When you buy a house, condo, or townhome that is part of a planned, covenanted community, you will most likely be part of a homeowners’ association (HOA). The Colorado legislature recently adopted new laws to provide protections for residents in HOAs when it comes to debt collection practices, foreclosure, and landscaping, among other things. Read on to learn more about these new laws and how they can protect you if you live in an HOA community in Colorado.
An HOA is a legal entity set up to manage and maintain a neighborhood. Its members usually consist of homeowners in the community. The original developer of the community typically creates the HOA.
The rules of the community are set forth in what is called the Declaration of Covenants, Conditions, and Restrictions (CC&Rs). The main functions of the HOA are:
(Learn more about homeowners’ associations in Nolo’s article Homeowners' Associations (HOAs) and CC&Rs.)
Colorado recently passed an “HOA Reform Package” (House Bill 13-1276, House Bill 13-1277, House Bill 13-1134, and Senate Bill 183) that holds HOAs to stricter standards in the areas of debt collection, foreclosure, and landscaping. This legislation addresses the following main areas:
Effective January 1, 2014, House Bill 13-1276 requires most HOAs to adopt a policy governing the collection of unpaid assessments that specifies:
Before the HOA can turn a delinquent account over to an attorney or collections agency, the HOA must provide a notice to the homeowner specifying:
Third party debt collectors must also adopt this collection policy if collecting an HOA debt.
The HOA and any debt collector must also make a good-faith effort to coordinate with a delinquent homeowner to set up a payment plan to pay off past-due assessments and other delinquent payments. The homeowner may pay off the delinquency by making equal installments over a period of at least six months.
If the delinquent owner fails to comply with the payment plan or fails to remain current on regular assessments during the plan, the HOA may then immediately pursue legal action.
An HOA (or the assignee of the HOA's assessment lien, such as a third-party debt collector), may only foreclose if the past-due total amount is equal to six months or more of common expense assessments.
Also, the HOA board must vote in favor of foreclosure before proceeding with such a foreclosure on any given delinquent account, and may not delegate this authority to an attorney, insurer, manager or any other person. (Learn more about HOA foreclosures in Nolo’s article HOA Liens & Foreclosures: An Overview.)
House Bill 13-1277 requires that HOA community managers be licensed under the Colorado Division of Real Estate. This law goes into effect July 1, 2015.
House Bill 13-1134 requires the Division of Real Estate to conduct a study to assess options, costs, and the need for the Division of Real Estate to (among other things):
The study must be completed by December 31, 2013, and is expected to result in further HOA legislation in Colorado.
This law also requires all HOAs to register with the state.
Senate Bill 183 addresses the severe drought conditions in Colorado and ensures that HOAs do not needlessly require homeowners to maintain water-dependent landscaping. Among other things, the bill prohibits:
However, HOAs are permitted to adopt and enforce design or aesthetic guidelines that:
This new law is effective immediately.