HOA complaint resolution requires HOA homeowner involvement

Silence is not golden!  Seems that too many Homeowners Association (HOA) home owners can get long on complaints but short on acting on their concerns.  If you have/had an HOA complaint or feel you’ve been wronged by your HOA Board or property management company (PMC) you’re not alone but you must be heard.  The State HOA Office and your State representatives have received thousands of HOA complaints over the past two years.  This represents but a fraction of HOA complaints.

HOA home owner apathy is no different than in our general population.  What drives apathy in HOA disputes is an inability of  home owners to successfully exercise their rights.  In Colorado we have many HOA laws and nearly two-thirds of our population live under HOA governance.  Home owners encountering problems and simply trying to get their HOA to comply with their own governing documents quickly find out that what is in the law and their by-laws is not always enforceable from the home owners perspective.  The number one reason for our HOA laws being basically unenforceable is that they all lack a viable, affordable, and accessible means for dispute resolution except our costly, time consuming, litigious, and “pay to play” court system.  This dilemma on HOA governance increases home owner apathy and disengagement but doesn’t dampen individual disenchantment with the HOA living concept.

The solution to enforcement of HOA home owner rights rests with implementing an out of court binding dispute resolution process.  A process that is affordable and accessible and has a definite beginning (filing a complaint) and end (a decision).   Such a process was recently passed into law for HOA home owner complaints with PMCs that will go into law in July 2015.  This process is also used when filing complaints against licensed professions in the State via the Department of Regulatory Agencies (DORA).   Why not for HOA home owner complaints?

The State of Colorado completed a study that identified out of court binding dispute resolution for home owner complaints.  This process would handle 95% of home owner complaints that involved non-compliance with HOA law and HOA governing documents but not be applicable to felony cases or those over a certain dollar limit in damages.  Home owners could still opt to go to court vs this process and thus no one’s legal rights to a court case are forfeited.  The process levels the playing field by not requiring lawyers and costly court proceedings, decides cases on current HOA law and HOA governing documents not legal maneuvers in court, allows for home owners to have their “day in court”, provides no advantage to those with financial resources, keeps frivolous complaints out of court, saves home owners and HOAs in court costs, and provides finality to complaints.  It is the solution to HOA complaints.

Implementation of an out of court binding dispute resolution process only awaits  legislator sponsors in the upcoming Colorado legislative session.  I can assure you that those opposed to reform such as the Community Association Institute (CAI), property managers, and HOA lawyers are already at work with their lobbyists, lawyers, and financial influence to stop such HOA reform in Colorado.

Our organization, Colorado HOA Forum, knows your State legislators are finally beginning to understand HOA issues from the home owner’s perspective.  They know what should be done but to date have no done it.  In the past, legislators only listened to well paid lobbyist such as the CAI to craft legislation and pursue HOA issues.   Of course this ensures nothing changes.  HOA home owners must contact their legislators asking them to support the State HOA study and implement an out of court binding dispute resolution process.  This can easily be done by visiting the Colorado HOA Forum’s web site.

Your Voice: HOA fees: it’s not the amount but the value and justification

Two thirds of Colorado residents live under Homeowners Association (HOA) governance.  All live under covenants, controls, and restrictions and are assessed dues and fees in return for community provided services and amenities.  Amounts vary and so do the range and quality of service.  Dissatisfaction arises when the value of services for fees is not in line with home owner expectations and/or the justification for fees is poorly supported and can’t be contested.  So what causes this misconnect between expectation and delivery.

Problems can occur when HOA home buyers/owners are unaware of what services are to be provided by the HOA.  Providing this information to home owners prior to closing on the sale of a home and having buyers certify they read it should be a legal requirement.  Problems also occur when HOAs mismanage funds resulting in an inability to provide services at a quality level.  This includes not funding HOA reserve funds for planned maintenance, using intended maintenance funds inappropriately on Board special projects or on costly and mostly avoidable law suits, over paying and not competing contract work, and just poor financial planning and management with no oversight or accountability.  Then there is the problem of HOA dues being too low for too long to deliver services.  Another significant and less discussed problem relates to the lack of oversight and control over the property management companies (PMC).  In most HOAs, the PMC runs the community and yes this is the tail wagging the financial dog with little oversight or disclosure to home owners.  One more but necessarily the last problem is that HOA Boards have almost zero accountability and unlimited authority in making financial decisions for the community without apprising or with the approval of home owners.  This includes raising HOA dues, making special assessments, embarking on high cost law suits, and funding special and high cost projects all without home owner approval or having to justify their actions to home owners.

Then there are fees assessed HOA home owners by PMCs that are not in any HOA documents or approved by HOA Boards.  For example, the HOA Transfer Fee.  This fee is NOT imposed by, determined by, or retained by the HOA but pocketed by the PMC upon the sale of a home in an HOA.  No justification or legal requirement is given, the amount is arbitrary ranging from $100 to over $1,000, can’t be negotiated, must be paid or you can’t sell your home, and worst of all you don’t know about the fee until the closing on your home.

HOA fees and financial accountability are an ongoing problem for HOA home owners.  Although Colorado has many HOA laws they all lack an ability to hold the HOA Board and/or PMC accountable for financial mismanagement, reckless behavior, or to provide quality services.  The laws lack mandates for home owner involvement and approval on spending HOA funds.  Home owners are left paying the fees and assessments unless they choose to challenge the HOA in our costly, litigious, time consuming, “pay to play” court system and most simply can not afford this venue.  The good news is that most HOAs and PMCs operate with a good degree of integrity but when bad apples arise the financial consequences can be catastrophic and costly to home owners.  Until our State laws are modified to empower home owners with a means (out of court binding dispute resolution process) to hold HOA Boards and PMCs accountable home owners will remain vulnerable to financial abuse and unexpected financial obligations.

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

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

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

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

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

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

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

Will Colorado HOA Home Owners be Ignored by Legislators, Again?

This past Colorado Legislative session was a loss for home owners with proposed legislation to save HOA home owners millions of dollars in unjustified fees reduced to a meaningless disclosure Bill.  Another proposal to preclude HOA Boards from using HOA funds on law suits without home owner approval died.  Then there was just a lack of interest by legislators when asked to sponsor Bills to limit the amount of special assessments a Board can levy without home owner approval, limiting fees and administrative charges on HOA debt (not pocketed by the HOA), and follow-up on a State mandated study that would provide for an out of court binding dispute resolution process for most HOA home owner complaints.  The big winners with HOA home owner legislative efforts were the Community Association Institute (CAI), lawyers, and property managers who lobbied to ensure HOA Bills and issues were not addressed and/or when introduced as legislative Bills were killed or watered down to retain the status quo.

Our group, Colorado HOA Forum, www.coloradohoaforum.com , will again begin our efforts to gain legislative sponsors to reform HOA governance.  This should be a somewhat easy task with over two thirds of Coloradans living under HOA governance, with thousands of complaints received by the State HOA Office, and equal amounts of emails and telephone calls received by legislators about HOA concerns.  However, opposition groups are well funded and influential in our State legislature.

This is an election year and HOA home owners need to ask their legislators questions about who they represent in HOA issues.  HOA issues for this voting group affect their lives financially, legally, and socially as much if not more than any issue.

Colorado HOA Forum: Newsletter May - July 2014

The Colorado HOA Forum has just published its' latest newsletter:  May - July 2014.  The newsletter can be accessed on their web site    www.coloradohoaforum.com  

CAM Licensing Provides for Out of Court Binding Dispute Resolution, why not same for HOAs ?

We would like to see the Colorado Department of Regulatory Agencies (DORA) speak out in support of our out of court binding dispute resolution proposal  Regardless of what they may claim, they do get involved on some level with legislation.  This was exhibited when they tacitly endorsed an empty disclosure law to rein in HOA transfer fees vs a direct law to limit this abusive fee.  They were quoted by legislators and the CAI as not endorsing a law to limit transfer fees.  Furthermore, DORA has directly allowed interest groups to write their regulatory guidelines as is the case with property manager licensing with CAI input.   

This Office completed a study on HOA complaint resolution in which our proposal for an out of court binding process was recommended.  The proposal awaits a legislative sponsor and surely DORA’s opinion will be sought.  We hope DORA points out when questioned by legislators in the next legislative session that they will be providing an out of court dispute resolution for property manager complaints.  If it is good enough for property managers (and all others that DORA regulates) it is a valid process for HOA home owner complaints.   

Frequently Asked Questions Concerning property  manager licensing

DORA web page for all property manager licensing information

 

FHA Loans, CAI, and Transfer Fees

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

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

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

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

 

 

Colorado HOA Forum's 2014-2015 Legislative Initiative

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

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

2. Improve upon Colorado legislation that licenses HOA property managers

3. Limit fees and administrative assessments on HOA debt.

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

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

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

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

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

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

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

 

 

 

 

 

HOA Home Owners Push for Workable Dispute Resolution

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

HOA Special Assessments: Costly Without Home Owner Oversight

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

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

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

 

HOA Home Owner's Wallets Emptied Over Fees

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

CAI Again is Anti Home Owner in Construction Defects Bill

Pending final version of the Bill we offer the following for your consideration:

An HOA construction defects Bill is anticipated to be introduced to the Colorado legislature.  It would allow home owners to litigate construction defects damages in an out of court venue and to limit the powers of HOA Boards in using HOA funds in construction defects litigation.  Guess who objects to this Bill?

 Denver Post article , “HOAs vow to fight change to defects law”, April 23.  The content was from interviewing CAI (Community Association Institute) spokespersons who vehemently oppose the Bill.  Where do begin?  First, HOAs are not opposing this Bill.  There is no identified HOA organization opposing this Bill nor does one exist.  The CAI surely doesn’t represent the interests of HOAs or HOA home owners.  Next, the CAI claims home owners would be denied their legal rights to a jury trial in construction defects cases.  Interpretation:  the CAI wants to force home owners in construction defects cases and in the most minor HOA complaints (such as a records access complaint) to take their disputes to court.  Court is too litigious, costly, and time consuming for home owners.  Thus, the current system requiring court makes pursuing one’s legal rights not feasible.  The Bill doesn't strip any home owner of their right to sue for damages.  The Bill will allow for an affordable and accessible (out of court) venue via arbitration for home owners to litigate damages using their private funds.  Next, the CAI objects to a provision in this law that would require home owners to approve any construction defects class action suit that would use HOA funds.  This clause in the Bill is intended to protect and empower home owners from HOA Boards that could otherwise independently and without home owner awareness pursue high cost legal cases without their approval.   HOA legal cases often result in material financial loss to HOAs and subsequent special assessments to replenish HOA reserve funds all without home owner involvement.  This provision empowers home owners.  Then the CAI indicated that out of court arbitration costs would not save home owners or HOAs in legal costs.  The CAI makes things up as they go along.  An individual’s court case on construction defects can easily run $20 – 30,000 or more and if you lose add the contractor’s legal costs.  If the HOA takes on the case using HOA funds in a class action suit the costs can easily run in the hundreds of thousands of dollars.  What would it cost to compensate one or a few arbiters for a day or two of work?  Again, the CAI has proven to be the most anti-homeowner organization in the State and throughout the nation. 

 

This Bill can provide home owners with a previously inaccessible and affordable out of court venue for dispute resolution (arbitration), save home owners and HOAs on legal costs, and empower home owners by having a say in how their HOA funds are spent.  The final version of this Bill is yet to be known but you can bet when the CAI comes out against a Bill it surely is not in the interests of home owners.