Common Sense and Affordable Legislative Approaches Must Be a Priority
As Chair of CAI's Colorado Legislative Action Committee ("CLAC") and a political junky, I avidly follow federal and state legislative and regulatory initiatives relating to HOAs. If you follow our blog, you know that on Friday Representative Su Ryden introduced HB 1134 which significantly increases the obligations and authority of the HOA Information Office & Resource Center and the HOA Information Officer.
Not speaking as Chair of CLAC or a representative of Community Associations Institute, but speaking as an attorney who specializes in HOA law and who works daily with HOAs to address a variety of issues and challenges, I have to say that HOA legislation should address significant and pervasive problems in an efficient and cost effective manner.
While many of the concepts in HB 1134 are honorable and seem to make sense, I'm extremely concerned about the expansion of the role of the HOA Information Officer to require him to:
1. Monitor and review HOA procedures and any election-related disputes that arise.
2. Recommend enforcement action if the HOA Information Officer reasonably believes election misconduct has occurred.
3. Appoint an election monitor and conduct the election of directors for an HOA if 15% of the total voting interests in the association, or 6 unit owners, whichever is greater, petition the HOA Information Officer to do so.
While election misconduct occurs from time-to-time in HOAs, it's imperative to look at whether this is a pervasive problem and to carefully consider the financial costs to all HOAs for the "fix" in this bill. The 2011 Report of the HOA Information Office and Resource Center provides that of the 478 complaints received about HOAs in 2011 - only 7.24% of those complaints related to elections. Further, we do not know whether those complaints were actually valid ones.
What we do know is that HB 1134 requires the Director of the Division of Real Estate to determine a per unit fee each year for registration and to multiply that fee by the number of units in an HOA to determine the total cost for each association to register. (Currently the registration fee for an HOA is capped by statute at $50.00) Given the fact that most HOA experts estimate that there are at least 12,000 HOAs in Colorado, the costs associated with the HOA Information Officer carrying out the election responsibilities under the bill would be considerable. Those costs would be passed along to all HOAs in Colorado which are still struggling financially in these tough economic times.
While the 2012 Report of the HOA Information Office and Resource Center had not yet been published when I posted this blog entry, I suspect we will find that election misconduct is not a top tier issue in the complaints. However, I will humbly and happily eat crow on this if I am wrong . . .
The implications of the election provisions for freedom of association, an essential subset of the right to free speech, are at least as worrisome as the potential for additional expense. This bill would effectively grant more power to 15 percent of owners than it grants to a majority of owners. Does the state really wish to be in the business of overturning the decisions of majorities of freely associating citizens? I can almost see the resulting First Amendment case from my common area!
As a practical matter, the election provisions would effectively foster tyrannies of disgruntled minorities. Many boards of directors already have perennial vacancies. As written, these provisions can only aggravate this situation as even more directors burn out and resign their seats. How would any of this create an environment for better HOA governance, exactly?
I sincerely wish that, before rushing headlong into yet another crusade to "protect" the people from bogeymen they have so frequently created in the first place, our elected representatives would pause and think through the potential consequences of these bills before they get filed in the first place.