Questionable HOA Fees Costing Home Owners Millions

If you closed on a home in an HOA you most likely noticed a few line items that are, well, just there.  Ask for an explanation of the fee and your Realtor in many cases has no idea what it is for, how the fee was determined, or who is charging and retaining it.  Worse yet you get no receipt or detailed invoice but are simply instructed to pay it or the home sale will not be completed.  Then there is another fee home owners pay and have no particular details about it: a Document Processing Fee.  You might be told it is a cost incurred by the Title company to provide the buyer documents about the HOA.  Still no receipt on who "really" receives the fee and what work was completed to earn it.  This practice robotically continues on tens of thousands of home sales each year not because it is all legal or mandated but "because it can" and our legislators dodge the issue at the cost of millions to home owners
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The first fee is an HOA Transfer fee retained by and amount determined by the HOA Property Manager (Community Association Manager (CAM)).  The HOA doesn't require it and in most cases has no idea about this fee.  The fee is in actuality a "double" billing for services already paid for by the home owner via their HOA dues to the CAM: issuing a final bill (Status Letter) to the home owner showing any outstanding/delinquent dues or other obligations: providing copies of HOA governing documents (mostly in electronic form); and charges to change names on administrative records.  The fee is actually illegal based on State law, SB 11-234.  The law states this fee can only be charged to recover unreimbursed expenses by a CAM in the sale of a home.  Thus, why are home owners paying on average $300-350 in Transfer Fees when all the "justification" (based on work performed) for the fee has already been paid for by the home owner?

The Document Processing Fee, charged by the Title Company, makes some sense as it is charged to mostly cover the costs of acquiring from the CAM and providing to the home owner the Status Letter and governing documents.  Title Companies must register this process and fee with the State.  In some cases the CAM charges the Title Company a fee thus hitting the "trifecta" by being paid three times for the same services.

The Colorado legislature, along with the consent of DORA (Dept of Regulatory Agencies), passed a CAM licensing law and HB, 1254 Disclosure of Fees, to rein in this abusive fee.  The sponsors of both laws (highly influenced by CAM lobbyist) and DORA in writing licensing rules avoided requiring CAMs to justify the Transfer Fee.  No requirement to identify exactly what the unreimbursed costs related to the sale of a home were that justified the fee; did not require CAMs to document their services justifying the fee by other than a one liner on a home closing statement with amount; did not provide home owners a means to dispute the cost; allowed for unlimited amounts in the fee to over $1,000 without any means for home owners to contest; and didn't address the deceptive practice of CAMs duplicate and triplicate billing home owners.  In summary, home owners to continue to pay, CAMs continue to be enriched, and our legislators will again be asked to pass legislation to require legal justification of the fee and to limit the amount.

Denver's Construction Defects Ordinance: make it simple

State construction defects legislative reform has failed so localities do it themselves.  Now it's Denver's turn. The goal for developers is to cut down on the number of and frivolous lawsuits.  However, this always comes with too many caveats at the expense of home owner's rights.  Home owner's (not represented in the debate) would like to be empowered on the use of their funds in litigation.  Too often costly HOA litigation is pursued by HOA Boards and their lawyers without the knowledge or approval of home owners and can result in draining HOA reserve funds and special assessments.  A simple, compromise law that would serve both interests groups can be crafted by State legislators and integrated into State HOA law.  It is no more complicated than this:  All HOA litigation, other than for routine and administrative matters, funded with HOA resources and/or debt instruments requires a majority vote of approval by home owners.  Supplement this by requiring that prior to any vote home owners be made aware of the proposed law suit, its' purpose, total cost and funding sources, and the consequences in the event of an unfavorable decision.  This simple amendment to State HOA law will automatically cut down on law suits, save home owners and developers significantly in legal costs, and empower home owners over the use of their funds.  The issue of requiring arbitration is mostly a moot point.  Almost all HOA declarations over the past fifteen years requires this dispute resolution process and is only changed to promote costly court cases at the encouragement of HOA lawyers. Simple in this case is a WIN WIN for all. 

HOA Transfer Fees Costing Homeowners and Businesses Millions (Colorado)

The HOA Transfer Fee is assessed HOA home owners upon the sale of their home.  The fee ranges from under $50 to over $1,000 with no requirement to justify the fee based on work performed.  It's pay it or you can't sell your home.  Misunderstood is the fact that the fee is not retained by or amount determined by the HOA but by the HOA's property manager.   The fee is not negotiable nor can the services it supposedly provides be shopped for in the market place.  Worse yet the fee is not legally mandatory like taxes and filing fees but unquestionably entered on closing documents.   The fee costs Colorado home owners upwards of $10 million a year.

The fee was made illegal via SB 11-234 on all residential home sales except those with community associations such as HOAs, condominiums, mobile home parks, and time shares.  The fee can be assessed home owners for unreimbursed costs incurred by property managers related to the sale of a home in an HOA.  Thus only extraordinary costs apply. At no time in the debate to allow this fee has anyone from the property management industry and their trade group, Community Association Institute (CAI), offered evidence of what these unreimbursed expenses were to warrant any fee let alone fees averaging $350+.  Home owners pay HOA dues to cover updates to administrative and billing records, changing and exchanging security codes and cards, creating monthly billings and home owner financial status documents.  The dues also pay for updating and making readily available copies (for a small fee) of HOA governing documents.  So why are home owners being charged $350 on average to do what they are already paying for?

There is more.  Title/home closing companies charge a document fee averaging $150.  This in part/full is to cover costs associated with ensuring the buyer receives copies of the HOA governing documents and a Status Letter (no more than a final billing statement indicating the home owner's financial status with the HOA).  The property manager, not the HOA, can bill the Title company a fee in any amount to provide this information.   Thus the Title company may or may not use the fee in total to cover their own costs.  As mentioned, the HOA official documents can be obtained free by the home owner/Realtor via the HOA's web site and hard copies cost no more than $25 and the home owner has already compensated the property manager to complete these ordinary tasks with their HOA dues.

Then there is the Transfer Fee on home refinancing.  Yes, you buy a home then refinance a year later and pay the fee again.  The administrative and billing records remain the same and your security codes/cards don’t change.  The Status Letter (current billing) and HOA governing documents are emailed to the Title company and this costs you hundred’s of dollars in a Transfer Fee and "for what"?

Legislation to end this abusive, excessive, and illegally applied fee was pursued in Colorado several years ago but was watered down and then killed by HOA property manager interests.  The HOA property manager licensing bill was supposed to address the disclosure of the fee but not ending or limiting the amount or ability to challenge the fee: basically allowing things to continue as is.  Then the State Agency overseeing licensing endorsed disclosure to be a one-liner on closing documents ("HOA Transfer Fee") with no detail, invoice, limit on amount, or justification required.   

The Colorado HOA Forum, a Colorado home owner advocacy organization, will continue to lobby legislators to support a Bill to end or limit this fee. 

If you paid an HOA Transfer Fee the Colorado HOA Forum wants to know

If you recently sold your home in an HOA and paid an HOA Transfer Fee or Status Letter charge the Colorado HOA Forum wants to know.  The fee is charged to HOA home owners, condominium and time share owners, and mobile home park residents on the sale of their homes.  The fee is NOT assessed, retained, or amount determined by the HOA but by the property management company (PM).  Home owners are normally first apprised of the fee at home closing, provided no receipt or justification, amounts range from zero to over $1,000 with no relationship to work performed, and if you don't pay the fee your home sale will be stalled.  The fee is not required by law or to be part of the home closing.  These fees cost Colorado HOA home owners upwards of $10 million a year. 

The fee is assessed illegally!  SB 11-234 makes the transfer fee illegal unless it pertains to extraordinary costs incurred by a PM in the sale of the home.  The transfer fee is "supposedly" charged to reimburse PM's for costs in producing a final home owner's "status of financial standing" with the HOA.  Note, this is mostly no more than a final billing that is computer generated taking all of five minutes i.e. routine work.  Any justified status letter/transfer fee charges should not include services already paid via HOA dues including producing a statement as to financial obligations of the home owner with the HOA, researching any liens on the property, inspection of the property's condition, producing copies of official HOA documents (that are normally free upon request or involve only a minor fee by the HOA), or for administrative costs such as changing names in records, issuing new card keys or gate remote controls, or updating billing systems (this is all routine, paid for with HOA dues and no different than work required when residents marry, divorce, upon a death that don't result in additional charges to the home owner).  Thus, any transfer fee/status letter charge should be fully documented, involve only extraordinary and unreimbursed costs incurred by the PM, and not involve any charges for work already paid for by the home owner with HOA dues.

The new HOA property manager licensing law also precludes PM's from duplicative billing for services, unreasonable and excessive billing for services, and not fully disclosing and documenting work performed.  PM's in non-compliance can have their licenses revoked.  Additionally, transfer fees as discussed in this article are not allowed when they involve an FHA/HUD loan.

The Colorado HOA Forum wants to hear from anyone who sold their home in an HOA and paid a transfer fee or status letter charge.  Contact them at coloradohoaforum@gmail.com .  Home owners may be eligible for a refund in part or in full as part of an individual claim or class action suit.

Colorado HOA Forum Issues "HOA Manager Complaint Guide"

The Colorado HOA Forum has made available on its' web site a DRAFT copy of its' HOA Property Manager Complaint Guide for use by home owners who want to file a complaint against an HOA property management company under the new Community Association Manager (CAM) Licensing Law.  The Guide will make it easier to complete the State's on-line complaint form and also will help home owners write the justification for the complaint using references to State HOA laws.  For example, if a home owner is denied access to HOA records, has issues with the way meetings and elections are conducted, if their HOA is in total disrepair, or if the HOA is charging home buyers/sellers an HOA Transfer Fee they can file a complaint with the State Office (DORA).  The Guide provides legal references that can justify these issues as a violation of law requiring disciplinary action by the State.


The Forum understands this Guide is an ongoing process to develop additional legal references to support a laundry list of home owner complaints.  It has submitted a list of changes to DORA concerning changes to the on-line complaint process and to add additional features such as allowing complaints and documentation to be submitted via email and U.S. mail and a process to track and give feedback to home owners about filed complaints.


The Colorado HOA Forum also is available to help home owners on filing their complaints by filling a contact form on their web site:   www.coloradohoaforum.com .

HOA Foreclosures Allow for Selling Your Home for Pennies on the Dollar

Homeowner's Association (HOA) legislative reform has proven to be extremely difficult in Colorado. Whether the recent HOA manager licensing law, HOA debt collection policy, limiting HOA Transfer Fees, or requiring the justification of HOA fees the result has been watered downed or "killed" Bills by interest groups such as the Community Association Institute (CAI) to the detriment of home owners.


Possibly one HOA issue can gain success in our legislature with support from home owner's groups and the CAI: HOA foreclosure reform.   The abusive and not uncommon practice of HOA's foreclosing on properties for pennies on the dollar is financially devastating to home owners and financial institutions. Too often HOA's foreclose on a property and questionably, but legally, sell the home to speculators, investors, and sometimes privileged parties for a fraction of the home's value to gain payment of HOA debt. The buyer pays off all liens and obligations encumbered on the property, gains title to the property free and clear, and can then proceed to sell the home for fair market value. No requirement to for the HOA to pursue or accept fair market value offers. No net proceeds on the sale go to the bank to mitigate the loss on the defaulted loan nor will any proceeds be used to pay down the home owner's mortgage balance. Too often these foreclosures turn into absentee landlord rentals to the detriment of the community. All this courtesy of Colorado's HOA "super lien" law.


Nevada has recently addressed this problem with legislation. Basically, when an HOA sells, for example, a $400,000 home for $25,000, the mortgage company will have a 60 day period after the sale to intervene and pay off all previous liens, reimburse the purchaser of the property for the sales price plus identified costs incurred. Home ownership would be reverted back to the mortgage company and placed on the market for sale at or near its' fair market value. The net proceeds from the sale would reduce the outstanding mortgage balanced owed by the home owner, reduce the banks losses, and most likely result in a full-time home owner in the community. Thus the practice and incentive of foreclosing/selling HOA homes for pennies on the dollar is mitigated.


Colorado has an HOA "super lien" law promoting this predatory practice. In general, the law allows HOA's to foreclose on homes ahead of first-mortgage providers, giving HOA assessments “super-lien” status that extinguishes first deeds of trust upon foreclosure. Thus if the HOA lien is not paid and HOA foreclosure is completed the buyer is free and clear of any mortgage obligation. HOA legislative reform similar to the Nevada law would address this abusive practice. The Colorado HOA Forum, www.coloradohoaforum.com, will be asking our legislators to sponsor a Bill similar to the Nevada legislation to mitigate this abusive and destructive foreclosure practice

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.