantive HOA reform over the past several years.

Phantom Opposition in Media on Colorado Construction Defects Bill

Colorado SB 15-177, construction defects reform, is aimed at reducing the number of law suits entered into by HOAs and to define, improve upon, and reduce the cost of dispute resolution.  This particularly impacts HOA home owners as it requires the approval of home owners prior to the HOA spending its' funds on litigation.  Too often HOA Boards at the encouragement of their lawyer enter into costly litigation without the knowledge or approval of home owners.  The consequences can be burdensome special assessments and increases in HOA dues to pay for the litigation and replenish reserve funds.

 

The Colorado HOA Forum, representing home owner interests, supports this legislation as currently proposed.  The Bill is opposed by the Community Association Institute (CAI) with a membership comprised mostly of property managers and HOA and trial lawyers. 

 

Lakewood, CO and most recently Lone Tree, CO have enacted local ordinances similar to the proposed SB 15-177.

 

We have monitored press releases on both the Lakewood and Lone Tree efforts.  The press (Denver Post, Denver Business Journal, and TV news) has again mentioned that opposition to the subject Bill is strong among HOA organizations and HOA home owners.  We challenged the media to identify just one HOA organization (members being HOAs) and/or one HOA home owner's organization (mostly home owners as members).  TO DATE NEITHER COULD IDENTIFY ONE!  THERE IS NO HOA OR HOA HOME OWNER's ORGANIZATION IN THE STATE TO OUR KNOWLEDGE OR THE MEDIA'S EXCEPT THE COLORADO HOA FORUM, NONE, LET ALONE ANY WHO OPPOSE SB 15-177.

 

This happens time and again with HOA issues: those representing the home owner's opinion being organizations and trial lawyers that are a hindrance to and block any HOA legislative reform such as the CAI.

 

This misrepresentation of who represents HOA home owners exemplifies why our issues for legislative reform and SB 15-177 have such controversy and difficulties in gaining support:  the opposition identified basically doesn't exist and/or misrepresents itself as supportive of home owners.

 

Below is a link to the latest article from the Denver Business Journal that suggests opposition from phantom organizations such as home owner groups and HOA entities:

 

http://www.bizjournals.com/denver/blog/real_deals/2015/02/lone-tree-to-take-up-construction-defects.html

 

We ask the press to once again get it right and verify who represents home owners and those who reject legislative reform that promotes home owner's rights and good governance.

CAI Threatened Over Empowering HOA Home Owners on the Use of Their Own Funds in Litigation: SB 15-177

The Community Association Institute (CAI), long incorrectly identified as a home owner centric organization in the press and by State legislators, is at it again in attacking HOA home owner’s rights.  The CAI represents the interests of property managers and HOA lawyers and not home owners.  This time they are objecting to a provision in proposed Colorado SB 15-177 (construction defects) that requires HOA home owners to approve the use of HOA funds in litigation.  Why the opposition?  The CAI and HOA lawyers view the HOA as a profit center and easy money and empowering home owners on decisions on the use of their own funds is considered disruptive and meddling.

Too often HOA lawyers raid HOA bank accounts for legal fees and costly legal cases that should not have been litigated leaving home owners with depleted reserve funds, special assessments to pay legal costs, and/or increases in HOA dues to replenish reserve funds. HOA Boards can currently enter into litigation without apprising home owners of their intent, the cost and consequences of litigation or how they intend to finance legal fees. Boards can incur unlimited legal expenses and even take out debt instruments to pay legal fees. Home owners in too many cases only know of the financial consequences after the case has been litigated and they are stuck with the bill.  This Bill simply reins in the authority of an HOA Board (that is highly influenced by HOA lawyers and property managers) in making decisions on litigation that can have significant if not catastrophic financial impact.

SB 15-177 would not preclude legal action but require a majority of home owners to approve litigation. This would mitigate the number of law suits and the abusive practice of an HOA Board suing in behalf of a very few (as few as two) vs the community at large.  More cases would be handled in the less expensive legal venue of arbitration thus saving HOA’s significant sums of money. Home owners could still pursue individual actions using their own funds.

The CAI is fabricating a tall tale in contending that any legal fees paid to an HOA lawyer related to routine advice and counsel would take a majority vote of home owners. This Bill doesn’t get involved in regulating or interfering with the operations and daily functions of the HOA. Legal counsel on enforcing covenants, controls, restrictions, and debt collection or other issues involving common and routine HOA issues would not require a majority vote of home owners. It’s just not in this Bill.  Payment of routine legal counsel doesn’t require a law suit today nor would it under this Bill. This Bill is directed at legal cases filed in a court of law that are specific, unique, non-recurring and financially impacting. The CAI is attempting in what should be an embarrassing statement to say that any payment to an HOA lawyer would have to be voted upon: this is called desperation.

The winner in this Bill will be home owners in HOA community associations (not the Community Association Institute) who will now be empowered with more control over the assets of the HOA and still retain the right to litigate construction defects.  This Bill does not impair the ability of any HOA Board to govern but contributes to open governance.

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.

HB 15-1040 Would Remove Protections under Property Manager Licensing

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

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

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

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

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

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

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

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