guest blog by Stan Hrincevich, (www.coloradohoaforum.com)
Homeowners Associations (HOAs) are comprised of three entities: home owners, HOA Boards and their legal counsel, and the property management company (PMC). Problems can arise from any of these but for those who follow HOA issues the involvement of PMCs can be most problematic. PMCs affect HOA governance with their direct involvement in operational and financial matters and through their trade organization, the Community Association Institute (CAI), which has undue influence in HOA legislative activities that craft HOA law. For decades the sole source for Homeowners Association (HOA) information for the media and the State Legislature has been the CAI. Why not? Their name implies they represent the concerns of community associations and home owners: aka HOAs. Legislators “trust” this organization to represent home owners and citizen interests but most have no idea who or what they represent.
Legislators actually think their membership and funding comes from HOA home owners and HOAs: WRONG. They have trusted this organization for decades and have allowed them to set the rules in HOA governance and financial management. Yes, they craft the legislation that sets the rules for their industry and interests and ensure through their actions that HOA State law and HOA governing documents are highly enforceable from the HOA Board’s and PMC perspective and very weak for home owners. Due to this close relationship between the CAI and legislators across the country, HOA legislative reform has been very difficult and the few Bills that have passed have been watered, are more cosmetic than effective, and in no way help with enforcing home owner’s right
If you visit CAI or their legal affiliate web sites and read their literature you would think they represent HOA home owner interests. Wrong! Their membership is mostly comprised of PMCs and lawyers. The CAI is an organization that derives most of its’ income from selling their educational classes. Nothing wrong with this but read below on how they commingle this business with legislation. Then there is CAI “the trade organization” for PMCs. Nothing wrong with this either except that they have ensured all State HOA laws aren’t written to hold PMCs accountable for their actions.
Then there is the connection between the CAI and HOA lawyers who have ensured through their legislative influence that no binding, affordable, and accessible out of court dispute resolution process is available to resolve HOA home owner complaints. This of course ensures HOA legal enforcement from the home owners perspective against abusive HOA Boards and PMCs remains in our litigious, time consuming, pay-to-play court system making HOA law mostly ineffective.
The CAI and the entities they represent and work with in State legislatures have thwarted HOA legislative reform for decades. Recent examples:
*killing an HOA Transfer Fee Bill that would have limited the fee and required explanation and justification of the fee (this costs home owners in Colorado $10 million a year);
*opposition to a Bill that would have required HOA home owners to approve the use of HOA funds prior to entering into expensive legal actions;
* opposing an out of court binding dispute resolution process for home owner complaints (leaving home owners with only our pay to play court system for the most minor dispute resolution);
*their involvement in writing Colorado legislation to license property managers resulted in using such legislation to promote their sales of educational courses and hence drive up the cost of such required educational courses for property managers;
*opposing the limiting of HOA fees, fines, and administrative and legal fees on HOA debt; opposing term limits on Board members when others are available to serve;
*obstructing legislation on protections of home owners against liens and foreclosure for HOA debt; attempts to promote legislation that would expand the independent authority of Boards in governing HOA operations (without home owner approval); and the list goes on and all anti-home owner.
You can blame the CAI for the lack of HOA reform with their legislative intervention but much blame also goes to our political process that makes money the name of the legislative game and places unfunded citizen groups at a disadvantage.
The CAI and its constituents are the most anti HOA home owner group in the nation and in Colorado they most certainly are a wolf in sheep’s clothing and our legislators and the media are only beginning to realize their role. The beginning of HOA legislative reform and improved governance thus begins with dispelling the belief that the CAI represents home owners; revealing their history and actions in HOA legislative reform; curtailing the CAI’s influence with our Government agencies, media, and legislators; and having HOA home owner groups recognized in our legislature and in the media to offer a home owner centric perspective to improving HOA governance.
Thank you! Great information.
Very well said! We must continue to expose this group of charlatans for what they are.
As Ward and Stan are aware ( all three of us live in Colorado ), things in this state are even worse than they appear.
The so-called “Colorado Common Interest Ownership Act” ( CCIOA ) codifies the power of H.O.A. corporations to issue fines, impose a lien to secure those fines, and foreclose to collect on those liens. Because our legislators believe that doing so is “in the best interest of the state and its citizens“, and that “continuation of the economic prosperity of Colorado is dependent upon strengthening of homeowners associations” corporations. It also endorses the “priority of payments” accounting scam, by saying that
This is a way to allow the industry to conflate assessments (“dues”) with fines and fees, so H.O.A. corporations can slander home owners who refuse to pay disputed fees as “delinquents”, and foreclose on their home to collect disputed fees — even if they are paying their assessments.
And Republican Party workers have the gall to tell me that government shouldn’t interfere in so-called-“contracts” between H.O.A. corporations and individual home owners. Because your average conservative and libertarian will support any form of authoritarianism and imbalance of power between individuals and corporations, no matter how unconcsionable, as long as it can be couched in the language of contract law. Meanwhile, Colorado Democrats like state senator Morgan Carroll (who is worse than useless) work with the industry attorneys and lobbyists to provide the illusion of reform, while ensuring that home owners remain as powerless as ever.
Telling people who are being abused that they agreed to be abused will only work for so long, until the victims start looking for their rights elsewhere.
You can read the entire CCIOA by clicking here. The entire thing is 80 pages long, but here are some relevant excerpts:
Colorado Revised Statutes 2013
TITLE 38
PROPERTY – REAL AND PERSONAL
ARTICLE 33.3
Colorado Common Interest Ownership Act
38-33.3-102. Legislative declaration. (1) The general assembly hereby finds, determines, and declares as follows:
(a) That it is in the best interest of the state and its citizens to establish a clear, comprehensive, and uniform framework for the creation and operation of common interest communities;
(b) That the continuation of the economic prosperity of Colorado is dependent upon strengthening of homeowners associations in common interest communities financially through the setting of budget guidelines, the creation of statutory assessment liens, the granting of six months’ lien priority, the facilitation of borrowing, and more certain powers in the association to sue on behalf of the owners through enhancing the financial stability of associations by in creations association’s powers to collect delinquent assessments, late charges, fines, and enforcement costs;
38-33.3-209.5 Responsible governance policies – due process for imposition of fines – procedure for collection of delinquent accounts – definition. (1) To promote responsible governance, associates shall:
(2) Notwithstanding any provision of the declaration, bylaws, articles, or rules and regulations to the contrary, the association may not fine any unit owner for an alleged violation unless:
(a) The association has adopted, and follows, a written policy governing the imposition of fines; and
(b) (I) The policy includes a fair and impartial fact-finding process concerning whether the alleged violation actually occurred and whether the unit owner is the one who should be held responsible for the violation. This process may be informal but shall, at a minimum, guarantee the unit owner notice and an opportunity to be heard before an impartial decision maker.
38-33.3-302. Power of unit owners’ association. (1) Except as provided in subsections (2) and (3) of this section, and subject to the provisions of the declaration, the association, without specific authorization in this declaration, may:
(k) (I) Impose charges for late payments of assessments, recover reasonable attorney fees and other legal costs for collection of assessments and other actions to enforce the power of the association, regardless of whether or not a suit was initiated, and, after notice and an opportunity to be heard, levy reasonable fines for violations of the declarations, bylaws, and rules and regulations of the association.
[ continued from previous comment ]
38-33.3-302. Power of unit owners’ association. (1) Except as provided in subsections (2) and (3) of this section, and subject to the provisions of the declaration, the association, without specific authorization in this declaration, may:
(k) (I) Impose charges for late payments of assessments, recover reasonable attorney fees and other legal costs for collection of assessments and other actions to enforce the power of the association, regardless of whether or not a suit was initiated, and, after notice and an opportunity to be heard, levy reasonable fines for violations of the declarations, bylaws, and rules and regulations of the association.
38-33.3-316. Lien for assessments. (1) The association, if such association is incorporated or organized as a limited liability company, has a statutory lien on a unit for any assessment levied against that unit or fines imposed against its unit owner. Unless the declaration pursuant to section 38-33.3.302 (1) (j), (1) (k), and (1)(l), section 38-33.3-313 (6), and section 38-33.3-315 (2) are enforceable as assessments under this article.
38-33.3-316.3. Collections – limitations. (1) In collecting past-due assessments and other delinquent payments under this article, an association or holder or assignee of association’s debt, whether the holder or assign of the association’s debt is an entity or person, shall:
(3) For purposes of this section, “assessments” includes regular and special assessments and any associated fees, charges, late charges, attorney fees, fines, and interest charged pursuant to section 38-33.3-315 (2).
Editors note: This section is effective January 1, 2014.
> As Ward and Stan are aware ( all three of us live in Colorado ),
> things in this state are even worse than they appear.
An article in Construction Finance Journal ( “Assessment Liens: An Overview of Different Schemes” May 7, 2013 ) describes Colorado as being on the extreme end of the spectrum regarding H.O.A. liens.
“In Colorado, an association’s lien for past due assessments arises automatically by statute”
But Libertarians and Republicans insist that home owners agreed to it.
> The final step down this path can be seen in the
> assessment lien law of Colorado. In Colorado, an
> association’s lien for past due assessments arises
> automatically by statute, and there is no specific
> provision in the law providing for the recordation
> of the lien. . .
Colorado state senator Morgan Carroll’s friends at HindmanSanchez P.C. — an H.O.A. law firm that works with the senator to craft H.O.A. legislation — has put together a guide to “Foreclosure of Assessment Liens”.
Even though the lien is statuary, Republicans insist on telling home owners that they agreed to it.
Senator Carroll’s buddies recommend foreclosing on properties with at least $15,000 in equity; see 1(C)(3) below. Why?
And if there is some home owner that the board doesn’t like, see 1(C)(4), the H.O.A. corporation can issue a junk fine or fee and slander the owner as “delinquent” if the owner disputes it. The state will automatically grant the H.O.A. corporation a lien. Then the H.O.A. corporation can foreclose to collect on the lien, ridding itself of the undesirable individual.
According to Senator Carroll’s buddies, this can be done without having to go to trial; see sections 2(A)(6) and 2(A)(8) below:
Foreclosure is a no-lose proposition for the H.O.A. corporation, because the owner who has been divested of his property still has the legal obligation to pay the mortgage. See “Is An HOA Obligated To Pay the Mortgage on a Property It Foreclosed On?” at HindmanSanchez’s web site (emphasis added):
It is no coincidence that HindmanSanchez P.C. is in the for-profit business of obtaining liens and selling them to 3rd parties (“Collections/Foreclosures. Collecting Money. It’s a Dirty Job, but Somebody’s Got to Do It”: dead link).
I’m sure that they claim it’s for the benefit of the other home owners, and not their own pocketbooks. But back in 2002 — 12 years ago — former H.O.A. attorney Evan McKenzie told ABC News that
The perverse incentives and moral hazards inherent in the H.O.A. system, combined with the profit motive, ensure it can be no other way.
The practice of H.O.A.s foreclosing on home owners to rent out their property until the bank forecloses is a common business model across the country. For example, Robert Tankel, Florida attorney # 341,551 and a member of the Community Associations Institute,
He justifies his business model by appealing to the Tea Partyin’ disciples of Ayn Rand and Ronald Reagan.
Nothing promotes the ideas of capitalism and free-markets more than kicking people out of their homes (often for trivial amounts and reasons) so some lawyer can make a profit from a real-estate “investment”. It was Mitt Romney’s prescription for the housing crisis. Tankel was doing so much business that he had to increase his staff from 3 to 16 (see also here). That’s a 433% increase! Tankel is what Republicans call a Job Creator ™. And I’ve never known folks like Jon Caldara to disparage anyone for making a profit.
Note: As reported on this web site on June 25, 2014 (“Love It When An HOA Pervert Goes Down!”), Robert Tankel was arrested for “lewd and lascivious molestation of a child”. I have no doubt that if Tankel were the type of lawyer who represented individuals against corporations, instead of the other way around, the Cato Institute’s web site Overlawyered.com would have reported this. As it is, I leave it as an exercise, or more accurately a challenge, to the reader to find stories about H.O.A. lawyers at Overlawyered.com .
Disclosure: In theory, HindmanSanchez P.C. represents the Madison Hill H.O.A. corporation, although in practice the H.O.A. corporate board of directors works for the law firm. As a home owner in Madison Hill H.O.A., I have dealt with HindmanSanchez P.C. on numerous occasions, including suing the law firm itself (but not the H.O.A. corporation). They are vicious, nasty sociopaths — and the kind of lawyers that Libertarians and Republicans like.
CAI’s 2014 survey of residents was conducted by Public Opinion Strategies. This is a political research and strategic communications firm. I was curious to see which campaigns POS aided and abetted. Take a look for yourself http://pos.org/clients/campaigns/
Scroll down to the bottom to see “Political Parties/State Organizations”
EVERY ONE OF THEM REPRESENTS REPUBLICANS. Their client list also includes the National Association of Home Builders and the National Association of Realtors http://pos.org/clients/associations-and-issue-groups/
Well done Stan. People in your position, along with Bob Frank, are needed to speak out and be heard. I will be glad to help and support you in your efforts.
In the next few days I plan to release a Commentary on the unclean hands of CAI with its false and misleading advertisements, while pretending to be the modern day Philosopher-King guiding the legislators to a better America. -George Staropoli
Stan, great blog. I have always compared the socio-political HOA environment to a three legged stool. The three legs are 1) Developer with an appointed Board – and later the owners’ Board, 2) local government, 3) buyers/residents. The first two legs are longer than the third, the buyers/residents, because as the third leg, they have few rights and very little influence on how their community is created, compared to the Developer plus Board and the local government. What happens when one leg is shorter on a three legged stool? It stands unbalanced. And what happens when weight is placed on top of the stool? It topples over. We have seen this happen in financially stressed communities, and we will likely see more of it in the future if owner rights are not balanced against rights of the rights of developers, HOA boards and local governments.
Stan,
Have you considered a ballot measure, instead of dealing with our worse-than-useless legislators?
This is the third election cycle I have been attending political events, trying to make our politicians — and those seeking their jobs — aware of this problem. They simply are not interested. You’re obviously better at getting them to listen to you, but it appears that it hasn’t made a difference. While I disagree with our policy proposals, I share your frustration.
As you are aware, in the past year there was a successful effort to recall three Colorado state senators. John Morse and Angele Giron were recalled, while Evie Hudak resigned before the recall election so that Governor Hickenlooper could appoint another Democrat.
Get that? Colorado Democrats believe that elections do not improve democracy or representative government! These are the same people who passed HB13-1303 (“Voter Access and Modernized Elections Act”), ensuring that all elections in this state will have the integrity of H.O.A. elections. They were able to enact HB13-1303 without a single Republican vote in 30 days:
Apr 10, 2013 | House | Introduced In House – Assigned to State, Veterans, & Military Affairs
Apr 15, 2013 | House | House Committee on State, Veterans, & Military Affairs Refer Amended to Appropriations
Apr 17, 2013 | House | House Committee on Appropriations Refer Amended to House Committee of the Whole
Apr 18, 2013 | House | House Second Reading Special Order – Passed with Amendments
Apr 19, 2013 | House | House Third Reading Passed – Related Vote
Apr 22, 2013 | House | Introduced In Senate – Assigned to State, Veterans, & Military Affairs
Apr 24, 2013 | Senate | Senate Committee on State, Veterans, & Military Affairs Refer Unamended to Appropriations
Apr 26, 2013 | Senate | Senate Committee on Legislative Council Refer Unamended to Senate Committee of the Whole
Apr 26, 2013 | Senate | Senate Committee on Appropriations Refer Amended to Legislative Council
Apr 30, 2013 | Senate | Senate Second Reading Laid Over Daily
May 1, 2013 | Senate | Second Reading Passed with Amendments
May 2, 2013 | Senate | Third Reading Passed – Related Vote
May 3, 2013 | House | Considered Senate Amendments – Result was to Concur – Repass
May 10, 2013 | House | AM 04:20 Signed by the Speaker of the House
May 10, 2013 | House | PM 04:10 Signed by the President of the Senate
May 10, 2013 | House | Sent to the Governor
May 10, 2013 | Governor | Governor Action – Signed
FYI: Angela Giron, one of the recalled state senators, was the senate sponsor of H13-1303. The controversial gun-owner control measures, which later cost 3 state senators their jobs, were similarly rushed through without a single Republican vote in early 2013.
So why don’t they act decisively on H.O.A reform?
Why? It’s not as though they care, or have to worry, how the Republicans will vote. It’s not as though thousands of citizens are going to arrive at the state capitol to oppose H.O.A. reform, as they did to oppose last year’s gun-owner control bills. I was there. It was standing room only. The capitol staff had to set up an “overflow” area in the basement for the crowds. From inside the capitol buidling, we could hear the protestors who were outside. On one day, somebody was even flying a plane around the capitol, towing a banner that said “HICK: DO NOT TAKE OUR GUNS”. I’ve never heard of a simliar response to H.O.A. legislation. Can you imagine if as many home owners showed up to speak about H.O.A. reform bills that the hearings had to continue until ten o’clock at night? Can you imagine if somebody flew a plane around the capital building towing a banner that said “SKIBA: DO NOT TAKE OUR HOMES”? Unfortunately, I can’t.
I understand why the Republicans oppose H.O.A. reform based on flaws in their ideology. What is the Democrat Party’s excuse? If our Democrat legislators wanted to pass meaningful H.O.A. reform, they could do so within a month. The bottom line is that they do not want to. Instead, they only offer illusion of reform to keep the peasants placated, while ensuring that home owners remain as powerless as ever.
Morgan Carroll became president of the Colorado state senate after John Morse was recalled. If she was such an H.O.A. reformer, she would have even more clout to do so now. Her web page says “Putting Your Interests Above Special Interests!” right under her picture. I won’t respond to that here, because what I really think of Colorado state senator Morgan Carroll (Democrat-Aurora) would consist of a long stream of extremely vulgar profanity that Ward would not publish on this web site.
A few weeks ago, I had a chance to speak with the folks behind the recall effort. They told me that politicians won’t listen or act unless they believe their job is at stake. I think that trying to get meaningful H.O.A. reform through the state legislature is a waste of time and effort. Especially after what happened to HB14-1254, Stan’s efforts to eliminate H.O.A. transfer fees. I don’t know how much it would cost to get an H.O.A. reform measure on the ballot for a popular vote — I’m sure it’s more money than I have — but I think that going directly to the people is the only way to get it done.
Colorado Democrats claim that elections don’t serve the interests of democracy or representative government. Here in Colorado, “representative government” has been failing to protect Colorado home owners for nearly 25 years. Maybe it’s time to give “democracy” a chance.