Manager Licensure-What Does it Really Mean?

David A. Firmin | Wednesday, April 17, 2013 | State Legislation

One of the major bills being debated this year, HB13-1277, promises to become as famous in the HOA circles as SB 05-100 and SB 06-89.  This bill represents a major change in how community associations are perceived and managed.  So what does it mean and what is its impact?

HB1277 establishes a mechanism in which Community Managers and Management companies will need to become licensed in order to manage community associations.  The bill has three separate parts, which (i) define what a community manager and community management is, (ii) the requirements to obtain a license and from who, and (iii) what happens if a manager fails to get license or commits an act that warrants revocation of that license.   The 28 page bill authorizes the Director of the Division of Real Estate to promulgate rules to enforce the new requirements.

As the first step for most communities and managers is to determine what it takes to apply for a license and actually get it, we will focus first on the requirements for a license.  The bill contains several prerequisites that must be met prior to even applying for a license.  An applicant must first:

  1. be of at least 18 years of age; have obtained a High School Diploma or a equivalent General Education Development Certificate;
  2. submit finger prints to the Colorado Bureau of Investigation so that a criminal history check may be completed;
  3. pay for the criminal history back ground check; and
  4. obtain and hold either a designation as a Certified Manager of Community Associations (CMCA), an Association Management Specialist (AMS), or as a Professional Community Association Manager (PCAM) or any other designation as may be identified by the Directors. 


Once you have turned 18, submitted (and paid for) fingerprinting so that a criminal back ground check may be completed, managers may then (and only then) submit to and pass (with a score determined by the Director) the licensure test, which will test core competencies in knowledge relating to:

  1. legal documents and statutes that enable a community association to operate;
  2. the roles and responsibilities of a manager, owners, committees and the executive board;
  3. management ethics for association managers;
  4. steps for developing and enforcing community association rules;
  5. the manager's role in organizing, assisting and conducting board meetings;
  6. effective collection of assessments;
  7. remedies for delinquent owners (which are changing by separate bill - so stay tuned);
  8. over view of financial statements; (i) characteristics of effective risk management and insurance;
  9. methods for implementing and evaluating a maintenance program;
  10. criteria for deciding whether to use association staff or contract work for work in community;
  11. how to prepare a bid request and key contract provisions;
  12. recruiting and screening of managing personnel;
  13. and of course the basic areas of employment as addressed by federal, state and local law.


Only if a manager accomplishes all of the above, obtains insurance in amounts established by the Director, and has not been convicted of a felony in the last 2 years, may the manager identify him or herself as a community association manager and manage communities.  If HB 1277 becomes law, managers will have until July 1, 2015 to comply with these requirements.   As more information becomes available you will be able to find it here. 

Comments

Thi bill will put an undue burdn on small assocaitions.

Question: Am I correct to infer that if you have a criminal offense on your record, that you may not pursue a career in Property Management - because you won't be allowed to get a license? Small wonder there is so much recidivism.

For those property managers who hold Real Estate Licenses would this also count or would we need to also go through this process? I would think that having a real estate license that is required to do property management would also count for HOA management.

As a manager, I don’t feel that licensing is going to solve as many of the problems that some think it will. Anyone will be eligible to obtain a license, ethical or not, by taking a class and passing a test. The VAST MAJORIY of HOA disputes are caused by homeowners who are not fully aware of the process and of their rights, or by boards of directors who do as they please, or use their position for their own gain or to harass those whom they don’t like. This bill does nothing to address these issues. A licensed manager is not going to wittingly do something that would cause his license to be in jeopardy. Directors are not usually familiar with the provisions of state laws or of their governing documents, and, if they are, they do as they wish any way, because they know that the only recourse for homeowners is expensive and time-consuming legal actions. Many homeowners will get the mistaken impression that licensed managers are ethical, honest and fair, and that all issues that give rise to disputes will miraculously vanish. They will file complaints against managers, only to find out that the problem was something that the board did, and that this is not regulated by any bill. This will result in increased frustration for them. Licensing will add to the cost of management, which will be passed along to the communities. Managers and management companies will not be willing to “eat” these costs. HOA management is not usually a chosen career; it’s not something most people intend to undertake. We are usually drawn into this field by circumstances that were unintended. In other words, it is not usually a “destination career.” Additionally, many managers use their jobs as stepping stones to other positions, or as temporary stops along the job path. Most managers are gone within 6 months to a year, and management companies are lax in whom they hire, because experienced managers simply do not exist. Such people will not bother to go through the time, effort and expense of obtaining a license. As a result, the pool of available managers will shrink, possibly leading to a scarcity of good managers. Under this scenario, managers will be able to command increasing compensation, which will also be passed along to the HOAs. Instead of increased regulation, what is needed is a process of resolution. I call this “Resolution, not Regulation.” Under this scenario, the state institutes a mandatory, binding and expedited administrative-hearing process, in which valid disputes are heard before a panel of 3 persons who are experts in the field of HOA government and operation. The panel would have the same authority as in the proposed process for hearings on manager complaints. Complaints could be brought against a manager, against a board, against one director, or even by the HOA against an owner for matters other than collections. The parties to a complaint would pay a small fee for the cost of the process. The panel would be empowered to order corrective action and punitive fines. Imagine a world in which complaints are dealt with appropriately, swiftly and inexpensively! I do!

I predict a TON of new business for those of us who can actually obtain and hold such license given the pool of qualified managers is going to shrink significantly I also predict raises! The law of supply and demand says it's going to be more expensive to obtain professional management so they certainly didn't solve the way Associations are percieved. I can see what they want to accomplish but since managers act upon the direction of the Board it doesn't really solve the problem. Any persuasive person can get elected to make decisions and everyone knows that Board's do not always follow the advice they are given. How many responsible budgets have been vetoed by a Board because they didn't want to fund it and how is a license going to solve such problems? It's a dumb law and the sponsors should be ashamed!

This is the most over reach by government that I have seen. While I agree with some of the applicant checks the balance of the requirements are examples of government over reach.

I believe those who already hold active real estate licenses, who are ingood standing with DORA, should automatically get the "state test" licensing. We've been fingerprinted, taken many many hours of classes, and maintain our licenses by continuing our education. Another test is simply redundant.

But you may not have taken the class offered by CAI, passed the test offered by CAI, and obtained the certification offered by CAI, (and paid handsomely for these "services") which, in the end, was the reason CAI pushed so heavily for passage of this law. CAI will forever benefit financially from this arrangement. Think about it. You are not qualified until CAI deems you to be so, and it needs a financial commitment from you before doing any deeming!

What ever happened to the Doctorate of Respondeat Superior rule of law? Merely requiring Property Managers be licensed, does very little in the way of answering Who is Actually in Charge? Aren't the employers ultimately responsible for the actions of their employees? Seems to me that there should be standards established for Management Companies and their owners. Such as a Code of Conduct for participation in any Conflicting Interest Transactions between HOA Companies and the Contractors. Full Disclosure Rules for behavior between HOA Company Owners and the contractors. There should be full disclosure regarding any personal and/or professional interests and/or relationships. Much as a Registered Investment Advisor must complete and follow Brochure Rules with DORA, so too should the management companies. Also, what about a person earning a CPM (Certified Property Manager) designation from the Institute of Real Estate Management IREM? There should be some provision for educational training that one could obtain via a community college, or other educational institution or entity. As someone who has always operated and complied with DORA, to include on-site inspections, the above recommendations appear to make sense. One of the biggest complaints in relation to Property Management Companies and Contractors has been "Kick Backs", Preferrential Treatment, Insider Information, and the like. Having served on a Board of Directors I can attest to the fact that Management Company owners periodically received "FREE" or subsidized landscaping services, painting services, and roofing at the expense of the associations merely because of the contractor's relationship with the Property Management Company owner. Some of this behaviour is borderline criminal to say the least. Once had an electrician reduce our cost of lighting replacement because we had "FIRED" the management company and were self managed. He said that it was a "Finder's Fee" for obtaining the contract. Would have cost the Association an additional 20%!!! There are paint companies in Colorado Springs that have continually complained that a particular paint contractor always "OUTBID" them. Why, because the Property Manager and/or Management Company Owners provided him with insider information. This runs true of several of the industry trades. This behavior leads to: 1) inadequate and/or unprofessional installation, 2) decreased quality, and 3) cost over-runs to the Association. Paying too much for Poor Quality. As a Registered Investment Advisor if I conducted such behavior in my practice, I would be doing jail time for "Insider Trading." Also, there needs to be higher standards regarding advising clients as to how and where to invest Reserve Funds. To a degree, Property Managers and/or Board Members may be providing Financial Advise without a license. For example, if a Property Manager merely advises a client to place "ALL" of their funds into a financial institution for safekeeping there are several questions that must be asked. 1) If the instrument is a Certificate of Deposit is it insured by the FDIC. N ot all commercial paper instruments issued by a bank are. 2) What are the "Early Wiothdrawal" penalties? For example, if an HOA has a 2 year CD earning 1.75% interest, and they withdraw it prior to the two years the penalty exceeds the amount of interest earned. 3) If the funds are in a large amount, are there procedures and/or guidelines regarding diversifying financial instituions in the event a bank goes into Receivorship? 4) Why aren't the interest maturities being laddered to avoid potential interest rate loss? 5) If the funds are being professionally managed, did the HOA Board of Directors or Property Manager obtain a copy of the company BROCHURE from the Division of Regulatory Agencies, Securities Division, or the Securities Exchange Commission? 6) If the funds are managed by a brokerage, what are the custodial fees? 7) Is the brokerage a Fee Based or Commission brokerage? With the low interest rates, Opportunity Cost is often Opportunity Lost. However, ignorance as an effective defense may not work in the eyes of the law. Caveat Emptor - Buyer Beware.

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