On August 10, 2022, House Bill 22-1137 (“HB 1137”) went into effect. The new law at that time made significant changes to how HOAs in Colorado are permitted to handle enforcement and collection matters. Now that we have lived with and worked under this law for a year, we have discovered issues with the law that adversely impact HOAs. However, the biggest failure of this new law is that it protects violating homeowners to the detriment of the 99% of other homeowners and residents in their community who are forced to live with these continuing violations which HB 1137 promotes.

A fundamental concept that is missing in HB 1137, is that HOAs are tasked with balancing the interests of individual homeowners living in their community with the interests of all homeowners and residents living in their community. At its core, the proponents of HB 1137 incorrectly made the assumption that HOAs routinely discriminate or treat unfairly the individuals who are violating the use restrictions in the declaration of their communities or the rules of their community. The proponents did not take into account that use restrictions and rules are intended to protect the interests of all of the homeowners and residents living in their communities and are not intended to protect the corporate entity which is known as the HOA.

Since we are still in the midst of summer, I have noticed when driving into the HOA where I am a homeowner that the two sixty-day cure periods that owners have for non-health and safety violations have made it extremely difficult for my community to enforce architectural guidelines. I live in a large planned community in Arvada where the vast majority of the owners take pride in keeping their yards in a tidy condition and their homes painted in compliance with the requirements of the community. However, every evening when I turn into my community, the first thing I notice is the home that was painted with colors that are not approved for our community (my HOA has 41 color combinations to choose from) and the house directly across the street from that eye sore has weeds that have now reached at least 2 feet in height. I’m glad that I live several blocks away from those two homes!

The cure periods for these violations have empowered these owners to thumb their nose at my HOA and their neighbors, since they can’t be fined for pro-longed periods of time and the HOA cannot bring a lawsuit against them for injunctive relief during the cure periods. Not to mention, I suspect my HOA doesn’t want to use the assessment income paid by all of the other homeowners in my community to bring a lawsuit against these two homeowners who refuse to come into compliance. Contrary to what the proponents of HB 1137 assumed, HOAs are not big corporate entities with unlimited funds. Instead, their income is reliant upon the assessments which the homeowners pay.

Finally, as an HOA attorney, I have recently had to deal with an unprovoked physical attack in a community I represent. Based upon HB 1137, we had to provide the individual who perpetrated the attack with 72 hours to cure their violation. What does that even mean? Does that mean if the individual doesn’t attack anyone else within 72 hours, the Association cannot levy a significant fine against the attacker or file a lawsuit for injunctive relief to protect the other owners and residents in the community? The provision providing a 72 hour cure period for health and safety violations does not provide the tools HOAs need to protect the other owners and residents in the community from these horrific violations!

There is a HOA Task Force that is convening for the purpose of looking at homeowner’s rights – which includes issues relating to enforcement. I hope you will join me in encouraging this Task Force to look at the unintended consequences of HB 1137 and to ensure that the rights of all owners and residents in HOAs in Colorado are protected. It is essential for HOAs and this Task Force to balance the rights of individual homeowners with the rights of all owners and residents living in HOAs. It is possible to get this balance right!

  • “…I always think that the chances of finding out what really is going on are so absurdly remote that the only thing to do is to say hang the sense of it and just keep yourself occupied.” — Douglas Adams, The Hitchhiker’s Guide to the Galaxy*

Responding to record requests can sometimes be a daunting task. With CCIOA’s detailed list of “records of the association” that Colorado common interest communities are required permit requesting owners to inspect, combined with requesting owners’ increasing tendency to submit broad records requests, here are a few tips to help you get through this process as easily and painlessly as possible:

  • “I don’t know what I’m looking for… I think it might be because if I knew I wouldn’t be able to look for them.”

It is helpful to scrutinize records requests closely, as soon after receipt as feasible, in case they encompass documents that are not “records of the Association.” Unless stated otherwise in the governing documents, if a document in the possession of the association or manager (as the association’s agent) does not qualify as a “record of the association” (per C.R.S. 38-33.3-317), the Board may decline to allow the requestor to inspect or copy that document. This includes documents falling outside the relevant statutory retention timeframes (such as old ballots, contracts, proxies, tax returns, “written communications…to all unit owners generally as unit owners” etc.).

  • “So once you do know what the question actually is, you’ll know what the answer means.”

Just because an owner has requested it, and the association/manager has it, doesn’t mean it needs (or is allowed) to be provided:

  1. Contracts, leases, and bids, etc. currently under negotiation, attorney-client privileged communications, and records involving individual units not belonging to the requestor, are among the types of documents that may be withheld.
  2. Personnel, salary, or medical records relating to specific individuals and (without prior written consent) personal identification and account information of members and residents, including bank account information, telephone numbers, electronic mail addresses, driver’s license numbers, and social security numbers, must be withheld/redacted before records are turned over to the requestor.

However, copies of email threads among Board members that culminate in a vote/action outside a meeting, must be provided to owners who request them, so it is best to limit extraneous discussion on such threads.

  • “We demand rigidly defined areas of doubt and uncertainty!”

Although the provision of association records to a requestor may no longer be conditioned upon the statement of a “proper purpose,” owners may be required to submit written document request describing with reasonable particularity the records sought. This means, if an owner requests a broad category (such as ‘financial records’) fails to include a limiting timeframe, etc., the Board is within its rights to request greater specificity. This can be a very helpful early step in the process by expediting/ limiting the review time required for responding to such requests.

Moreover, associations may charge, and collect in advance, a reasonable charge to cover the costs of labor and material for copies, production/reproduction, mailing, and special processing of records, if applicable.  

Records that do not already exist or are not in possession of the association or manager do not need to be created/re-created in response to a records request.

* Unless otherwise specified, all quotes herein are from Douglas Adams, The Hitchhiker’s Guide to the Galaxy. (See https://www.audible.com/blog/quotes-hitchhikers-guide-to-the-galaxy.)

Notice Regarding Colorado HOA Homeowners’ Rights Task Force

On May 24, 2023, Governor Polis signed into law HB23-1105, which creates an HOA Homeowners’ Rights Task Force (“Task Force”) to examine issues confronting communities that are governed by the executive board of an association. You can read more about the Task Force at https://dre.colorado.gov/division-notifications/house-bill-23-1105-task-forces-to-examine-issues-affecting-homeowners-rights.

Thanks to Senate Bill 23-178, community associations throughout the state will see a significant increase in the presence of mischievous young rabbits in the coming years.  Senate Bill 178 requires planned communities with detached structures – single family home communities – to permit the installation of vegetable gardens (which include flowers, fruit, herbs, and other edible plants) in front, side, and rear yards. Only owners who are responsible for their landscaping are allowed to make these changes.

The first thing that crossed my mind was that my front yard, with its steep slope, would wash immediately onto the sidewalk if I removed the turf and left a bare dirt planting bed.  Fortunately, community associations can impose design and aesthetic guidelines on vegetable gardens, so you probably shouldn’t plow up your sod to grow corn throughout your 800 square feet of front yard yet. Associations can protect existing drainage and grading, and require that these changes not impair fire buffers.

The bill also ensures that owners can install nonvegetative turf grass in backyards, and strengthens the existing right of owners to install xeriscaping.  In fact, it requires community associations to provide owners with a choice of three pre-approved water-wise garden designs!

We are hard at work preparing policies for our clients to be ready for this bill to take effect this August.  Reach out to any of our attorneys for more information and pricing!

House Bill 23-1131, which would have required a majority of unit owners present at a Board meeting for the Board to approve a proposed budget, has been postponed indefinitely after its hearing in the Transportation, Housing, and Local Government Committee. Even a proposed strike-below, which would have allowed minute numbers of residents to veto a budget (and resulted in unpaid insurance premiums and other expenses) was not sufficient to keep the bill alive. While we all want our communities to be fiscally responsible, this was not the way to do it!

After our scintillating discussion focused on HB 1137 this afternoon, I can’t resist but to hold another class that focuses on HB 1137 and all the other 2022 legislation and other legal changes impacting Colorado community associations. Community managers and Board members are invited to join me on July 11, 2022 at 1:00 to explore beyond the boundaries of 1137 and learn how new laws will impact towing, voting, and community maintenance obligations. This class has been approved for one hour of CAM-ICB credit. Sign up today!

You are invited to a Zoom meeting.
When: Jul 11, 2022 01:00 PM Mountain Time (US and Canada)

Register in advance for this meeting.

After registering, you will receive a confirmation email containing information about joining the meeting.

Community managers are invited to join us on June 29 at 1:00 to learn about House Bill 1137, what it says, what it doesn’t say, and what you need to know to take care of your communities. Register in advance for this class; it’s sure to ruin your day, but we promise to make it as painless as possible!

Governor Polis signed HB 1137 into law on Friday, in spite of calls by hundreds of community members for a veto. This ambiguous, flawed, and expensive bill will go into effect on August 10. As a reminder, HB 1137 will fundamentally alter all community collection and enforcement processes, as well as require certain decisions to be conducted in executive sessions and not delegated to management. It will prevent the use of fines as a means of enforcement and force more matters to litigation, whether between the Association and an owner, or between neighbors. All communities that are required to maintain responsible governance policies under CCIOA will need to contact their attorneys to update these policies before the law goes into effect, as HB 1137 impacts several different policies.

After a contentious session, House Bill 1137 is finally in its final form and on its way to the Governor. This bill is going to create havoc should it go into effect on August 10.

It will:
– Eliminate fines as a means of enforcement against individual, discrete behavioral violations that are easily cured and easily repeated (such as short term rental violations and noise violations).
– Create unfunded and new mandatory expenses for translations, process service before commencing collections, certified mailings, and balance letters.
– Confuse owners by requiring notices regarding amounts owed that will be inaccurate and fail to reflect all charges payable on accounts in collections, and further confuse them by requiring collection notices that tell owners how to cure non-existent covenant violations.
– Create ambiguities in existing parts of the law that are not changed by HB 1137.
– Force communities to subsidize delinquencies and delay foreclosures until the owner misses an 18-plus month delayed balloon payment (multiple times), creating breaches of existing loan and bond documents and negatively impacting lenders’ willingness to loan in communities.
– Create accounting errors for management companies and communities by removing fees, charges, awarded attorney fees, and late charges from the foreclosable HOA lien, but leave them as part of the lien that must be paid at sale or refinance.
– Eliminate a truly wronged owner’s right to recover all actual damages in a foreclosure.

It will not:
– Eliminate HOA foreclosures. While courts will have to work out the details, an HOA may end up with a judgment lien that is almost equivalent to the existing HOA lien, which lien will include things like attorney fees and late charges and is subject to foreclosure.
– Protect homeowners. You remember those unfunded expenses I mentioned above? An HOA will either have to pay those out of pocket – and that means higher assessments for everyone in the community – or stop with enforcement altogether and face legal liability for a breach of fiduciary duty (and again, innocent owners will pay the costs).
– Stop lawsuits. To the contrary, by taking away the power and availability of fines, more matters will be sent to legal counsel for enforcement lawsuits. A homeowner who might’ve followed the rules in response to a fine reasonably designed to compel compliance will now be able to buy his or her way out of following the rules, leaving the HOA in the impossible position of ceasing enforcement (and violating fiduciary duties), or filing a lawsuit.
– Save money. This bill will force all HOAs to adopt two or more updated responsible governance policies in the span of 70 days. Thousands of communities will contact their attorneys in a panic to ensure they are compliant before the effective date. Then, in a year, when a clean-up bill is introduced to address all the issues we’ve pointed out that have been ignored or minimized, those communities will have to spend more money for more revisions to their policies.

Let’s not do that. Veto this bill. Communities will be better off with a revised bill in 2023 that is conscientiously drafted with real input from the people who will implement the law in real life, than they will be with a poorly drafted and ambiguous law shoved through the legislative process in an attempt to show responsiveness to tragic stories that will still happen with HB 1137 in place. Let’s fix the problem, not make it worse.

The Governor signed House Bill 1040 into law last week, enshrining into law the obligation for community associations to provide notice to community members should it need to restrict access to common elements for more than seventy-two hours. While this is an appropriate, fair, and laudable goal, many other provisions of House Bill 1040 create liabilities and ambiguities for common interest communities.

The bill mandates that associations “preserve and protect unit owners’ ability to use and enjoy common elements.” In other words, a Board’s business decision to close common elements is now subject to an affirmative duty to preserve and protect, not withstanding extenuating circumstances that make use and enjoyment of the common elements detrimental to the rest of the community. Just today I worked with a client with a common element hot tub that is obsolete, only used by a few short term renters, and that will cost tens of thousands of dollars to maintain (and six figures to replace) when the community has many other more pressing financial obligations. Does the association breach its fiduciary duty if it spends money to pay its other bills rather than having the hot tub open and tested even when no one uses it?

The association will probably have to raise its assessments to pay the bills, rather than make a decision to close the tub for an undetermined time and risk litigation from a short term landlord. Would be a shame if it couldn’t collect on those assessments.

The bill also prohibits associations from “unreasonably” restricting or prohibiting access to, or enjoyment of, any common element.

You know that boiler rooms, roofs, and management office spaces are typically common elements in condominiums, right? Some condominiums even rent out common element management units to third parties. Are Boards really now prohibited from excluding owners from drunken rooftop picnics on flat roofs? Sure, that exclusion is probably reasonable, but why should Boards even have to justify this level of control? And if you were on Mars in 2020, you might not be aware of the conflicts between homeowners and Boards regarding common element pool and clubhouse closures related to COVID-19. Many homeowners considered closures to be completely unreasonable, and just as many considered them to be necessary and reasonable. This bill undermines a Board’s decision to close common elements in the face of a new and unknown virus and the risks associated with death and, even worse – no insurance. I hope we won’t have another pandemic any time soon.

I firmly believe that owners are entitled to reasonable information from their Boards about common element closures. Unfortunately, House Bill 1040 goes beyond that intention to create ambiguities and liabilities for Boards that exercise reasonable business judgment in light of their duties to the community as a whole.

And one last consideration; while the bill does not amend the CCIOA section that outline the CCIOA provisions that apply to communities formed before July 1, 1992, its language indicates it probably does apply to those pre-CCIOA communities. Plan accordingly.