Members of Community Associations Institute in Colorado have received the following update from CAI’s Colorado Legislative Action Committee on the HOA Reform Package of bills:
HOA Reform Bills Cross the Legislative Finish Line With Little Time to Spare
It is an understatement to say that the 2013 legislative session has been a busy one for CAI’s Colorado Legislative Action Committee (CLAC)! As you know, key legislators introduced a package of bills they called the HOA Reform Package which was aimed at providing consumer protections for owners and residents in HOAs. While CLAC did not author the bills, we were extremely involved in working the legislation in an effort to seek a balance between the rights of individual homeowners with their associations as a whole. While some folks have said that we just should have killed some of the bills, given the make-up of the legislature, we knew this was an impossible task and ultimately wouldn’t serve anyone well. As a result, we rolled up our sleeves and got to work. We are pleased with the results of our work with key legislators and ultimately ended up coming out in support of the following four pieces of legislation.
Expansion of Regulatory Authority
House Bill 1134 (HB 1134) as originally introduced broadly expanded the powers of the HOA Information Officer and the HOA Information and Resource Center which are both housed within the Colorado Division of Real Estate. During the legislative process, the bill was completely overhauled. In addition to requiring all HOAs (including pre-CCIOA communities) to register and simplifying the registration requirements, the bill requires the Division of Real Estate to conduct a study which will assess options, costs and the need for the Division of Real Estate to:
· offer to mediate HOA complaints;
· mandate the mediation of complaints;
· refer disputes to alternative dispute resolution services;
· provide owners with an expedited and inexpensive administrative hearing process specific to HOA disputes;
· monitor and review HOA procedures and election-related disputes;
· report alleged election-related misconduct to the Director of the Division of Real Estate;
· when requested, appoint an election monitor to conduct HOA elections;
· provide regulatory oversight over declarant-controlled boards to ensure they are complying with their fiduciary duty to the association and comply with the requirements in CCIOA relating to transition; and
· provide regulatory oversight to protect executive boards, directors, homeowners and residents from threats or defamatory conduct arising in HOA matters.
This study must be completed by December 31, 2013, and we expect it will result in legislation next year to further regulate HOAs.
Expectations for HB 1134: Like the other HOA bills, HB 1134 has made it through the legislative process and soon will be sent to Governor Hickenlooper who we expect to sign the bill into law. HB 1134 will go into effect on August 7, 2013.
HOA Debt Collection Bill
Near the end of the legislative session, House Bill 1276 (HB 1276) also made it through the legislative process with bipartisan support. Here are highlights of the bill:
HB 1276 requires that the Collection Policy which all HOAs are required to have under CCIOA must include at a minimum:
· The date on which assessments must be paid to the association and when an assessment is considered past due;
· Any late fees and interest the association is entitled to charge on a delinquent account;
· Any returned-check charges the association is entitled to charge;
· The circumstances under which a delinquent owner is entitled to enter into a payment plan and the minimum terms of the payment plan; and
· Before the association turns over a delinquent account to an attorney or collections agency, the association must send the delinquent owner a written notice specifying:
o The total amount of the arrearage, with an accounting of how the total arrearage is determined;
o Whether the opportunity to enter into a payment plan exists and instructions for contacting the association to enter into the payment plan;
o The name and contact information for the individual the owner may contact to request a copy of the owner’s ledger to verify the amount of the debt; and
o That action is required to cure the delinquency and failure to do so within 30 days may result in the account being turned over to a collection agency, a lawsuit being filed against the owner, the filing and foreclosure of a lien against the owner’s property and other remedies available under Colorado law.
Note: Third-party purchasers of an association’s debt or lien must also adopt this Collection Policy and comply with the terms of it prior to taking action to foreclose on the lien or collect on the debt.
An association, or the assignee of the association’s lien, may only proceed to foreclosure if the total amount secured by the lien would equal or exceed 6 months of assessments. Also, the board of an association must vote to proceed with foreclosure on any given delinquent account. Boards are not permitted to delegate their responsibility to authorize a foreclosure action to an attorney, insurer, manager or any other person.
Delinquent owners have a one-shot opportunity at a payment plan to bring their delinquent account current. The payment plan must be for a minimum of six months but can be longer if the association so wishes. The delinquent owner must make the scheduled payment as required by their payment plan and pay their current month assessment obligations. If they fail to make these payments, the association may immediately proceed with collections.
This one-time opportunity to enter into a payment plan does not extend to lenders who take title to the property as a result of a default on a mortgage or flippers.
Note: Third-party purchasers of an association’s debt must also comply with the payment plan provisions.
Expectations for HB 1276: HB 1276 has made it through the legislative process and soon will be sent to Governor Hickenlooper who we expect to sign the bill into law. HB 1276 will go into effect on January 1, 2014.
Manager & Management Company Executive Licensure
House Bill 1277 (HB 1277), which would require the licensure of community association managers and management company executives, just made it through the legislative process yesterday and will soon be sent to the Governor’s desk. This 28 page bill went through significant amendments during the legislative process and is impossible to completely summarize in this email communication. However, here are some highlights of HB 1277:
Beginning on July 1, 2015, community association managers, management company CEOs and executives of management companies who directly supervise managers will be required to be licensed in Colorado.
To obtain a license, these individuals must hold one or more of the following credentials: (1) the Certified Manager of Community Associations (CMCA) certification awarded by the National Board of Certification for Community Association Managers; (2) the Association Management Specialist (AMS) designation awarded by Community Associations Institute; (3) the Professional Community Association Manager (PCAM) designation awarded by Community Associations Institute or (4) any other credential identified by the Director of the Division of Real Estate.
In addition to holding one or more of the credentials outlined above, the manager must take a course and pass an examination relating to Colorado law and the governing documents of associations.
Prior to obtaining their license, the managers must pass a criminal background check. In addition, licensed managers may be subject to discipline by the Division of Real Estate for a variety of offenses. Depending upon the severity of the offense, the discipline may include: (1) an administrative fine not to exceed $2,500; (2) censure of a licensee; (3) place the licensee on probation and set the terms of probation; (4) temporarily suspend a license; or (5) revoke a license.
Expectations for HB 1277: HB 1277 will soon be sent to Governor Hickenlooper who we expect to sign the bill into law. HB 1277 will go into effect on January 1, 2015. However, managers and management company executives will not be required to hold a license until July 1, 2015. In the meantime, this bill will go through significant rulemaking with the Colorado Division of Real Estate. CLAC will be requesting input from members on proposed rules and will provide important updates during this process.
Senate Bill 183 (SB 183) was introduced to address the severe drought conditions in Colorado and to ensure that HOAs are not unnecessarily requiring homeowners to install water-guzzling turf grass as part of their landscapes. SB 183 has made it through the legislative process and is expected to be signed into law any day now by Governor Hickenlooper and will immediately go into effect. Here are some highlights of the bill:
· For the installation of new landscapes or when receiving requests to modify existing landscapes, associations cannot require that any turf grass must be installed in the landscape.
· Turf grass is defined as “continuous plant coverage consisting of nonnative grasses or grasses that have not been hybridized for arid conditions which, when regularly mowed, form a dense growth of leaf blades and roots.
· If owners ask their associations for permission to install turf grass, associations can permit the installation. Associations just cannot require the installation of any turf grass in a landscape.
· In enforcing covenants, associations are not permitted to require owners to water their landscapes in violation of water use restrictions. However, associations may require proof from owners that they are watering their landscape or vegetation in a manner that is consistent with the maximum water permitted by the watering restrictions which are in place.
· Associations are permitted to adopt and enforce design or aesthetic guidelines that: (1) require the installation of drought-tolerant vegetative landscapes; (2) regulate the type, number and placement of drought-tolerant plantings; and (3) regulate the hardscapes which an owner may install.
Once all of these bills are signed into law, CLAC will be writing comprehensive articles on each of the bills and will provide you with guidance on what you need to do to comply with them. We will also be scheduling legislative update classes to discuss the legislation. Please keep your eye on your Chapter’s newsletter for important updates and information.