Guest blog by Stan Hrincevich
SB 15-177 concerns proposed construction defects litigation in Colorado. No Bill is perfect and in the world of HOA homeowners’ rights we seize the moment for any reform especially when it reins in the influence of HOA lawyers, property managers, and abusive Boards. This Bill would require HOA homeowners to approve the use of HOA funds in litigation.
Homeowners would have to be apprised of any intended litigation, informed on the substance and estimated costs, the consequences of unsuccessful litigation such as special assessments, and how the lawsuit is to be financed. A majority vote would be required to use HOA funds. HOAs can still bring legal action for construction defects and individuals can still pursue legal action using their own funds.
The Community Associations Institute (CAI) and HOA lawyers hate this Bill as it reins in their mostly open and easy access to HOA funds for litigation by requiring homeowners to first approve of such action. This can save large amounts of money for homeowners and safeguard reserve funds that can now be used for lawsuits. The CAI’s latest and weak argument on this Bill contends a Board would require a homeowner to vote for legal counsel on everyday, routine matters but no such verbiage is in the Bill and this is called desperation. See the article below for more information.
Please take a few minutes to write your legislator asking them to support SB 15-177. If the content of the Bill changes to lose our support we will let you know. Your email does help and helps home owners. Get involved!
CAI Threatened If Homeowners Are Empowered
(article from HOAforum.org)
The Community Associations Institute (CAI), long incorrectly identified as a homeowner-centric organization in the press and by State legislators, is again attacking the idea of HOA homeowners’ rights. The CAI represents the interests of property managers and HOA lawyers and not homeowners. This time they are objecting to a provision in proposed Colorado SB 15-177 (construction defects) that requires HOA homeowners to approve the use of HOA funds in litigation. Why the opposition? The CAI and HOA lawyers view the HOA as a profit center and easy money. Empowering homeowners on how their funds are used considered disruptive and meddling.
Too often HOA lawyers raid HOA bank accounts for legal fees and costly legal cases that should never have been litigated. That leaves homeowners with depleted reserve funds, special assessments to pay legal costs, and/or increases in HOA dues to replenish reserve funds. HOA Boards can currently enter into litigation without apprising homeowners of their intent, the cost and consequences of litigation or how they intend to finance legal fees. Boards can incur unlimited legal expenses and even take out debt instruments to pay legal fees. Home owners in too many cases only know of the financial consequences after the case has been litigated and they are stuck with the bill. This Bill simply reins in the authority of an HOA Board (that is highly influenced by HOA lawyers and property managers) in making decisions on litigation that can have significant if not catastrophic financial impact.
SB 15-177 would not preclude legal action but require a majority of home owners to approve litigation. This would mitigate the number of law suits and the abusive practice of an HOA Board suing on behalf of a very few (as few as two) vs. the community at large. More cases would be handled in the less expensive legal venue of arbitration thus saving HOAs significant sums of money. Home owners could still pursue individual actions using their own funds.
The CAI is fabricating a tall tale in contending that any legal fees paid to an HOA lawyer related to routine advice and counsel would take a majority vote of home owners. This Bill doesn’t get involved in regulating or interfering with the operations and daily functions of the HOA. Legal counsel on enforcing covenants, controls, restrictions, and debt collection or other issues involving common and routine HOA issues would not require a majority vote of homeowners. It’s just not in this Bill. Payment of routine legal counsel doesn’t require a lawsuit today nor would it under this Bill. This Bill is directed at legal cases filed in a court of law that are specific, unique, non-recurring and financially impacting. The CAI is embarrassing itself by claiming that any payment to an HOA lawyer would have to be voted upon. Obviously, the CAI is desperate to kill this bill.
The winner in this Bill will be homeowners in HOA community associations, not the Community Association Institute. Homeowners will now have more control over how HOA assets are used. They will still retain the right to litigate construction defects. This Bill does not impair the ability of any HOA Board to govern but contributes to open governance.
It was unthinkable ten years ago that anti-HOA bills would be considered, or even proposed. It just gives me hope for the future. Homeowners are becoming more and more informed.
Just think of the lawsuits that might have been avoided if HOA Boards were required to obtain majority approval before proceeding to court:
the Farran’s lawsuit over a political sign that was a few inches too large; Mr. Murphree’s “unauthorized object” flag in a flowerpot lawsuits; FL’s fight against a woman with MS to keep her service dog to help with her disability; another FL condo association lawsuit over revoking an owner’s right to keep his small dog for health reasons (the owner took his own life recently due to stress over the legal battle); lawsuits over drought-tolerant lawns and solar panels; lawsuits over a therapeutic playhouse for a disabled child, not to mention that a majority vote might also prevent Nevada-style bogus construction defect lawsuits! How many of these legal battles would have been approved by a majority of voting interests?
The answer is not many — unless the people perpetrating the legal battle happen to hold a majority of the voting interests as developers, bulk-buyers, real estate investors, etc.
ie. If you have 100 units and the people on the Board own at least 51 of them — or if the Developer still controls with weighted votes — this is a moot point.
But that’s ANOTHER big problem in HOAs that needs to be addressed.
This bill seems to be on the right track.
Yeah, this is step in the right direction. I certainly don’t want my condo board pursuing legal action for petty rule breaking or for amounts that would cost more in legal fees to fight than to just write off.