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 .
Sunday, July 26, 2015
Friday, July 24, 2015
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
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
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.
Monday, June 29, 2015
HOA Manager Licensing: Heavy on Fees Lite on Consumer Protections
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
Sunday, May 17, 2015
Colorado HOA Manager Licensing Program Flawed
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.
Friday, May 1, 2015
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.
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.
Friday, April 24, 2015
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.
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.
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