The state legislature is considering and appears poised to pass a bill requiring HOA management companies to disclose funds they receive from third parties (i.e.: from someone other than the Association). HB 2014-1254, as rewritten, would require these disclosures.
What’s our firm’s position?
We recommend this bill be passed. We have been and are supporting HB 2014-1254.
When are the disclosures required?
Disclosures are required at the time of contract negotiations and yearly.
Who are the disclosures to?
To the Board of the Association. The Association can determine whether to disclose those fees to its owners. We recommend disclosure by the Association to its owners on an annual basis, and also if the management company of the Association changes. Is there a cap in the bill on management company transfer fees? — No. Initially, caps were a part of the bill. As re-written the bill does not have a cap on those charges.
Haven’t these disclosures been made in the past?
Yes, as to transfer fees. As to fees from any other source, disclosure practices vary. Most contracts that management companies have entered into with Associations include disclosures of transfer fees. Yet, most existing contracts do not have a full disclosure requirement of revenue from any source, as received by the management company due to its status as agent of the Association. HB-1254 adds that additional disclosure requirement.
What is the current status of the bill?
The bill cleared the Colorado House of Representatives in February and is before the State Senate as of the date of this article. It will soon be heard by the State Senate’s local government committee.
What happens to management companies that do not disclose fees to the Association?
The company could be investigated and disciplined by the Colorado Department of Real Estate. That state office is a division of the department of regulatory agencies. A fine of up to $2,500.00 for each separate offence may be imposed for failing to make full and try disclosures of fees.
For more information, contact any one of the attorneys or other professionals at Orten Cavanagh and Holmes, www.info@ochhoalaw.com or (720) 221-9780.
