Representative Kit Roupe (R-Colorado Springs) has introduced House Bill 15-1113 (“HB 1113”) in an attempt to protect HOAs in Colorado from the financial consequences of lenders continuing the sale dates of public trustee foreclosures. HB 1113 would require lenders who continue the foreclosure sale beyond the first required sale date, to pay the assessments of the individual they are foreclosing upon until the lender actually sells the home. However, in an attempt to be fair to the lenders, Representative Roupe has also built into the bill exceptions to this assessment payment requirement. 

Under Colorado law, once a lender commences a public trustee foreclosure on a home, the lender is required to set the foreclosure sale date within 110 to 125 days. The lenders are then permitted to continue the foreclosure sale date for up to one year. It’s common for some lenders to continue the sale date over and over. It’s also not unheard of that after the sale date has been continued for one year, some lenders will withdraw the foreclosure and start the process and continuances all over again. 


What does this mean for HOAs? Owners of homes in HOAs know that when they haven’t paid their mortgage their lender is going to foreclose on their home. Since these folks know they are going to lose their home, they also stop paying their HOA assessments long before their lender starts the foreclosure process. In fact, it’s not uncommon for owners to stop paying their assessments up to six months or more prior to the lender starting the foreclosure process. Then, when a lender takes up to a year to actually go to sale on a home, the HOA where the home is located can experience an assessment delinquency of sometimes up to 18 months or even more! While HOAs in Colorado have the superlien which requires the lender to pay the association what would equal six months of delinquent assessments, it still leaves the HOA with a significant assessment delinquency. Since generally the only income stream HOAs have is assessment income, these prolonged foreclosures mean HOAs don’t have sufficient funds to cover the common expenses of the association or they have to increase the assessments for the other homeowners. 


Representative Roupe has served on the board of HOAs. She understands the devastating financial consequences of the prolonged foreclosure process on HOAs. By introducing this bill, Representative Roupe is attempting to protect the financial condition of these nonprofit corporations and the folks who live in them.


HB 1113 has been assigned to the House State, Veterans & Military Affairs Committee. While the bill is an extremely important step for HOAs, there is no doubt the banking industry will not be happy with HB 1113. Even if this bill does not make it out of Committee, the introduction of HB 1113 will bring an important issue to the attention of the Colorado General Assembly.


As always, keep your eye on this blog for the latest information on legislation impacting HOAs in Colorado.