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.

Misrepresenting who Represents HOAs and HOA Home Owners

The latest misrepresentation of who represents HOA home owner's interests comes by way of Colorado Public Radio (CPR) and their article "Could limiting defect lawsuits bring more condos to Denver?" .  The article's point person for an opinion on what is best for HOAs and thus HOA home owners is no less than the Community Association Institute (CAI).  The problem is that this organization doesn't and never has represented HOA home owner's interests.  Their members are property managers (PM) and lawyers not HOAs or home owners:  let's get it right!   The CAI spends time and money in State and Federal legislatures lobbying to ensure legislation promotes their interests and mostly at the expense of HOA home owners rights and wallets:  against ending/limiting of the unjustified and illegally applied HOA home sale transfer fees costing HOA home owners millions each year (pocketed by CAI members not HOAs);  oppose limits on fees, fines, and add-on charges on HOA home owner debt (a million dollar+ income supplement to property managers and HOA lawyers and not a dime to the HOA);  blocking efforts to implement a recommendation in a Colorado State study that supports out of court dispute resolution for home owner complaints that would save HOAs and home owners in legal costs and not require lawyers to settle disputes;  and opposing legislation that would require home owner approval prior to using HOA funds on costly litigation or major capital expenditures.

When our State legislature and regulatory agency required guidance on writing legislation, guidelines, and ethical standards to implement a new law to mitigate abusive practices in the  (PM) industry they relied on the CAI for expertise.  Licensing is implemented to protect homeowners against the abusive practices of PMs (the CAI's members) so why the undue influence in writing rules from the very industry that caused the problem in the first place?  This is what happens when an organization is accepted to incorrectly represent HOA home owners.
Then there is the CAI's objection to a requirement in the proposed construction defects legislation that mandates home owners vote on the use of their HOA funds prior to the HOA entering into costly litigation.  This would effectively decrease the number of HOA law suits, ease of access to HOA bank accounts enjoyed by HOA lawyers, and save HOAs millions each year in litigation costs (but the CAI is only protecting home owner interests, right!)

Just one more example to seal the case on misrepresenting the CAI to be home owner centric.  This involves their lobbying efforts with FHA/HUD and the State legislatures to allow the continuance of the abusive HOA home sale Transfer Fee.  The fee is charged by, amount determined by and retained by property managers in the sale of a residence in an HOA to prop up PM income: no benefit to the HOA.  If not paid at home closing it can preclude the home sale.  What else it can preclude is FHA/HUD loan approval/insurance on home sales as HUD doesn't allow the presence of these fees in the home sale transaction.  Thus this fee can dampen home sales and the building of affordable housing that benefits from  HUD loans.

CPR is not alone in getting who or what the CAI is wrong.   The Denver Post, our legislators, television, and other media outlets are all equally wrong.  When confronted they seem to be unaware of who or what the CAI represents, their legislative actions, how they make their money, and who are their paying members.  Informed and accurate reporting and legislating would ask these questions. Interesting to note that when the media indicates the CAI represents HOAs and home owner's organizations they can't or don't try to identify just one: there aren't any!  This ongoing, unquestioning and inaccurate practice of who or what represents home owner's interests is problematic and detrimental to home owner interests and ensures the governance and oversight of HOAs will continue to be skewed against home owners until the media and legislators get it right.

HOA Home Owners: "figure it out yourself" says legislator

HOA home owners seeking solutions to ensure their home owner's rights should not look to some legislators for solutions if the response from one legislator is any indication.  Our organization recently received a response from a State legislator in regards to our request to sponsor legislation to provide for an out of court binding dispute resolution process for home owner complaints (because court is too costly, litigious, and time consuming for ordinary folks).  This legislator said "they (HOA homeowners) should figure out their problems themselves" and the government has no role in HOA issues.  Really! 

Well government caused the problem by allowing legislation to be mostly written by developers, lawyers, and the Community Association Institute (CAI) to ensure their financial interests were protected.  Legislation was written with the absence of any viable means to enforce these laws or HOA governing documents from the home owner's perspective.  If government broke the intended good of HOAs and the laws they created they should fix it. 

I don't see this particular legislator (and others) directing businesses and interest groups to figure it out for themselves.  They are liberal in handing out subsidies to farmers, tax breaks for large corporations, tax rebates and incentives to businesses, imposing tariffs on imports or working to open barriers to free trade, restricting pollutants or chemicals in our food, etc.: all to help "in figuring it out".   This attitude about not legislatively helping HOA home owners from abusive practices and basically unenforceable laws is no less than dismissive of home owners and hypocritical. 

What HOA home owners are asking for, unlike the help provided to businesses and special interest groups, are remedies that don't cost taxpayers a nickel but save home owners, taxpayers, and HOAs millions each year in legal costs and ensure enforcement of property rights.  HOA home owners deserve more respect when asking for legislative support especially when they ask for so little.

FHA-HUD Loans and Affordable Housing Problemed by HOA Transfer Fees

The HOA Transfer Fee charged, retained, and amount determined by property management companies (PMC) on home sales in community associations poses an impediment to HUD loan approval.  This fee was made illegal on residential home sales in 2011 except in HOAs.  Why: 1) legislative influence by interest groups and 2) because the fee is a means to prop up profits for PMCs on the backs of home sellers without having to justify work for the fee (in other words it is charged only because it can with tactic endorsement from Realtors, mortgage companies, HOAs, developers, and home sale closing  agents).  Note, the fee is not mandatory nor can the home seller shop for a better rate (ranging from $50 to $1,000+) and if not paid the home sale is held up.   If you are applying for an FHA/HUD loan and the HOA or condominium charges a transfer fee related to the sale of the home, the loan most likely will not be approved.  This third party fee benefiting the PMC and representing redundant charging by the PMC for work already compensated for in the PMCs's contract with the HOA is not allowed under FHA guidelines.  Thus, the HOA Transfer Fee, costing home owners millions a year in Colorado, unjustifiably and financially burdens home owners and impedes loan opportunities to low and moderate home buyers.  The time to end this fee is now and we at the Colorado HOA Forum ask our legislators to sponsor a Bill to limit/end this abusive, unproductive, and harmful fee.

If you purchased a home in an HOA (single family dwelling, townhome, condominium) over the past two years and your closing documents indicate an HOA Transfer Fee was assessed, please contact the Colorado HOA Forum   coloradohoaforum@gmail.com.  We will work with home buyers/sellers to request a refund of this fee and apprise the FHA of this improper fee. 

Can an HOA do this or that? Ask a different question

The questions too often asked as to whether an HOA can do something;  “is that against the law”; “but State law indicates”; or “my HOA governing documents state I have the following rights but....”.   In most cases the questions reveal a violation of home owner’s rights under the law. The question you should be asking is the one you really don't want the answer to.  You bought your home in the HOA with the understanding that you give up something (home owner’s rights under the covenants, controls and restrictions) to get something (a neighborhood with stable home prices, aesthetically appealing, community amenities, etc.).  You understand that an HOA is a local government of its' own managing the affairs of the community and can collect dues/fees and penalize non-compliance.  This all seems acceptable as you are protected by a full set of home owner’s rights to ensure abusive practices are mitigated, financial accountability is demanded, and governance is executed with open elections, meetings, and management practices. 

Then one day you have a problem with the HOA being in non-compliance with your governing documents.  This could be anything: your rights to records access; meetings and resulting minutes are not conducted according to the by-laws; the HOA reserve funds are depleted or maintenance of common areas is poor and you want answers; the HOA is taking on debt without home owner approval and you want specifics; election irregularities; your fence that was previously allowed and approved is now resulting in fines for covenant infractions; and on and on.  You want answers and an ability to protest for your rights.  You get no answers.  The whole house of cards on HOA home owner’s rights collapses and you ask "can they do that", "isn't that illegal".

In the world of HOA law home owners find out too late that enforcement of covenants, controls, and restrictions is mostly one-sided.  Fortunately, most HOAs comply with their own governing documents and HOA State law.  However, when the all too frequent dysfunctional HOA Board with its' "lifer" and over energetic members govern with secrecy, bullying tactics, and disregard for the law home owners quickly find out what can go wrong and is wrong with our HOA laws.  They are mostly NOT enforceable from the home owner’s perspective. The only venue for complaints and enforceable decisions on HOA home owner complaints is our costly, litigious, and time consuming court system.  This matches the limited funds and time of the home owner against the unlimited funds, time, and HOA attorneys of the Board.  Is this a level playing field?  Any wonder why home owners don’t/can’t pursue their HOA home owner rights?

So the answer to the question "can they do that" is really "what are you going to do about".  The answer you don't want to hear is "not much".   A system where HOA home owner complaints can be handled in an out of court venue with binding decisions that is accessible and affordable is needed.  This will improve upon the enforcement of HOA governing documents ensuring both community and home owner’s rights are affective.   HOA legislative reform is needed and is the only way to handle this imbalance in HOA governance.