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.

Who or What is the Community Association Institute (CAI) and HOA Reoform?

Homeowners Associations (HOAs) are comprised of three entities: home owners, HOA Boards and their legal counsel, and the property management company (PMC).  Problems can arise from any of these but for those who follow HOA issues the involvement of PMCs can be most problematic. PMCs affect HOA governance with their direct involvement in operational and financial matters and through their trade organization, the Community Association Institute (CAI), which has undue influence in HOA legislative activities that craft HOA law.  For decades the sole source for Homeowners Association (HOA) information for the media and the State Legislature has been the CAI.  Why not?  Their name implies they represent the concerns of community associations and home owners: aka HOAs.  Legislators "trust" this organization to represent home owners and citizen interests but most have no idea who or what they represent.  Legislators actually think their membership and funding comes from HOA home owners and HOAs:  WRONG.   They have trusted this organization for decades and have allowed them to set the rules in HOA governance and financial management.  Yes, they craft the legislation that sets the rules for their industry and interests and ensure through their actions that HOA State law and HOA governing documents are highly enforceable from the HOA Board’s and PMC perspective and very weak for home owners. Due to this close relationship between the CAI and legislators across the country, HOA legislative reform has been very difficult and the few Bills that have passed have been watered, are more cosmetic than effective, and in no way help with enforcing home owner’s right

If you visit CAI or their legal affiliate web sites and read their literature you would think they represent HOA home owner interests.  Wrong!  Their membership is mostly comprised of PMCs and lawyers.  The CAI is an organization that derives most of its’ income from selling their educational classes.  Nothing wrong with this but read below on how they commingle this business with legislation.  Then there is CAI “the trade organization” for PMCs.  Not hing wrong with this either except that they have ensured all State HOA laws aren’t written to hold PMCs accountable for their actions.  Then there is the connection between the CAI and HOA lawyers who have ensured through their legislative influence that no binding, affordable, and accessible out of court dispute resolution processes is available to resolve HOA home owner complaints. This of course ensures HOA legal enforcement from the home owners perspective against abusive HOA Boards and PMCs remains in our litigious, time consuming, pay-to-play court system making HOA law mostly ineffective. 

The CAI and the entities they represent and work with in State legislatures have thwarted HOA legislative reform for decades.  Recent examples: killing an HOA Transfer Fee Bill that would have limited the fee and required explanation and justification of the fee (this costs home owners in Colorado $10 million a year); opposition of a Bill that would have required HOA home owners to approve the use of HOA funds prior to entering into expensive legal actions; opposing an out of court binding dispute resolution process for home owner complaints (leaving home owners with only our pay to play court system for the most minor dispute resolution); their involvement in writing Colorado legislation to license property managers resulted in using such legislation to promote their sales of educational courses and hence drive up the cost of such required educational courses for property managers; opposing the limiting HOA fees, fines, and administrative and legal fees on HOA debt; opposing term limits on Board members when others are available to serve; obstructed legislation on protections of home owners against liens and foreclosure for HOA debt; attempts to promote legislation that would expand the independent authority of Boards in governing HOA operations (without home owner approval); and the list goes on and all anti-home owner.  You can blame the CAI for the lack of HOA reform with their legislative intervention but much blame also goes to our political process that makes money the name of the legislative game and places unfunded citizen groups at a disadvantage. 

The CAI and its constituents are the most anti HOA home owner group in the nation and in Colorado they most certainly are a wolf in sheep’s clothing and our legislators and the media are only beginning to realize their role. The beginning of HOA legislative reform and improved governance thus begins with dispelling the belief that the CAI represents home owners; revealing their history and actions in HOA legislative reform; curtailing the CAI’s influence with our Government agencies, media, and legislators; and having HOA home owner groups recognized in our legislature and in the media to offer a home owner centric perspective to improving HOA governance.