State HOA Office Study Recommendation Avoids Costly and “milk toast” HOA Dispute Resolution

The Colorado State HOA Office completed its’ study on HOA dispute resolution.  One of the recommendations deserves actions:  “Implementing a binding arbitration program would be a cost-effective and expeditious means by which many of the disputes between homeowners and HOAs can be resolved”.  This would be the single most important and effective piece of HOA legislation passed in decades.  Cost savings to HOA’s and home owners will be millions of dollars a year in legal costs. The proposal can level the legal playing field that currently pits the limited funds of a home owner against the unlimited funds and legal resources of the HOA.  The program would resolve problems based on HOA law and HOA governing documents vs. legal proceedings and manipulation.  Complaints would be resolved in a timely manner before compounding.  HOA complaints would begin and end out of court through an initial inexpensive filing fee and end with a binding decision rendered by a trained HOA arbiter.  Home owners could still choose to go to court vs using this process thus no legal rights are forfeited.  The process is not complicated, doesn’t require lawyers, will not cost taxpayers, and is easy to implement.

HOA complaints mostly don’t belong in a court room and such proceedings cost taxpayers in court costs and unduly overload our court system with cases. HOA complaints mostly concern non-compliance with State law and HOA governing documents and certainly don’t require lawyers and complicated and costly legal proceedings in a court. 

This solution is NOT the flawed mediation process that requires home owners to gamble hundreds of dollars on a mediation session in the “hope” of gaining an agreement on dispute resolution.  Mediation has been a recommended dispute resolution for decades in HOA legislation and is minimally effective.  Mediation adds time, process, and cost for home owners on dispute resolution with no guarantee of finality.  The agreements in mediation can be “walked away from” by either party without prejudice thus sending the parties back to court:  the very thing trying to be avoided.  Mediators are not licensed and don’t require any HOA educational or training standards. Mediators hearing your case can thus be anyone.  This “profession” has less standards and rules than beauticians, plumbers, manicurist, etc. Mediators claim to resolve up to 50-60% of cases heard but what about the other 40% who are thrown back into court and the uncounted complaints that are never filed due to an inability of a home owner to gamble hundreds of dollars on the uncertainty of mediation? 

The recommendation of the State study can resolve the flaws of dispute resolution through the courts and mediation.  The out of court process involves using trained med-arbs (mediators with arbiter decision making authority) in an out of court venue. The cost to taxpayers is zero as the system would be self-funded.  The State’s HOA Office would oversee this process.  It already has an infrastructure in-place for filing complaints and collecting fees.  The process is similar to handling home owner complaints with HOA property managers through the Department of Regulatory Agencies (DORA).  Thus, DORA has administrative models, precedence, and experience to implement this system. 

Objections are surely to come from lawyers, the Community Association Institute (CAI), and mediators who have spoken against this process based on their economic stake in continuing the current litigious and costly dispute resolution process.  However, with thousands of complaints and inquiries received by the State’s HOA Office and legislators it is time to focus on solutions and problem solving vs continuing on the current path that has tainted HOA governance and made HOA laws ineffective for home owners.

Out of court binding dispute resolution is affordable, simple, fair to both HOA and home owner, provides cost savings to home owners, HOA’s, and taxpayers, provides timely complaint resolution, is accessible, doesn’t require anyone to give up their legal rights, and results in decision and finality in disputes.  The State’s recommendation awaits legislative sponsors.

Colorado HOA Forum   www.coloradohoaforum.com

 

 

 

HOA Issues Not Sexy but Costly to Home Owners

Homeowners Association (HOA) issues continue to avoid the political limelight and continue to cost home owners millions of dollars a year in unjustified and abusive fees and leave home owners with an inability to enforce their HOA governing documents and State HOA laws.  It would seem HOAs deserve more consideration from our legislators when over two thirds of Coloradans live under HOA governance and the State’s HOA Office has received thousands of home owner complaints.  HOA bills have been passed but ALL are basically unenforceable from the home owner’s perspective.  They require residents to take their complaint to our costly, time consuming, and litigious court system that is impractical and unaffordable for most homeowners.  Furthermore, most well intentioned HOA reform Bills have either been watered down to provide more illusion of reform than effectiveness and/or written by the special interest group, Community Association Institute (CAI), whose practices the Bill was targeted to restrain.  The most recent example of the illusion of HOA legislative reform is HB 14-1254.  The Bill was intended to limit the unjustified, abusive, and costly ($15 million a year to home sellers) HOA transfer fee imposed by property managers (made illegal on all residential home sales except HOAs in 2011).  Again, a well-intentioned Bill, rewritten by the CAI with the improper and tacit approval of DORA (Department of Regulatory Agencies), into a meaningless disclosure Bill with no restrictions. 

The only explanation for the continued lack of exposure of HOA problems and ability of our legislature to pass effective HOA laws seems to be that the issue simply is not “sexy” enough for the media and/or an inability by politicians to turn HOA matters into voter motivation.  Our organization, Colorado HOA Forum, considers HOA issues a sleeping giant based on the growing numbers of citizens living under HOA governance and the increasing number of complaints received by the State’s HOA Office and our representatives.  Those politicians realizing the importance and potential voting block of HOA residents can only benefit from the unquestioned metrics of this citizen interest group. 

Who or What is the Community Association Institute (CAI): You May Be Surprised

 

Who or What is the Community Association Institute (CAI):

You May be Surprised (a Colorado and Nationwide Perspective)

 

For decades the sole source for Homeowners Association (HOA) information for the media and State Legislature has been the Community Association Institute (CAI).  Why not?  Their name implies they represent the concerns of community associations and home owners: aka HOAs.  They have been the main/only source sought and invited to the table for input and wisdom on HOA matters by Government Agencies, legislators, and the media.  This group is so well “respected” it has been asked to write or participate in writing HOA legislation to ensure participation of a knowledgeable and “unbiased” authoritative source.  Government regulatory agencies invite this group to write industry rules and regulations and mostly adopt without challenge.  The media goes directly to the CAI whenever an HOA problem surfaces to get the reason why and for them to provide a “correct” solution.   HOA legislative proposals will see this group’s lobbying machine swarm and be welcomed at the Capitol to ensure the “right” and “workable” legislation is crafted.   Visit this organization’s web site and read their literature. Unless you do so carefully you would think they altruistically represent home owners vs being the trade group that represents HOA property manager interests.  This group is often invited to Legislator’s Town Hall Meetings (without the same courtesy extended to home owner groups) and represented as the expert and protector of home owner’s rights. 

The actions of the CAI, however, reveal it is a well-financed and marketed machine that is the most anti-HOA home owner group in the country.  In Colorado,  and in other States, over the past decades this group has legislatively intervened to ensure HOA laws proposed or passed have been watered down to be ineffective from the home owners perspective and/or written to ensure CAI’s profitability and increase costs to HOA home owners.  This group represents property managers, HOA Boards, legal and real estate interests, NOT home owners.   Recent examples:  killing an HOA Transfer Fee Bill that costs home owners $15 million a year in unjustified and unauthorized fees; direct intervention in a property manager licensing Bill to ensure it served to sell their educational courses, increase membership and dues and ensure licensing rules and regulations were reflective of their own legislative proposal that protected HOA Boards and property manager interests;  opposed any legislation to provide HOA home owners an affordable and accessible venue to dispute complaints out of court;  supported a Bill to authorize HOA’s to levy fees against home owners even when not authorized to do so in the governing documents;  opposed limiting fees and add-on charges to HOA home owner debt;  opposed full and detailed disclosure of property manager fees assessed on home sellers; obstructed legislation to minimize home owner protections against liens and foreclosure for HOA debt;  and the list goes on and all anti-home owner. 

The beginning to HOA legislative reform and improved governance 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.     

 

HOA Fees Disclosure Law Ensures Hiding Details (Colorado HOA law)

If it walks like, sounds like and looks like an effective law then it isn’t.  This describes most disclosure laws.  These laws are generally the result of a Bill’s sponsor(s) caving into interest groups and compromising their own (flexible) principles to get something done even if only ornamental or ceremonial.  Disclosure Bills provide the illusion of accomplishment and are satisfying to those voting for the Bill.  Truly a game of “three card legislative monte”.   HB 14-1254, HOA Fee Disclosure, is the poster child for deception in legislation through disclosure.   Phase I: The original Bill had nothing to do with expanding disclosure of HOA fees, really!  It was aimed at limiting an abusive, excessive, and unauthorized fee on HOA home sellers (transfer fees).  The Bill’s sponsor was threatened by interest groups to change the Bill or it would be killed.  Phase II:  All language in the Bill related to reining in abuse was removed and the Bill morphed into an empty fee disclosure proposal.  Worse yet, an interest group rewrote the Bill with ambiguous, non-definitive, and unenforceable disclosure requirements for most HOA fees and didn’t even address HOA transfer fees.  Phase III:  A legislative attempt was made to include specific language to document, justify, and detail the billing of transfer fees.  This is called disclosure.  In line with the intention of disclosure laws the compromise reached on this effort was  to ”disclose” at the level currently provided that involves a one liner on closing documents with no detail: that’s called endorsing concealment.    There you have it, a disclosure law that ensures nothing changes and nothing revealed but legislators and home owners can now feel good with “disclosure”. 

Colorado Empty Disclosure Legislation Remains Popular (HOA's not exception)

Our Colorado legislature will pass more "disclosure" laws in 2014.  Disclosure laws are intended to ensure all information about a transaction is exposed guaranteeing the parties involved in the event are not deceived and have all information to make a sound decision.  In law making, however, disclosure Bills can present a false sense of accomplishment.  They appear forceful, problem solving and protective of rights but in reality are meant to preclude change.  They are too often the result of Bill sponsors caving into interest group pressures to remove that which could affect change or provide a means of enforcement.  Disclosure Bills are more often than not ornamental, administrative, and provide a false sense of accomplishment.  These laws require documenting the problem to be solved but do little to end abusive practices. 
Two Bills, HB 14-1254 and 14-1285 (and more to come), regarding HOA Transfer Fees and Tax Preparer respectively, exemplify the illusion of effectiveness through disclosure.  Both Bills require fees to be disclosed but there is little expectation that documenting abuse or deceit will mitigate abusive practices.  Think in terms of disclosure on the back of a ticket to an event, credit card disclosures on interest charges and privacy act data usage, or those unintelligible real estate purchase contract documents that “disclose” only what the person writing the documents understands.  Has disclosure helped the consumer?  Then think about how you pursue your rights when that which has been disclosed is violated?  Really, can we afford an expensive court case?  Disclosure Bills don’t include enforcement provisions (purposely!). 
Legislators can feel good and boast about their vote for “disclosure” but such Bills change little if anything.   

Legislation Too Often More Ornamental Than Effective (e.g. HOA Law)

News laws may be more ornamental than effective.  We often get excited about a new law that seemingly addresses an issue only to find out it lacks one important aspect to make it effective:  enforcement.  Some laws provide guidelines and rules most of which won't effectively change current practices, assign accountability, or define penalties for non-compliance.  Then there are those "disclosure" laws that require revealing information in a transaction or event.  This again mostly means an abusive practice can continue but now the violator will have to document it at some level.  Other laws specifically state compliance and mandatory requirements but neither provide for penalties nor a means of enforcement outside our litigious, costly, and time consuming court system that is out of reach for most people.  Thus laws are too often the result of an original and well defined Bill being modified by interest groups to present a level of legislative accomplishment but with no real impact on the problem intended to be resolved: the illusion of change.  Colorado HOA laws exemplify how we don't need more laws but a means to make our current laws effective.

HOA Disclosure Laws Provide False Sense of Accomplishment

Our Colorado legislature will pass more "disclosure" laws in 2014.  Disclosure laws are intended to ensure all information about a transaction is exposed guaranteeing the parties involved in the event are not deceived and have all information to make a sound decision.  In law making, however, disclosure Bills can present a false sense of accomplishment.  They appear forceful, problem solving and protective of rights but in reality are meant to preclude change.  They are too often the result of Bill sponsors caving into interest group pressures to remove that which could affect change.  The Bill is rewritten to exclude any enforcement provisions.  Disclosure Bills are more often than not ornamental, administrative, and empty and provide a false sense of accomplishment.   Most HOA laws are disclosure types.  They direct the HOA or property management company to document but not change the practice and fail to address enforcement.  The HOA Transfer Fee Disclosure Bill exemplifies this illusionary legislative tactic.  The transfer fee is known to be abusive, excessive, and misused and the original Bill had a defined solution.  It was changed to a disclosure Bill.  Now the abusive practice simply must be documented but nothing in the Bill will stop the practice.  Even HOA laws addressing release of records to home owners or rules for elections are ornamental.  The laws are well intentioned and defined and require documentation and disclosure but are absent of enforcement from the home owner’s perspective.  Legislators can feel good and boast about their vote but in reality they supported more of the same.  Thus, disclosure laws require documenting the problem to be solved but do little to change it.  The next time you read about passage of a “disclosure” Bill know that it is in reality a law in which its' original intention and effectiveness has been watered down or removed to ensure continuation of the practice intended to be corrected.