As you may have heard by reading our blog, on May 28, 2013 the HOA Debt Collection bill (HB 1276) was signed into law by Governor Hickenlooper. Although the requirements of the Bill do not go into effect until January 1, 2014, it is not too soon to commence preparing revisions to your Association’s Collection Policy to ensure timely compliance.
Effective January 1, 2014, an Association must have a Collection Policy which, at a minimum, includes the following information:
(1) The date on which assessments must be paid to the association and when an assessment is considered past due;
(2) Any late fees and interest the association is entitled to charge on a delinquent account;
(3) Any returned-check charges the association is entitled to charge;
(4) The circumstances under which a delinquent owner is entitled to enter into a payment plan and the minimum terms of the payment plan;
(5) 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:
(a) The total amount of the arrearage, with an accounting of how the total arrearage was determined;
(b) Whether the opportunity to enter into a payment plan exists and instructions for contacting the association to enter into the payment plan;
(c) 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
(d) 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.
An Association will also be required to provide a delinquent owner with a one time opportunity to enter into a payment plan, lasting at least six months, to bring their delinquent account current. In the event the association and a delinquent owner agree to a payment plan, the owner is also required to remain current in the payment of future assessment fees. If an owner fails to make the installment and/or regular assessment payment(s), the association may immediately proceed with additional action to collect the unpaid debt. The payment plan requirement does not extend to owners who do not occupy the property and took title as a result of a default on a mortgage (i.e. public trustee foreclosure) or association foreclosure.
In addition to the changes above, an association will not be able to foreclose its lien against a delinquent owner until the balance due equals or exceeds 6 months of assessment fees. For example, if assessment fees are $300 per month, an association can foreclose once there is an $1,800 balance on a delinquent owner’s account. The balance can include items in addition to assessment fees such as interest, late fees, fines, attorneys’ fees, and other charges permitted to be charged by the governing documents. Also, the board of directors will now be required to vote and formally approve the filing of a foreclosure action on any given account and cannot delegate this responsibility to an attorney, insurer, manager or any other person.