New HOA laws require debt collection policy, licensed managers

Article Courtesy of The Denver Post

By Matthew Patane

Published July 6, 2013 

Colorado homeowners associations will face stricter standards on debt collections and manager licensing under legislation passed this year.

That legislation was prompted, in part, by multiple " horror stories" from the past few years regarding homeowners associations, or HOAs.

"We had a $750,000 embezzlement a few years ago ... what a black eye for the industry," said Cici Kesler, president of Association & Community Management, which manages homeowners associations in the metro area.

The debt collection law requires all HOAs to set up a policy detailing basic information for homeowners. HOAs must also offer delinquent homeowners a six-month payment plan at least once before taking severe action.

Under the licensing law, all community association managers, management company CEOs and executives will be required to attain a state license by July 1, 2015.

In addition to those laws, there are two others, which:

prohibit any HOA from requiring the installation of turf grass, such as Kentucky bluegrass, or other extremely water-dependent landscaping.

direct the HOA Information Office and Resource Center to conduct a study on how much authority the office should have. This law also requires all HOAs to register with the state.

Gary Kujawski, the Division of Real Estate's HOA information officer, said there are 8,582 registered HOAs in Colorado, comprising 869,408 units. He said the total number could be much higher since not all HOAs are currently registered.

The Community Associations Institute, which represents HOAs and community managers, estimates there are between 12,000 and 15,000 associations in the state.

Kujawski said the office has received 754 complaints so far this year from 159 individuals. Last year, the office received a total of 576 complaints from 309 individuals.

Kujawski became the information officer late last year. He said the increase in complaints is largely due to the fact that homeowners now have someone to discuss their problems with. Instead of having homeowners file a general complaint, Kujawski said he works with homeowners so they can file a more specific complaint.

"There's someone here to discuss the situation," he said. "People are being a little more aware of the issues."

Molly Foley-Healy, the chairwoman for CAI's Legislative Action Committee, said problems most often arise either from a lack of transparency from HOA boards and from when homeowners do not understand their association's governing documents.

Kujawski said 14 percent of complaints concerned HOA managers and boards not following governing documents while another 13 percent concerned poor communication with homeowners. Those two categories had the highest percentages among seven categories of complaints.

Foley-Healy said homeowners should pay the most attention to the debt collection and water conservation laws. 

Even though those laws give homeowners more leeway with delinquent payments and landscaping, Foley-Healy said they would still have to abide by their HOA's governing documents.

Meanwhile, she said community managers and boards need to be aware of the debt collection law, since their policies may not match the new law's requirements. Managers also need to pay attention to the licensing law, since those without certification need to set aside time to become certified and take a test on Colorado law.

More information about the laws, HOAs and how homeowners should handle HOA disputes can be found on the HOA Information Office website.


The Laws

HB 1134: Requires the HOA Information Office and Resource Center to conduct a study of other state HOAs to determine how much authority the Office should have over Colorado HOAs. The bill also requires all HOAs to register with the state. The law goes into effect Aug. 7, 2013 and the study must be presented by Dec. 31, 2013.

HB 1276: Requires HOAs to establish a policy that specifies the details behind debt collections. The law also requires HOAs to send homeowners written notification of the delinquency as well as give homeowners the ability to enter into a six-month payment plan at least once. Effective Jan. 1, 2014.

HB 1277: Requires all community association managers to become licensed with the state. Managers must meet certain certification standards, pass a criminal background check and pass an exam testing their knowledge of Colorado law. Effective Jan. 1, 2015. Managers must be licensed by July 1, 2015.

SB 183: Prohibits any HOA from requiring homeowners to install turf grass or other extremely water-dependant landscaping. The law also prohibits HOAs from requiring homeowners to water landscaping in violation of water use restrictions. Went into effect May 3, 2013.

Source: HOA Information and Resource Center in the Colorado Division of Real Estate

Colorado legislators propose HOA reform bills