An Ombudsman For Everyone? Apparently Not

Earlier in this legislative session, we wrote about proposed new legislation, Colorado H.B. 1278, that was going to create an HOA Ombudsman as a State of Colorado employee. The earlier version of the bill required the Ombudsman to be an advocate for the rights of unit owners in their communities and offer to mediate disputes, but would not purport to give legal advice to any party; act as a clearing house for information concerning the rights and duties of unit owners, declarants, and unit owners’ associations under CCIOA; report suspected violations of the new law or rules of the Division of Real Estate; and report other suspected violations of law to the appropriate authorities.          

The proposed law went through many iterations, but was finally passed on third reading by both the Senate and House last week, and was sent to the Governor’s desk for signing. Assuming that the bill is not vetoed, it will become effective on January 1, 2011. On its journey, the bill was winnowed down to remove the advocacy provisions, and instead of creating an Ombudsman to advocate for everybody, now creates within the Division of Real Estate an HOA Information and Resource Center, the head of which will be the HOA Information Officer.

The bill requires the HOA Information Officer to be familiar with the Colorado Common Interest Ownership Act (“CCIOA”). It provides that, in searching for a candidate to be the HOA Information Officer, the Division of Real Estate must place a high premium on candidates who are balanced, independent, unbiased, and without any current ties to an HOA board or board member or to any person or entity that provides HOA management services. After being appointed, the Information Officer must refrain from engaging in any conduct or relationship that would create a conflict of interest or the appearance of a conflict of interest.

So what is the Information Officer’s role? The bill provides that this person will act as a clearing house for information concerning the basic rights and duties of unit owners, declarants and associations under CCIOA. He or she will track inquiries and complaints and report annually to the Director of the Division of Real Estate regarding the number and types of inquiries and complaints received.

Part of the bill addresses how this new position is funded. The bill actually amends CCIOA to add a new section 401 that requires every unit owners association to register annually with the Director of the Division of Real Estate. Annual registration must be accompanied by an annual fee which will not exceed $50. However, the following associations are exempt from payment of the fee: (1) an association having annual revenues of $5,000 or less, or (2) an association that is not authorized to make assessments and does not have any revenue. If the association fails to register, it is ineligible to impose or enforce a lien for assessments under Section 316 of CCIOA or to pursue any action or employ any enforcement mechanism otherwise available to it under Section 123 of CCIOA until it is validly registered. However, a previously filed lien will not be extinguished by a lapse in the registration – it just will not be enforceable during any lapse in the registration. The lien will be enforceable, and applicable time limits will be extended once the association is again validly registered.

While many professionals in the industry have questions about the benefits of the bill, there appears to be at least one gaping omission. It is commendable that the bill requires the Information Officer to be familiar with CCIOA. However, as we all know, there is a whole group of common interest communities that pre-date CCIOA, and are only subject to certain provisions of CCIOA, including condominium associations that are subject to the Colorado Condominium Ownership Act, planned communities that are governed by their own governing documents, and timeshare communities. Familiarity with only CCIOA could very easily lead to misinformation being provided by the Information Officer.

Nevertheless, it is likely that we will soon have our very own Information Officer. What that means ultimately, only time will tell. Stay tuned.