As Chair of CAI’s Colorado Legislative Action Committee (“CLAC”), last week I participated on a legislative update panel at the CAI Rocky Mountain Chapter Spring Showcase. While the session addressed the status of manager licensure in Colorado, the main focus of the discussions were on the perception of the HOA industry by legislators, their constituents, regulators and special interest groups and what that means for the industry in the future on the legislative and regulatory front. 

The panel discussion began with a presentation by Aaron Acker, the HOA Information Officer, who noted that the number of complaints being lodged with his office have been increasing this year. Mr. Acker reported that while the calls are generally tracking the categories of complaints outlined in the 2011 Annual Report of the HOA Information and Resource Center, he is seeing a new trend in complaints relating to HOA law firms with an emphasis on how some firms are utilizing the foreclosure remedy.

Interestingly, Mr. Acker’s comments to some extent mirror the comments we have been hearing from legislators, the Colorado Department of Regulatory Agencies and special interest groups. In an article I wrote for Common Interests magazine entitled “Perception is Reality and That’s a Fact,” which will be published in May, I outlined the perceptions of these public officials and interests groups about HOA boards, managers, management companies and HOA law firms. While we certainly don’t always agree with these perceptions and some of them are unfair, here are common perceptions I wrote about in the article relating to HOA law firms:

“What is with these HOA law firms? Why are they foreclosing on owners instead of using other tools for collecting delinquent assessments? It’s just wrong to use foreclosure to get rid of someone the board and management don’t like. HOA lawyers should give advice that’s in the best interests of the homeowners and not just tell boards what they want to hear. These lawyers need to quit advising their associations that high fines for breaking rules are the way to go. If HOA law firms don’t do the right thing, maybe we need to change the laws they are applying and interpreting in an inappropriate way.”

Interestingly, when having conversations with public officials and interest groups on the use of foreclosure by HOA law firms, most agree that it’s an important tool for HOAs to utilize in collecting delinquent assessments. However, most also believe that foreclosure should only be used as a last resort.

Some folks may argue that these complaints and perceptions are the result of associations getting tough on collecting assessments. Based on the perceptions I have outlined above, I think that’s an oversimplification and might even be a bit tone deaf. Instead, these perceptions (whether they are fair or not) seem to focus upon the belief that some law firms are using, and even promoting, the foreclosure remedy as a routine course of action instead of on a case-by-case basis.  Unfortunately, these perceptions could ultimately lead to the introduction of legislation limiting the use of the foreclosure remedy. 

Winzenburg, Leff, Purvis & Payne believes that foreclosure is an essential option for associations to utilize in collecting delinquent assessments. However, it should be carefully considered and only used on a case-by-case basis under appropriate circumstances.