All the media and legislative talk of construction defect litigation and its impact on condominium construction in Colorado may seem like discussion that does not impact existing communities. But the changes to state and local laws concerning construction defect litigation do affect existing communities by creating owner notice and vote requirements that, in some cases, apply to construction undertaken by associations long after initial development of their communities. The impact of these requirements on communities will likely play out over time as defects occur and associations seek remedies.

While associations cannot unilaterally change the controlling laws, associations can take proactive steps when contracting for new projects. In particular, associations need to know how the potential for construction defects may affect insurance coverage on projects that associations contract to complete on their own. Did you know that many contractors’ insurance policies exclude multi-family housing projects from coverage?

Continue Reading Construction Defects and Insurance: Proactive Steps To Protect Your Community

HOA transfer fees are getting some attention in the news again this week. In particular, news coverage has focused on demands that HOA property management companies provide invoices for the transfer fees charged to buyers or sellers of properties within HOAs. There is good news for buyers and sellers in HOAs: access to transfer fee information is already available.

What exactly are transfer fees? Colorado statutes address transfer fees in the three following ways that are relevant to HOAs and their members:

  1. The Colorado Revised Nonprofit Corporation Act expressly authorizes nonprofit corporations to impose transfer fees upon their members unless the articles of incorporation provide otherwise. Most HOAs are formed as nonprofit corporations and have this right to impose transfer fees.
  2. The real property statutes prohibit certain transfer fee covenants, such as those intended to benefit a person or entity who does not hold an interest in the property burdened by the covenant. But transfer fee covenants for fees payable to homeowner associations are not prohibited and are recognized by statute as valid fees.
  3. Community association management companies typically contract with the HOAs they manage to charge transfer fees to the buyers or sellers of properties within those communities. The community association manager statutes and licensing rules impose explicit requirements on managers concerning these transfer fees. Those statutes and rules are the good news for buyers and sellers, and all owners, who want to know what transfer fees apply in their HOAs.

So what rights do owners, buyers, and sellers have to access transfer fee information?

Continue Reading HOA Transfer Fees: Access to Information Available Now

Winter in Colorado is sure to bring cold weather, snow, and urgent phone calls about broken water lines and slip-and-fall accidents on common areas. The problems usually start when the temperature begins to warm up after a cold spell or heavy snowfall. Water suddenly streams out of broken pipes, or snow melts and then freezes when the temperature drops at night. Whatever the circumstances, managers and board members can attest to the amount of work involved responding to owners, sorting through damages and injuries, dealing with insurance, and trying to understand legal obligations for water and slip-and-fall incidents. Most of us would love to find a magic wand that we could wave to make these problems disappear. Unfortunately, magic is not a reliable solution.

Associations can best position themselves for dealing with slip-and-fall situations by planning ahead and communicating with owners along the way. If your association is not sure what responsibility it has to remove snow and ice hazards from common areas, here are some risk management steps to help.

Review the association’s governing documents to determine responsibilities for snow removal. Different communities have different responsibilities, and your documents give direction. A condominium community may have the general obligation to remove snow from the common elements, while townhome documents may only require the association to take care of parking lots. A failure to comply with the covenants could result in claims of breach by the association, so confirming responsibilities up-front is crucial.

Continue Reading Frozen? Snow and Ice – Don’t Let It Go

Community associations often deal with situations that they must disclose to buyers or lenders as part of the documentation provided in a real estate transaction. Typical disclosures that associations must give include (1) whether the association is involved in litigation and (2) whether a special assessment has been levied. Litigation and special assessments seem easy enough to disclose. But the obligation to disclose, or the liability for not disclosing, is less clear with respect to threatened litigation or a special assessment under consideration but not yet approved. Associations should consult with legal counsel when a situation does not fall squarely within the mandatory disclosure categories. Failure to disclose may result in liability for the association, but giving too much information can also cause problems for an association.

As examples, associations tread into murky disclosure areas with respect to the following areas:

Ongoing disputes between the association and a particular owner or group of owners that does not involve litigation. In general, associations should neither hide nor embellish the facts regarding an unhappy owner’s impact on the community. A protracted dispute, much like a potential lawsuit or special assessment, is not a mandatory disclosure for associations or sellers.

Continue Reading Full Disclosure: How much is too much?

After extensive testimony in the House Business, Labor, Economic, and Workforce Development Committee this afternoon, the HOA transfer fee bill (HB14-1254) passed out of committee, with no amendments, for consideration by the House of Representatives. The HOA transfer feel bill is sponsored by Rep. Labuda (D-Denver) and Senator Balmer (R-Centennial) and received bipartisan support by a unanimous vote of the committee.

The HOA transfer fee bill requires management companies to affirmatively disclose their fees to the associations they manage, including those fees charged when a unit transfers ownership. The bill also requires management companies to disclose remuneration they receive from third parties as a result of their relationships with the associations they manage.

Several Community Associations Institute (CAI) members attended today’s committee hearing to testify in favor of the transfer fee disclosure bill. Those CAI members primarily represented management companies and offered legislators a full picture of the services that management companies provide in exchange for the transfer fees they charge. 

Earlier today the Colorado HOA Information and Resource Office released its 2013 Annual Report. Interestingly, the number of complaints more than doubled – from 576 in 2012 to 1,248 in 2013 – but the number of people logging complaints only increased slightly from 309 complainants in 2012 to 327 in 2013. The most complaints in 2013 related to association and management communication with homeowners (or lack thereof), which moved up from fourth place in 2012. The report contains other details about the number and types of communities registered with the Office, and the outreach work that the Office undertook in 2013.

For those of us who work with community associations on a daily basis, the report contains few surprises. Even so, the trends revealed in these annual reports are important to consider because they can sometimes have an influence on legislation and regulations affecting community associations. 

The report is also a good reminder for boards to ensure that owners and directors receive their annual education, as mandated by the Colorado Common Interest Ownership Act. Education can help prevent problems and complaints in your HOA. Our "CCIOA 101 for HOA Boards" blog series is a great resource for board members to learn about basic association governance laws. In addition, our attorneys work with association clients to prepare board and owner education classes tailored to an individual community’s needs. Contact one of our attorneys directly if you have questions about education options.

 

 

 

 

As you’re probably aware, effective January 1, 2014, recreational pot became legal in Colorado. This new law is already affecting homeowners associations. While some associations started planning for pot smoking residents last year when the law was passed, not every community association moved quickly to adopt rules and regulations or amend restrictive covenants to address anticipated issues related to recreational pot smoking. If your association has not yet considered whether the new marijuana laws will affect your community, or if you’re thinking about how to tackle problems before they occur, here are some things to consider:

Shared spaces. Most associations have the authority to create rules and regulations that control activities in outdoor and indoor common area spaces. If your association already regulates tobacco smoking in these areas, the association, through board of director action, may consider extending those smoking policies to marijuana use. Associations should also evaluate the extent to which local laws interact with association rules and regulations and seek to fill any regulatory gaps that warrant attention in specific communities. Boards will want to pay particular attention to areas of their communities where use of marijuana will impact other residents. For example, with tobacco smoke, smoking near doorways and windows of other units are areas that typically result in complaints from residents.

Continue Reading Marijuana Matters: Has your association taken a shot at regulating pot?

Last Friday afternoon an Administrative Law Judge ("ALJ") at the Colorado Public Utilities Commission issued revised proposed towing regulations. The Towing Carrier Rules start on page 57 of this document. This updated version of the proposed regulations is not nearly as onerous for community associations as the first version that was introduced back in January. For example, this latest version of proposed regulations does not require associations to post signs every 10 feet in their parking lots and allows associations to continue making towing carriers their authorized agents. In fact, the ALJ’s revisions to the proposed rules seem to have accounted for most of the concerns expressed by members of the Community Associations Institute. As an added bonus, these new regulations will clarify the proper signage for giving notice prior to authorizing nonconsensual tows from residential parking lots.

Continue Reading Move That Car! Final Proposed Towing Regulations Clarify HOA Towing Authority

The Colorado General Assembly concluded its 2013 session on Wednesday after approving several pieces of legislation that impact community associations. We have covered the legislation from start to finish and will continue to provide updates on key legislation, such as the new manager licensure law, as it moves through rule-making and implementation. For now, association boards should add the following action items to their upcoming meeting agendas:

Revise architectural guidelines to remove requirements that owners install turf grass. SB 183, which was signed into law today by Governor Hickenlooper, takes effect immediately and applies to all new landscaping and replacement or redesign of existing landscaping. With water restrictions in effect along the Front Range, associations should prepare to receive landscaping plans that eliminate turf grass. The Denver Botanic Gardens and Colorado State University’s Extension Services offer classes and resources on xeriscaping.

Adopt a policy concerning the installation of electric vehicle charging stations. SB 126 also takes effect immediately and applies most directly to townhomes and condominium associations.

Revise the association’s collection policy to comply with the requirements of HB 1276. This law does not take effect until January 1, 2014, but it’s not too soon to incorporate a six-month payment plan option for owners, the required board authorization for each individual foreclosure, and the other statutory mandates into your association’s policy.

Register with the Division of Real Estate’s HOA Information Office and Resource Center. HB 1134, which takes effect August 7, 2013, extends the registration requirement to common interest communities formed before July 1, 1992. If your association is already registered, then check this one off the list!

As laws have changed over the past few years and more information has become available online, community association governance has been forced to evolve to new, higher standards. Now more than ever, volunteer board members must understand their role as leaders and decision-makers for their communities, and they must have the tools to communicate effectively with their owners. When it comes to effective communication, we see a good mix of exemplar approaches (many of which were learned from experience) and communities that could benefit from proven strategies. If your community is looking for ways to improve communication, or struggling with a contentious issue and wondering what may help, consider the following options for increasing transparency, educating owners, and fostering community within your association:

Hold regularly scheduled board meetings. If owners do not have access to the business of the association, they may get suspicious of what the board is doing. Unfortunately, all too often, perception is reality for owners. You may meet for months without other owners in attendance, but that does not eliminate the need for meetings that owners can attend if they so choose. Set the time and location of meetings at the beginning of the year and stick to that schedule.

Allow owner access to board members. The community manager often serves as the primary contact person for owners with questions and problems to report. Managers then communicate with the board and take action where appropriate. But the manager should not serve as a substitute for the owner-elected board. Board members must make themselves accessible, typically at board meetings, so that owners can feel more assured that their voices are heard and considered in the board decision-making process. Remember that, under the new records law, owners have a right to obtain board member email addresses, so owner contact with board members is a part of board member service to the community. But remember, too, that all board members must have access to information used to make decisions—so individual board members should avoid secret conversations and promises to owners.

Continue Reading Good Governance and Communication Go Hand-in-Hand