The Colorado legislature will consider three home owner's association (HOA) Bills this session. Two will be mostly administrative and one could serve to be the most impacting HOA legislation of the past 20 years improving upon responsibilities and accountability in the HOA property manager industry and the potential to save HOA home owners millions of dollars annually.
SB 16-082, HOA Whistleblower (intimidation) Protection, and HB 16-1149, Remove Budget Reporting Exemption HOAs Predate Act (CCIOA), have admirable goals and provide great expectations but will accomplish neither (for now). These Bills have the same ole' problem that characterizes HOA legislation over the past decades: they lack enforcement from the home owner's perspective except through our costly, litigious, time consuming court system matching HOA funds and lawyers against the very limited resources of the home owner. Lacking an accessible and affordable venue to enforce these Bills home owners will more feel good about the Bills than experience any change.
HB 16-1133, HOA Manager Professional Responsibility and Disclosure, can positively affect home owner's rights and their wallets and provide financial relief to small businesses serving HOAs. This Bill modifies the HOA property manager (PM) licensing law. The Bill addresses the abusive and costly property manager HOA Transfer Fee that involves duplicate and triplicate billing of home owners for services already paid for with HOA dues, requires home owners to be provided a detailed receipt of charges for Transfer Fees, and requires that all Transfer Fees be in compliance with authority to charge as stated in State and Federal laws. This fee costs home owners upwards of $10 million a year. The Bill provides the smallest of HOA property managers financial relief from requirements to obtain a license that can cost them more than a year's income. Also, the Bill improves upon requirements for property managers to comply with State laws and HOA governing documents. The reason this Bill will immediately impact home owners is that when non-compliance with this Bill occurs a home owner can file a complaint with DORA (Dept of Regulatory Agencies) free of charge, have the complaint investigated, violators (HOA property managers in this case) can be fined and/or have their license revoked. and it will directly affect abusive PM Transfer Fee practices by requiring justification and documentation of to payees.
Showing posts with label transfer fees. Show all posts
Showing posts with label transfer fees. Show all posts
Friday, February 5, 2016
Thursday, July 9, 2015
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.
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.
Friday, September 12, 2014
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.
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.
Friday, August 15, 2014
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.
Subscribe to:
Posts (Atom)