2011 was an active year for legislation that will affect community associations of all kinds in Colorado. Overall most bills were positive and did not add significantly to the administrative burdens of managing and governing homeowners associations. But there are new laws that every Colorado homeowners association should be aware of.
The following checklist discusses the three major bills impacting HOAs that became law this session, and explains what boards and managers need to do to comply with them. We’ll also look ahead to the 2012 legislative session by covering a few “near misses” – bills that would have had an impact, but which didn’t pass this year, which we’ll be watching for next year.
||What HOAs Must Do to Comply
|Transfer Fees||SB 11-234||This new law is codified at CRS 38-35-127. It eliminates many kinds of transfer fees covenants on residential real estate.The good news for HOAs is that transfer fee covenants payable to common interest community associations of any kind are excluded from the prohibition – the law doesn’t change how HOAs collect and use transfer fees.Also good news: transfer fees charged by community association management companies at time of transfer of title of real estate are still valid.Finally, many – but not all – kinds of transfer fees paid to charitable organizations for the benefit of the community also may still be valid||We recommend that community association managers change the name of the fees they charge at time of transfer of title to “record change fees”, to avoid confusion among the general public.HOAs should also be aware that this is a Colorado state law only. Proposed federal regulations on transfer fees may be adopted soon by the Federal Housing Finance Agency (“FHFA”). Those regulations could be more restrictive, but lenders relying on federal guarantees would need to follow those federal guidelines. See our April 6, 2011 blog for more details on proposed federal regulations.We will keep you posted on any updates to the federal regulations.|
|Owners Association Conflict of Interest||HB 11-1124||This new law amends CRS Section 32-1-804.3 by requiring candidates for election to HOA boards to disclose conflicts of interest, for example, if they currently serve on a Metro District the HOA is located in.
The law also amends CCIOA section 38-33.3-209.5 concerning Responsible Governance Policies, by adding definition to conflict of interest policies (which are already one of the statutorily required Governance policies).
|It's time to put "conflict of interest policy review" on your board meeting agendas. All community associations subject to CCIOA must update their conflict of interest policies to:
|Identity Theft||HB 11-1095||This law amends CRS Section 24-21-111 to require the Secretary of State to implement a password-protected system for any corporate filings required for corporations and other entities – like homeowners associations -- under CRS Title 7.This security requirement should limit the danger of identify theft experienced over the past year in Colorado when thieves made online changes to corporate records.Corporate information will remain available to the public without a password.||Since most community associations in Colorado are non-profit corporations subject to the Non-Profit Corporations Statute, they are required to file periodic reports with the Secretary of State. This law will require the authorized agent of an HOA – either managers or self-managed boards -- to keep and use a password.|
BILLS THAT DID NOT BECOME LAW
The following three bills did not pass into law during this year’s legislative session, but they concerned issues which we anticipate may be raised again in 2012.
|Short Title||Bill Number||Description|
|HOA Registration "Clean Up"||SB 11-253||This bill was intended to clarify the HOA registration requirements contained in last year’s HOA Registration Act, HB10-1278, by amending the Colorado Common Interest Ownership Act (“CCIOA”) sections 38-33.3-401 and 38-33.3-117. The bill would have been very positive for HOAs because it would have reduced confusion or even the risk of litigation about interpreting certain sections of the HOA Registration Act. However, HindmanSanchez believes the Clean Up bill would not have CHANGED current existing law. We believe the following provisions of the bill are currently correct interpretations of the HOA Registration Act:
|Junior Lienholder Limits||SB 11-122||This bill would have been bad for Colorado community associations, because it would have treated HOAs differently from all other kinds of lien holders and limited their ability to assign liens. These limits would have limited HOAs’ leverage in foreclosure proceedings.|
|Superliens||HB 11-1197||This bill to change Colorado’s superlien law, CCIOA Section 38-33.3-316, as originally introduced, would have been negative for community associations. It proposed a series of technical changes to the law which, taken together, could have placed HOAs at a disadvantage when attempting to recover their statutory superlien -- a very important financial protection mechanism.The bill went through many compromises and amendments so that the bill’s final would have been, on balance, fairly positive for community associations. However, the bill died in committee this year.We anticipate more legislative action in 2012 involving liens, superliens and foreclosure laws which may impact community associations, perhaps negatively, but hopefully positively.|
We provided regular updates throughout the legislative session on our blog. If you’d like to stay in-the-know about upcoming state and federal laws and regulations, you may wish to subscribe.
Next month we’ll provide a more detailed look ahead to the 2012 Legislative session. Stay tuned!