Introduction to the 2011 Legislative Session and the Colorado Legislative Action Committee of CAI

  • The priority issues at the legislature were:
    • State budget
    • Health care
    • K-12 education
    • Higher education
    • Energy policy
    • Business & taxation
  • Over 600 bills and resolutions were introduced during the 2011
  • Many failed to move out of the opposite chamber
  • 13 bills were tracked by the Colorado Legislative Action Committee
    • 6 were elevated to "priority" level
    • Legislative envoys were assigned to each priority bill
  • The CLAC is a committee of CAI national
    • Delegates Appointed by National
    • 20 Delegates
      • 3 are Delegates of each Chapter
      • 14 Delegates are at large 
  • Legislative interest in Colorado Common Interest Communities continues

2011 Legislation That Became Law

  • Restrictions on Private Transfer Fee Covenants and Fees – SB 11- 234 (Jahn/Massey)


Key elements of this bill

    • The recording of new transfer fee covenants on certain residential real property is now restricted
    • Existing transfer fee covenants of HOAs are allowed and may continue
    • Existing transfer fee covenants (where the fee is paid to individuals or companies, not an HOA) were required to file a notice by October 1, 2011, or those transfer fee covenants are void
    • HOAs and the transfer fees they collect (vs. fees to the community manager) are exempt
    • Managers and management companies that charge a fee for status of an owner’s account and changing records of the HOA are exempt from this bill.  The fees charged should not be referred to as ‘transfer fees’

This bill is directed at are the so called ‘free-hold’ covenants recorded on a lot or lots that require a fee to be paid to certain persons (the person who put the covenant on the property and a support team).  Typically, these covenants run for a period of 99 years.  The create an obligation, specifically, the payment of a transfer fee, which is a fee or charge paid upon the conveyance of residential real property that runs with the land.  

Through 2 years of negotiations with a wide group of stakeholders, it became clear that HOA transfer fees were deemed to "run with the land" and should not be penalized.  

CLAC's envoy team was instrumental in protecting HOA interests.

  • Conflicts of Interest Among HOA Boards/Metro Districts  -- HB 11-1124 (Williams A. /Carroll)

Brought to CLAC's attention in mid-December by freshman Representative Angela Williams (D-Aurora), this legislation addressed and clarified the process by which someone could serve on an HOA board and a special district.  

Through the diligent and very consistent work of CLAC's envoy team, a balanced bill was amended and passed.  

As a result of working with Rep. Williams, CAI was asked to present at one of Rep. Williams' town hall meetings, and she also sponsored the SB 11-253 (HOA clearinghouse clarification).  Rep. Williams was also named “Legislator of the Year” by the CLAC.

Key elements of this bill

  • The bill requires candidates for director of a special district to contain information on whether the candidate is a member of an executive board of a unit owners' association  
  • The bill outlines requirements to be included in the governance policies of HOAs (those that are subject to requirement to have these governance policies)
  • The ‘conflict of interest’ governance policy must have the following:
    • A definition of the circumstances under which a conflict of interest exists
    • Procedures to be followed, when a conflict exists
    • Provide for periodic review of the procedures of the HOA on conflicts of interest  

This bill was signed into law by the Governor and took effect on April 13, 2011.

  • Residential Nonprofit Corp Meeting (Acree/Harvey) – HB 11-1110 (Acree/Harvey)

This bill modified parts of the Colorado Revised Nonprofit Corporations Act (“CRNCA”) in relation to a special classification of residential nonprofit corporations and their communities (retirement/senior living). The definition of these special purpose corporations excludes HOAs.

CLAC's envoy group worked diligently with Rep. Acree to assist and protect resident rights in these communities, so that law and operational standards for boards and residents in these communities would not be developing in ways inconsistent to common interest communities and HOAs.  

Rep. Acree wanted to mirror CCIOA in parts of CRNCA which address this special classification of residential community.  The added rights, similar to those in CCIOA, include:

  • a right to attend board meetings
  • a right to an agenda
  • rights to notice of board meetings to members (if electronic or email notice can be given, it is required to be given)
  • rights of participation, for residents, at board meetings
  • rights of the board to have executive sessions
  • the board is prohibited from making changes to the articles of incorporation or bylaws in an executive session
  • a right to refund of an ‘entrance fee’
  • a right to no further charges, 30 days after membership is terminated

The CLAC was able to strike a helpful balance in this legislation.  

This bill was signed into law by the Governor and took effect on March 11, 2011.

2011 Legislation That Was Defeated But May be Introduced in 2012  

  • HOA Information Office Revisited – SB 11-253 (Carroll/Williams A.)  

Current law requires certain HOAs to register annually with the Division of Real Estate in the Department of Regulatory Agencies.  

An annual registration fee is required to support the operation of the HOA Information and Resource Center, as established by HB10-1278.  

This bill sought to amend the registration provisions by:

    • requiring all HOAs to register
    • limiting registration information to the official name & contact information
    • preserving legal rights during any registration gap
    • clarifying that registration may not be invalidated based upon a technical error 

Due to political circumstances, the bill was lost (after prevailing in the Senate, it was lost in the House).

  • Super Liens Under CCIOA – HB 11-1197 (Gardner D.)  

Brought forward by attorneys for first lien lenders, CLAC's envoy spent significant time and professional expertise on attempts to strike a balance with this proposed legislation.  

Working with freshman Representative Deb Gardner, negotiations gave way to a compromise bill which would have increased the super lien to a 9 month period (as opposed to the existing 6 months allowed in the Colorado Common Interest Ownership Act) and clarified other elements of super liens.

The bill was upended at the 11th hour.  

This bill was postponed indefinitely by the House Economic and Business Development Committee on February 24, 2011.

  • Junior Lien Redemption Rights – SB 11-122 (Lundberg/Del Grosso)  

Round-two of this legislation yielded the same result—the bill died.  

CLAC's envoy invested hours in compromise attempts.  

Senator Lundberg believes that this is the only way to fix the issue and has committed to return the matter to the docket in 2012.  

Below is the official bill summary:

This bill limits the ability of a person to purchase a junior lien with high priority on property in foreclosure and to redeem the lien from the purchaser after the foreclosure sale.  The bill allows the purchaser to pay off the junior lien at face value through the public trustee, without having to find and tender payment to the junior lienor and without giving the junior lienor an opportunity to refuse payment and redeem the property instead.  Finally, the bill adds specific requirements for verifying the validity and amount of a debt enforced pursuant to the "Colorado Common Interest Ownership Act" on be    of a unit owners' association.

2012 Legislation Expected  

  • Déjà Vue.  Except for the bill restricting transfer fees, bills defeated in 2011 may appear on the 2012 legislative docket.  

Community Association Manager Credentialing or Licensure may be introduced in 2012 or a subsequent Legislative Session  

  • Sunrise Review Will Examine Need for Licensing Colorado Community Association Managers

On Novmeber 4, 2011, the Colorado Legislative Action Committee of the Community Associations Institute submitted a Sunrise Review Application to the Department of Regulatory Agencies (DORA) to investigate the need for licensing Colorado community association managers.

Based upon DORA findings, CLAC could propose licensing legislation in the 2012 session.  

Colorado community association managers are currently not required to be licensed, registered or certified.

According to the CLAC, licensing of community association managers would provide additional consumer protection to homeowners who live in HOAs and would elevate the level of professionalism of association management.

The Rocky Mountain Chapter of CAI and the Southern Colorado Chapter of CAI formed a task force more than six years ago to look at the need for community association manager licensing in Colorado.  Based on focus groups and multiple surveys with HOA  board members and association managers, a large majority of association managers feel there is an overwhelming need for licensing.  

Running an HOA is like running a business. Association managers are responsible for for protecting and maintaining property values in the communities they manage.

For most people, their home is their single biggest investment so it is doubly important to have a licensed association manager who is held to a higher standard.

Nine U.S. states and the District of Columbia have enacted manager licensing or certification standards and seven more states have pending legislation to enact such laws.

Legislation requiring licensing of association managers is gaining momentum nationally.  With more cases of embezzlement and companies and communities not adhering to state laws designed to protect homeowner rights, more states are realizing licensing provides homeowners much needed consumer protection.  

Several states that have enacted or have pending manager licensing legislation require managers to obtain their Certified Manager of Community Associations® (CMCA) certification, which is administered by the National Board of Certification for Community Association Managers (NBC-CAM).  NBC-CAM is an independent board that develops certification testing and standards for community association management.

The Colorado Division of Real Estate will be releasing a report in December of 2011 that will detail the type of complaints gathered by the HOA Information & Resource Center.

The report will is not expected to be positive.  Homeowners that call this office are the ones complaining, not the ones complimenting their HOA.  The data from the HOA Information & Resource Center is expected to support the need for licensing in Colorado.    

The proposal for manager licensure is a non-partisan issue.  The need for professional and effective community management is an issue that crosses party lines and affects all homeowners who live within a community association, accorlidng to the CLAC.

  • Notice Requirement (to all Members of Board Meetings).  As a result of complaints received in 2011, and also as an anticipated problem area in the 2011 report of the HOA Information Office and Resource Center, notice of board meetings to members is expected to be sought.

  • HOA Records.  As an anticipated result of complaints to the HOA Information Office and Resource Center, a bill giving members clearer rights to records is anticipated.

  • Transparency.  This topic may also generate a bill, based on complaints filed with the State office.

Governance Policies.  Since governance policies were required of some HOAs in 2005, the legislature has returned to this topic several times.  As such, a bill on this topic may also be introduced in 2012.  Nine policies are now required to be maintained by most HOAs (those not exempt from this requirement).  These include:

  1. Collection
  2. Conduct of Meetings
  3. Records Inspection
  4. Investment of Reserves
  5. Reserve Studies and Funding
  6. Covenant and Rule Enforcement
  7. Dispute Resolution (ADR)
  8. Conflicts of Interest
  9. How Policies are Adopted and Amended

Political Context of Common Interest Communities and HOAs  

Legislators hear frequently about issues in HOAs.

Many legislators have served on the board of directors of an HOA.

HOAs, their boards, members and management should reach out to their state legislators, in the State House of Representatives and in the State Senate.  A relationship you’re your legislators is critical, before it is needed.  Then, when an issue arises, it can be addressed.

To find your state legislator, visit Project Vote Smart’s website at http://www.votesmart.org and follow the directions.

Then, contact your state legislators!  Perhaps your HOA can invite your legislators to a board meeting, member meeting, community picnic or other event.

If an issue arises with either of your state legislators, refer the resident and/or the legislator to the CLAC.  The CLAC and its lobbyists, have extensive relationships with legislators.  The CLAC has created several suitable circumstances in which to articulate our policy positions, build mind-share and work with legislator champions to advance and protect the interest of those whom we serve.

Orten Cavanagh & Holmes, LLC
Copyright © 2018 Orten Cavanagh & Holmes, LLC .
Disclaimer

Denver

1445 Market Street, Suite 350
Denver, CO 80202
Main: 720-221-9780
Fax: 720-221-9781

Colorado Springs

14 N. Sierra Madre Street, Suite A-1
Colorado Springs, CO 80903
Main: 719-457-8420
Fax 719-457-8419