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Commentary and Analysis Regarding Colorado Law

LEGISLATURE CONTINUES PATTERN OF STRONGER REGULATION OF HOAs

Submitted by Eve I. Canfield

The Colorado Common Interest Ownership Act (“CCIOA”), C.R.S. § 38-33.3-101, et seq, was amended in 2013.  Two statutory amendments were made by HB 1276 and HB 1277. 

 HB 1276 has been referred to as the “HOA Debt Collection Bill”.  The legislature has continued to define and control collection procedures of HOAs to address what the public sees as unfair and abusive collection procedures by HOAs.  While the prior SB 100 required HOAs to adopt collection policies and procedures, HB 1276 goes further in stating specific requirements for an HOA’s collection policy.  HOA collection policies will have to be 1276-compliant, or the HOA will be prohibited from using a collection agency or an attorney to collect past due assessments.  There are 7 specific requirements to be included in the policy:

1) when assessments are due;

2) when assessments are deemed delinquent;

3) how much the HOA may charge for late fees, interest, bad checks,

4) under what specific circumstances and procedures will an HOA will allow an owner to enter into a payment plan for past due assessments, which can be no less than 6 months, and still stay current in paying their regular assessments;

5) notice requirements to owner before the HOA turns account over to collections (which must comply with the “Collection Letter” requirements below);

6) how an owner’s payments are applied to delinquent accounts; and

7) a list of the HOA’s available remedies for collection of assessments. 

An HOA often sends out repeated letters to owners for collection purposes, stating what months are owed, late fees, etc.  When an HOA decides it is time to turn the account over for collection to a collection agency or an attorney, there is one more notice to the owner required under number 5, above.  Some of the requirements are as expected, but this amendment adds some new requirements.  The five requirements for this Notice are: 

1)      A statement of the owner’s account with the total delinquency and how it was calculated. 

2)      A contact name and number of a person that the owner can contact to contest the amount due or enter into a payment plan (of not less than 6 months) for the past due assessments;

3)      A list of the HOA’s remedies that may be used to collect the debt;

4)      A statement of whether or not the owner may enter into a payment plan and the terms of the payment plan (based on adopted policies referenced in #4 above); and

5)      A statement that the owner has 30 days to address or cure the delinquency prior to the HOA turning the account over to an attorney or collection agency. 

HB 1276 does not provide much guidance in setting out what the policy should be to allow an owner to enter into a payment plan.  Some clear provisions are that the payment plan is for the delinquency in assessments (which may include late fees and interest); the owner must continue to pay current assessments and stay current; and the owner has 6 months at a minimum to pay off the delinquency.  An HOA might want to adopt a policy regarding repeat offenders, which might be a basis to disallow a payment plan for an owner, but the collection policy should be very specific about the circumstances. 

A third part of the Debt Collection Bill, establishes a minimum amount of delinquency that must be due before the HOA may proceed with foreclosure.  There must be a delinquency that is the equivalent of 6 months of common expense assessments past due.  The Board must consider and vote individually on the motion to foreclose.  Individual votes must be recorded. 

The key provisions of HB 1276 are increased detail in notice requirements for debt collection; minimum delinquency before foreclosure procedure is allowed; a 30 day opportunity for owners to address/cure delinquency; a provision for payment of delinquencies over a period not less than 6 months; and notice to owners of all remedies available to collect delinquencies. 

HB 1277

HB 1277  concerns a new requirement for licensing of individuals who are paid to manage HOAs.  License examinations are yet to be developed, but will be developed and likely administered by the director of the division of real estate.  Minimum requirements will be established for HOA managers in order to be licensed.  This would not be applicable to individuals who manage certain aspects of the HOA under the supervision of the governing board.  This is a bill in process and may not be effective until 2015.  Revisions will also be made to Title 12 – Professions and Occupations, for licensed HOA managers. 

New Case Law: 

One more new HOA related item:  A new case from the Court of Appeals will have an impact on voting for changes in governing documents.  It is Triple Crown v. Village Homes, 2013 COA 150 (November 7, 2013).  This case is getting a lot of attention for HOAs.  The court addressed 4 questions of first impression.  One of the key questions was whether there is a time limit for approving actions taken without a meeting of an HOA.  Some HOAs collect votes of owners over time until they reach the minimum percentage required to amend the Declarations, which cannot be more than 67%.  In this case, the court said that the HOA must comply with the time-limit provision of the Colorado Revised NonProfit Corporation Act (CRNPC).  That provision states that if an HOA seeks to amend its declarations without a meeting, votes must be collected within the 60 day limit of CRNPC.  The Declarant was successful in this case to invalidate an amendment as not timely completed, which significantly increased Declarant’s obligation to pay assessments on certain lots.

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