CAI’s Colorado Legislative Action Committee (“CLAC”) and members of CAI’s Attorney Committee have been working diligently on a rewrite of House Bill 11-1197 (“HB 1197”). As originally introduced, HB 1197 would have had a detrimental affect on the superlien which homeowner associations rely upon under the Colorado Common Interest Ownership Act (“CCIOA”). 

Representative Gardner, the sponsor of HB 1197, has worked closely with us and other stakeholders to rewrite the bill in a manner that is positive for everyone involved. As a result of these efforts, a strike-below has been drafted which will be heard by the House Economic and Business Development Committee on Thursday. Simply put, a strike-below means the provisions of the original bill are completely stricken and replaced with the language contained in the strike-below.


While the strike-below is not perfect, the provisions which are beneficial to homeowner associations outweigh the less positive provisions and CLAC has voted to support the bill.  

The strike-below of HB 1197 contains the following provisions:


●Clarification that the superlien equals, but cannot exceed, assessments which would have become due for the nine (9) months immediately preceding institution of a foreclosure. Institution of a foreclosure is defined as the date of recording of the Notice of Election and Demand or lis pendens, as the case may be. 


●The superlien has been increased from six (6) months to nine (9) months of assessments which would have become due for the nine (9) months immediately preceding institution of a foreclosure. If federal regulations adopted by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association require a shorter period for the superlien, the number of months of the superlien will be determined in accordance with those federal regulations.  However, under no circumstances will the superlien be less than six (6) months.


●An association is entitled to the superlien following institution of a public trustee foreclosure or judicial foreclosure “regardless of whether assessments are delinquent at the time of recording of the notice of election of demand or lis pendens.”  In other words, an actual delinquency is not required for an association to collect the superlien.


●From the date of recording of a Notice of Election and Demand or lis pendens, as the case may be, the lender must pay the association the amount of the superlien within six  (6) months.  


●If an association is required to take action against a lender to enforce the superlien, the association is entitled to reasonable costs and attorney fees and the greater of: (1) statutory interest on the superlien calculated from the date of recording of the Notice of Election and Demand or lis pendens; or (2) interest on the superlien calculated in accordance with the applicable provision of an association’s declaration, bylaws, or rules and regulations.


 ●A lender is not required to pay the superlien more than once every nine (9) months or a shorter period down to six (6) months if required by federal regulations.


●When an association commences a judicial foreclosure, the court must include in its judgment or decree the priorities of the two portions of the association’s lien – that portion of the lien which is superior to the first mortgage (the superlien) and that portion of the lien which does not have priority over the first mortgage (the junior lien). The association is required to hold separate sheriff sales for the superlien and junior lien.


●Currently an association is required, upon request, to provide to a unit owner, unit owner’s designee or holder of the first security interest in the unit with a written statement detailing unpaid assessments against the owner’s unit. The strike-below provides that this statement binds the association and the assignee of the association to the extent of the assessments assigned.


●Prior to, or contemporaneously with, an association commencing an action to foreclose on the association’s lien, an association must send a written notice of lien to the owner of the unit and the first security interest of record for payment of the lien. If the superlien is not paid within thirty (30) days of this notice, the association may proceed with foreclosing on its lien.


●If a lender provides a loan to an association and secures that loan with assessments, the lender must record the assignment of assessments prior to commencing a foreclosure action.


●The first security interest, or an assignee of that interest, has 90 days to redeem the superlien following the association’s sheriff sale.


CLAC will provide you with updates on HB 1197 as it proceeds through the legislative process.