HOA Manager Licensing: Heavy on Fees Lite on Consumer Protections

The HOA Manager licensing law goes into effect July 1.  Expect little reform for HOA home owners.  Property managers (PM) will be greeted with new fees, higher operating costs, and costly licensing requirements.  This Law illustrates what happens when the industry trade group for PMs (Community Association Institute (CAI)) writes the law and uses it to promote its’ financial interests.

The law increases PM business insurance costs, requires recurring license renewal and educational costs, imposes new background check and testing fees and for those who want to avoid State educational requirements and testing they will incur CAI membership, educational, testing and seminar costs. These costs have already resulted in PMs that serve smaller (less than 25 homes) HOAs to go out of business.

The fees, business costs and government involvement would be more tolerable if the law accomplished its’ intended goal of consumer protection.  However, the law is vague on the most simple demands and accountability for property managers: 1) there are no direct statements mandating PMs comply with all State laws and an HOA’s governing documents 2) no direct statements that require PMs to advise an HOA when they observe non-compliance with the law or to report to DORA when such advice has been ignored and violations continue  3)  no direct statements that hold PMs accountable when they carry out requested actions of a Board that are in non-compliance with the law or an HOAs governing documents  4) no mandates for PMs to provide home owners with a detailed explanation or legal justification of fees and assessments (such as the HOA Transfer Fee) they independently impose and retain and 5) no requirement to explain and justify in detail all PM fees in their contracts with the HOA.  Repeated requests to DORA (Department of Regulatory Services) and legislators from Colorado’s largest HOA home owner’s group, Colorado HOA Forum, to include these simple specifics have been rejected making reform and enforcement for home owners very difficult.  Legislators also refused to include in the Law assistance to smaller HOA PMs by reducing their licensing costs and requirements.     

Licensing also witnessed an unprecedented and disturbing legislative act.  The Law contains language directly promoting a private entity’s (CAI) sales products and educational courses.  It also allows the industry that is to be regulated (CAI) to develop and complete State educational, testing, and credentialing requirements none of which have been officially reviewed or approved by the State.

Then there is the missing legislative mandate in licensing rules to address meaningful “full disclosure” of all fees and assessments on home owners by PMs.  Specifically, the HOA Transfer Fee that cost HOA home owners millions each year will continue without any limits or justification.  DORA decided a one-liner on home closing documents with no receipt and/or detail of charges is “full disclosure” of this fee. 

Legislation/licensing that is crafted by the interest group to be regulated should be disconcerting to home owners and businesses.  The CAI has dominated the PM industry and HOA legislation in Colorado for decades.  Their influence and leadership has led to the need for licensing and reform.  July 1, 2015 was to be a good beginning on reforming the abuses in the PM industry but HOA home owners will sadly see little change.

Colorado HOA Form: an HOA Home Owner Advocacy Organization

 

Colorado HOA Manager Licensing Program Flawed

"HOA Exams Prove Tough", Denver Post May 17

HOA Exam Difficulty Related to DORA Incompetence

Exams based on educational requirements would not have this failure rate.  The educational courses promoted on the DORA web site and in State licensing legislation, HB 1277, have never been reviewed for content and relevance to the State exam. In fact the courses offered by the Community Association Institute (CAI), that represents the property management industry and makes a lucrative business by selling educational courses, got DORA and State legislatures to promote their courses (highly inappropriate) even before the final rules of conduct, requirements, and test exams were completed.  Property manager candidates believe endorsement indicated the proper study material.  Further, DORA has never completed an official review of CAI courses (that most candidates purchase to fulfill their educational requirements and acquire exam related knowledge) to ensure new HOA laws are even included in CAI material.

 

In our most recent legislative session a few legislators put together a successful Bill, HB 1343, to supposedly "streamline" and fix" the licensing process even though no known problems have been reported and no experience officially existed in the program (it is not effective until July 1, 2015).  The Bill was created with direct involvement of the CAI and DORA and once again it promoted only CAI courses that have never been officially approved for Colorado State testing relevance, it included licensing exemptions for executive types that surely need the training, and didn't "streamline or fix" any known problems officially reported by DORA with the educational courses or testing program. 

The actions by DORA and our legislators have resulted in property managers spending their time and money taking courses that doom them to failure in the exam and will drive many out of business.  The program has turned more into a fees collection and test taking initiative than a law about consumer protection and promoting competency and accountability in the industry.  Until DORA completes an official review and approval of course material that ensures educational material is relevant to testing the licensing program should be put on hold.   

HOA Group Continues to Block HOA Legislative Reform

The name sounds HOA home owner friendly but the organization has nothing to do with representing home owner interests:  just the opposite.  The Community Association Institute (CAI), the trade group for property managers and HOA legal interests, has thwarted HOA legislative reform for decades.  They have obstructed legislative efforts to promote enforcement of HOA home owner’s rights as stated in State law and HOA governing documents while getting legislation passed to promote their financial interests and ensure continuation of abusive, unjustified, and illegal fees on HOA home owners.  To say this another way, our legislators have allowed this group to write, modify, and suggest HOA legislation that has been detrimental to home owners.
 
Recently the CAI led efforts to kill legislation that would have saved home owners nearly $10 million in abusive and unjustified HOA Transfer Fees; this legislative session successfully blocked legislation that would require home owner approval on the use of HOA funds in litigation;  don’t support an out of court, affordable and accessible binding dispute resolution process for most HOA complaints;  got legislation passed to promote the sale of their costly educational courses and gained exemptions from State testing mandates for those that purchased and completed their courses; didn’t support reduced financial and educational requirements for the smallest of HOAs (20 or less units) to relieve them of costly licensing requirements; and opposed requiring full disclosure and justification of fees assessed home owners by property managers in the licensing rules.
 
Until our legislators place a priority on and listen to HOA home owners who make up over half of Colorado’s population vs the CAI financial interests the complaints to the State’s HOA Office will continue and home owners will be vulnerable to abusive and costly practices.  

HOA Bill Should be Downright Embarrassing to Colorado Legislators

HB 15-1343 was crafted to "fix and streamline" the HOA property manager licensing law" that will begin full implementation July 1, 2015.  To date, the Department of Regulatory Agencies (DORA) that is responsible for implementing the law has reported no problems to be fixed, no problems with available financial resources to support the program, no lack educational course providers, no problems with their ability to develop exams and conduct testing and grading, nor has DORA reported that the program is too burdensome on business.  DORA has not completed one status report on the results of implementing the licensing law.  DORA's responsibility is to get the program up and running and comply with the law (not  make the law). 
Arrive the special interests.  The same special interests (Community Association Institute (CAI)) that represent the industry to be regulated.  This interest group basically wrote the licensing law and rules and even got legislators to insert verbiage into the law to promote their lucrative business of selling property manager classes.  It appears they have even influenced DORA to avoid a legislative directive to make licensing rules that include full disclosure of all property manager fees and assessments levied against home owners. 
Now the CAI working with legislators and DORA manages to get this Bill proposed as a "streamline and fix" to the licensing law based upon no experience with the program and no reported problems and even before the program is fully implemented.  They further convinced legislators and DORA to again promote the selling of specific CAI courses in this Bill and to allow anyone who pays for and takes CAI courses to avoid State testing mandates. 
This Bill should be downright embarrassing to the sponsors of the Bill and any legislator who votes for it.  To date the licensing program is heavy on fees and mandates on businesses and lite on the intended purpose of the law which is to address abusive industry practices and consumer protections.  Is it any wonder why citizens don't trust or participate in government. 

Colorado Style HOA Manager Licensing

Colorado-style licensing of HOA property managers: let the fox watch the henhouse.  The business model to develop Community Association Manager (CAM) licensing legislation (and other HOA legislation):  1) legislators consult with the Community Association Institute (CAI)) to craft a Bill aimed at mitigating abusive practices of property managers who are the very folks the CAI represents 2) CAI lobbyist and their CAI “dependable” legislators become Bill sponsors 3) the Bill is assigned to Committees with CAI “dependable” legislators 4) the Bill becomes law with little to no home owner input, full of promoting CAI interests, and heavy on fees and costs and processes imposed on CAMs and 5) the Department of Regulatory Agencies (DORA) implements licensing rules highly reflective of CAI efforts but fail to even contain explicit language for CAMs to obey State law or an HOAs governing laws or for CAMs to report observed violation of the law thus ensuring oversight is empty from the home owner’s perspective.  Then adding one final insult to home owners, DORA was supposed to address abusive, duplicative, and excessive CAM fees assessed home owners (pocketed mostly by CAI members) by requiring “full disclosure” of fees in licensing rules.  DORA mandate for full disclosure on fees:  only require a one liner buried in an HOA contract with the CAM or on home sale closing documents; no requirement to provide any explanation or justification of fees, no required detailed billing  documentation of charges to the home owner, no documentation of how the fee was determined or who retained it, and no mention that the fee is not legally mandated or how the law limits this fee to be charged.
  
The HOA Manager Licensing Bill, well intentioned and having the potential to clean up abusive practices and fees, has turned into a fees and license collection entity within State, a marketing tool for the CAI to sell its’ educational courses, a law to support the continuation of the HOA Transfer Fees, and a financial burden on small HOA CAMs that has resulted in many quitting the business.  Little can be seen in this Bill to complete the intention of the law: consumer protection.  If all this wasn’t enough in supporting the status quo, a few legislators and DORA working with the CAI have proposed a Bill  (even before the law is fully implemented) to change licensing rules to further promote CAI educational courses and membership, allowing the CAI to partner with and complete DORA responsibilities of credentialing, testing, and grading CAM applicants, and gaining exclusions selected CAI members.

Licensing of CAMs in Colorado is truly the fox watching over the henhouse and exemplifies why it is so difficult to bring trust and participation from citizens in our government. 

HOA Manager Licensing Law Empty on Content and Enforcement

HB 13-1277, requiring HOA property managers (PMs) to be licensed by July 1, 2015 has fell victim to special interests.  As implemented, the law has turned into more of a fees collection, license testing and issuance business, and a promotional tool to sell educational courses than addressing abusive industry practices and providing consumer protection. The law fails to explicitly require any PM to follow State HOA laws and the governing documents of the HOA managed.  It doesn’t require a PM who observes unlawful practices to pursue corrective action.  Licensing was intended to address abusive and unjustified fees charged by PMs through “full disclosure”.  DORA has defined as acceptable “full disclosure” to be a one line statement on home closing documents or a one liner buried in an HOA contract.  PMs will not be required to explain or justify fees or to issue a billing statement detailing charges.  Home owners, however, will continue to be required to pay fees no questions asked.  A further failing of this law is the resulting financial burden on the smallest of HOA PMs that has already resulted in business owners deciding to quit the business leaving such services unavailable to many smaller and rural HOAs.  As written and implemented, licensing will change little it was intended to correct and continue that which special interests did not want changed.

Footnote: even before the licensing law was fully implemented the Community Association Institute (CAI), whose members are the impetus for licensing, had private meetings with leadership in DORA and with legislators to craft a Bill to revise the licensing requirements. Not one thing in this proposed Bill addresses the deficiencies in ethics and rules, operating standards, disclosure of fees, or helping small HOA managers. It does include special exclusions for property manager licensing in some supervisory and executive positions (the very folks at the epicenter of industry abuse will now be immune from even the little accountability in the licensing law).

CAM Licensing Hearings Fall Short For HOA Home Owners

The final public hearings on developing rules under the Community Association Manager (CAM) licensing program surfaced little in the way of new recommendations but plenty on weaknesses in home owner protections.  The rules were absent of details that are the foundation for home owners to bring complaints against abusive practices:

a.  No specific rule that CAMs must comply with HOA governing documents or State law.

b.  No rule requiring  CAMs to take action when they observe an HOA Board in non-compliance with their own governing documents or State law.

c.  Disclosure requirements on CAM fees imposed no new requirements.  DORA was supposed to address disclosure on the costly and controversial HOA home sale Transfer Fee.  Disclosure will only require a one line statement in a CAM contract and/or on home sale closing documents; no requirement to explain or document the fee to the home seller or to provide a hard copy invoice detailing (disclosing) services performed for the fee; no mention that the fee can only be for expenses incurred by the CAM in relation to the home sale for which they have not already been paid.

d.  The issue of reduced fees and educational requirements for the smallest of HOAs (20 or less units) was ignored.

A Bill will be submitted this legislative session to make changes to the licensing law.  The above shortcomings were requested for inclusion.  Unless these items are resolved the licensing law could end up being another HOA law that appears to help home owners but has little enforcement capability from the home owner’s perspective.