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Being in this industry requires staying on top of state laws that are voted on and affect how an HOA can operate. So many homeowners are under the assumption that an HOA is just a neighborhood with rules they agree upon and that is the end of the story. That is far from the truth.
An HOA is a non-profit business. HOA's have their own EIN (employer identification number) issued by the IRS. The HOA also must be registered with DORA (Dept of Regulatory Agencies) and also Colorado Secretary of State. Because it is a business, there are laws that are set up on how that business can run. CCIOA (Colorado Common Interest Ownership Act) spells out most of the laws that an HOA must follow, along with Colorado State. Colorado State has been going through a House Bill rampage for the past couple of years making it tougher and tougher for HOAs to conduct their business the way they want and because of that, the personal touch is also going by the wayside. Compliance and collection issues seem to be the hardest hitting areas that homeowners are struggling with. It amazes me some of the comments homeowners have come back with when they have received a collection letter for past due assessments. On more than one occasion, homeowners have demanded why someone didn't pick up the phone or stop by to let them know they were late before applying the late fee. An HOA nor the management company is not responsible for helping you keep on top of your finances. A mortgage company doesn't pick up the phone or stop by your house to warn you that you are going to be late so hurry and make a payment before a late fee is assessed. They send you your payment invoice and if you don't make the payment by their due date, you are charged a delinquent fee. It works the same with an HOA, as again, the HOA is a business. There are no "warnings". Just pay your assessments on time. Compliance issues are even stricter. With the new Colorado House Bill that went into effect, pictures with the date time-stamped on it MUST be sent via certified mail AFTER the Board votes on sending the warning, the homeowner is then given 30-days to "cure" the violation. If the violation isn't cured, the steps are repeated. Only after two consecutive 30-day warnings have been mailed and emailed/text or called, can a fine be imposed and no more than $500 per violation. It is not an instantaneous correction. Now, a new House Bill has taken it further to state that the person/neighbor can no longer stay anonymous when they turn in a violation. The person who makes the claim must be available to testify in court, (assuming it comes to that) on what they witnessed. Normally this wouldn't be a huge concern, but with this new House Bill, the homeowner who has the violation can demand a tribunal to fight the charge. With this option, it eliminates the allowance for a homeowner to remain anonymous. Every HOA must have Governing Documents. It helps explain how that particular HOA runs and the regulations you must follow if you buy into that HOA. Many of the governing documents must be adjusted to conform to Colorado State Laws at times, but there are many sections that are still up to the homeowners to vote on. DORA, CCIOA are both excellent places to stay up on how your business is allowed to run. Here is a Quick Guide in Governing Documents that DORA has provided for review. Remember, knowledge is power and a lot more affordable than ignorance!
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As summer approaches, homeowners' associations (HOAs) are increasingly faced with compliance challenges, particularly in light of the new House Bills being enacted in Colorado. These legislative changes have introduced additional hurdles for HOAs seeking prompt resolutions to issues arising from property violations. The requirements now dictate a more structured approach to enforcement, complicating the process for associations striving to maintain community standards.
Under the new regulations, any violation notice must include a date-stamped photograph and be dispatched via certified mail, along with a secondary form of communication, such as email, as specified in the House Bill. This process places a financial burden on the HOA, as the costs associated with these notifications cannot be transferred to the homeowner in violation. Furthermore, the HOA is mandated to allow a 30-day period for the homeowner to rectify the violation before any further action is taken. If the issue remains unresolved, a second certified letter, again accompanied by a date-stamped image, must be sent. Only after two consecutive 30-day notices have been issued can the HOA impose a fine, which may reach up to $500 for each violation. At Design HOA, we do not provide drive-through compliance services; rather, our focus is on the legal intricacies of managing your HOA effectively. We collaborate closely with board members who supply us with the necessary documentation, including images and details of compliance issues. This partnership enables us to issue violation letters promptly and in accordance with the new legal requirements, ensuring that your HOA remains compliant while addressing violations efficiently. Let's face it, Mondays are not our favorite days of the week. We are dealing with the weekend hangover and hoping we could have one more day of no alarm and sleeping in but this Monday is a day of celebration.
Design HOA has been following the CTA rollercoaster since last year and while I was catching up on the emails that had come in over the weekend, Lindsay Smith, attorney with cohoalaw.com, sent the email I had been praying for. The CTA is dead, at least for the entities in the USA! It will still be enforced for those businesses who are a foreign entity, but I'm thrilled that I only manage those here in the USA. If you would like to read her post, you can find it here If you prefer it coming straight from the horse's mouth, you can read it here I hope this brought a little Monday smile to your day too! Everything is on the rise and HOA assessment dues are too. With the increase of vendors, parts and insurance, the HOA is legally responsible to make sure the business is following the laws it must follow. Unfortunately this also means that many homeowners are unable to afford their assessment dues and are falling behind.
Design HOA understands this frustration and while we cannot advise you on what you should do, we can lay out what is an option for you, and also let you know some misconceptions of what many homeowners believe they can get away with. Under the new Colorado House Bill, homeowners who are delinquent can enter into a payment plan. The payment plan is for delinquent accounts and you can have up to 18 months to pay off the late assessments. During this time, no late fees or interest can be added to your account, however, if you miss a payment during the payment plan, the contract is considered void and fees can commence on your account. For accounts who are delinquent, the House Bill also requires that the collection letters be sent via certified mail (and yes, those costs can be charged to your account) and a secondary method of contact. We have had many homeowners argue that they never received the certified mail and therefore, a lien cannot be placed on their home. Courts understand that many homeowners will refuse the certified mail. The only requirement is that the collection agency and/or management company can provide proof that they at least tried to contact the homeowner regarding their delinquent account via certified mail. In other words, it doesn't matter if you accept that certified mail or not, after three attempts, the collection agency has fulfilled requirements by law to take legal action against your property and that includes filing a lien. Buying into an HOA has benefits and drawbacks, as does not buying into an HOA managed community. Assessment dues rarely go down, as the costs to maintain and run the nonprofit business increase every year. If you are struggling to pay your assessment dues, it might be time to see about buying into a less expensive HOA, or trimming other costs in your budget. Assessments should never be seen or treated like an option, as the law acknowledges this is a debt that you voluntarily entered into when you signed your purchase papers for your residence. Christmas came early in my opinion, as I opened up my email and saw the post from Attorney Lindsay Smith with Winzenburg, Leff, Purvis and Payne's law offices in Denver.
Judge Mazzant out of the Eastern District of Texas issued a nationwide preliminary injunction against the Corporate Transparency Act, finding that the Act is likely beyond the scope of Congressional authority. Reporting agencies do NOT have to comply with the CTA's January 1, 2025 filing deadline. Design HOA will be following this closely, as we believe this has always been a huge overstep by Congress. Design HOA and our Boards will be celebrating with this little win over the holidays! To read more about the case, click here. I'll admit I'm fairly new to the HOA management business. Prior to 2021, I was a published author of sweet romance, retiring my paralegal education. When my award-winning dystopian series was banned on social media, I was forced to look for an outside job, which led me to Source HOA. My experience with that company was bitter-sweet, as I was thrown into the world of HOA management (the sweet) and saw first-hand what greed can do to a company and its employees (the bitter).
I'm now going into my second year of owning my own management company. I run my business as I handle everything else: upfront, insistent on following the laws that dictate how the HOA business should run and transparency. I have my paralegal education in criminal law, business law and real estate law, so I know how to stay on top of the ever-changing House Bills that go into effect. As my business grows, I'm amazed at how many boards treat their HOA like a high-school popularity contest, or use their position to lord over homeowners. What's even more amazing are the management companies who allow this to happen and don't step in to correct the situation. Management companies are hired on to provide guidance and education for the board, so that their business stays compliant with Federal and State law. I'm dealing with another HOA management corporation who has egregiously taken advantage of several HOAs and has not even performed their management duties required by state law, yet have charged the HOAs for their services. It is so frustrating. I'm also dealing with a board who thinks that they are above following the laws that govern an HOA business and let's be clear; an HOA IS a business. I'm trying to guide them to follow the code of ethics outlined in their policies, to put aside their personal preferences and be completely transparent with their homeowners, but they are struggling with that issue. CCIOA states that the best practices are to promote transparency and good governance, boards should strive to respond to all reasonable and legitimate owner inquiries, even if they disagree with the owner’s perspective. A prompt and respectful response can help maintain positive relationships with owners and demonstrate accountability. If a homeowner questions a vote that a board decided on through emails, that homeowner is entitled to those emails and the string that led to the decision the board made without homeowners' input. Nothing is sacred, other than delinquencies and matters of legal concern. I will continue to try and guide this HOA in the right direction and hope that they learn to follow the laws and governing documents that were put in place for their business for a successful and productive future. If you are a self-managed HOA, or a member of the board and want to keep up with bills and laws, there are excellent educational resources provided by DORA and CCIOA to help you navigate your HOA business. On October 24, 2024, the preliminary injunction CAI filed was denied and CTA is still in effect. I have several HOA’s who are refusing to file, while others have already completed their filing.
For those who wish to file before the January 1st, 2025, deadline, each member on the board must file for their FinCEN number. This is through Congress, and they do not ask for any financial information. The information they gather is your legal name, your address, your social security, and a photo ID to prove you are who you say you are. Once you have completed that, they will give you your FinCEN number which is used to file the BOI (Beneficial Ownership Information) report. Once all the board members have their FinCEN number, you only need one board member to file on behalf of the HOA. You will provide your FinCEN number to the designated board member, who will then file. It’s a straightforward process, and I can provide the EIN number for the HOA which you will need to file. Please download the report once you have completed the filing and I will attach the form to your HOA legal files. I’ve attached links to help navigate this process. Please note that after each election, if new board members are elected, the HOA will need to file a new BOI with the new board member’s FinCEN number. There are several entities out there who are offering to file on behalf of HOA’s. The fees range from $100.00 to $200.00 per entity depending on the agency. As with the policies, I will offer this service for $65.00 per entity. I will need every board member’s FinCEN to file. Please note that if there are board member changes and another filing is required, it will be a new charge. If you choose to hire Design HOA to file your BOI, please have information submitted to our office by December 12th, 2024. Thank you. https://www.cohoalaw.com/what-the-courts-say/cta-still-in-play/ https://fincenid.fincen.gov/landing https://boiefiling.fincen.gov/ https://www.youtube.com/watch?v=GydCvfbKxPw&t=110s It is undeniable that we are currently navigating through challenging times. This election cycle has exacerbated divisions within our nation, leading individuals to abandon fundamental values such as empathy, respect, and constructive dialogue. The ability to engage in meaningful human interaction seems to have diminished, resulting in a societal landscape where the essence of being humane is increasingly overlooked.
In the realm of Homeowners Association (HOA) management, we frequently encounter homeowners who exhibit discourteous behavior. For instance, one resident made a disparaging comparison, suggesting that our management firm operates at a level akin to that of a sex worker, asserting, "I pay your wages, so you are obligated to cater to my demands." There is a prevalent expectation among some homeowners that the management team should be available around the clock, ready to fulfill every request. Additionally, frustrations often arise when individuals face penalties, such as late fees, leading to a pressing need to reshape the understanding of the role and function of a management company. It is essential to recognize that your HOA functions as a legitimate business entity, duly licensed within the state of Colorado. As a business, it is imperative that it adheres to the regulations established by state law. It is crucial to differentiate between an HOA management company and a property management firm; our primary obligation is to ensure that your association remains compliant with legal requirements. We are dedicated to maintaining fiscal responsibility, ensuring that your budget is appropriately managed, and that assessments are set at levels sufficient to cover the operational costs associated with running your HOA effectively. The board of directors serves as the primary authority for our organization, and our operations are guided by their directives as well as the governing documents of your homeowners' association (HOA) and applicable laws. Our role is to implement the policies and decisions made by the board, ensuring that we adhere to the established regulations and legal frameworks that govern our activities. This structure is essential for maintaining order and accountability within the community, as it delineates the responsibilities and expectations for all parties involved. As a service provider, our relationship with the board is similar to that of any vendor. We follow the instructions and guidelines set forth by the board rather than individual homeowners. For instance, when a landscaping service is contracted to maintain a property, the homeowner cannot dictate the terms of service; instead, the vendor operates under the authority of the board's decisions. This ensures that all work performed aligns with the community's standards and requirements, fostering a cohesive approach to property management and maintenance. Additionally, we function as the collection agency for the HOA. Timely payment of assessments is crucial for the financial health of the organization, as it enables us to meet our obligations, such as paying bills, renewing licenses, and compensating vendors. When you complete your title paperwork, you acknowledge your understanding of the HOA's governing documents, which outline the assessment schedule. Ignorance of these documents is not a valid defense in legal proceedings, as it is the homeowner's duty to familiarize themselves with the terms they agree to upon purchasing property within the HOA. We sometimes experience dissatisfied homeowners who express their belief that the management company is ineffective, claiming they are essentially paying for inadequate services. In response to these concerns, we encourage individuals to consider volunteering for a position on the board of directors. Our observations indicate that those who take the initiative to serve often find themselves in prolonged terms, as there tends to be a lack of volunteers willing to take over these responsibilities, leaving them with little choice but to continue in their roles. In Colorado, regulatory bodies such as the Department of Regulatory Agencies (DORA) frequently offer complimentary seminars and educational sessions tailored for both homeowners and board members. Engaging in these opportunities can provide valuable insights into the evolving landscape of housing regulations and best practices for community management. By participating in these classes, homeowners can enhance their understanding of the issues at hand and better equip themselves to contribute meaningfully to the governance of their homeowners' association. It is essential for homeowners to recognize that without active participation in the board, they forfeit their right to voice complaints regarding the decisions made by the board of directors. By stepping up and volunteering, individuals not only gain a firsthand perspective on the complexities of managing an HOA but also have the chance to influence the direction of their community. Active involvement is crucial; it empowers homeowners to advocate for their interests and ensures that their concerns are addressed in a constructive manner. When I started this blog, I had hoped that I could post monthly, but time got away from me, budget ratification meetings and new HOAs took precedence in my life, which is great! I've got a break in between meetings and allows me to dig deeper into some of the laws Congress is trying to enforce. The Corporate Transparency Act aka CTA is one of them. Enacted in 2021 as an attempt to prevent money laundering, Congress established a "beneficial ownership information (BOI) report to be filed with FinCEN (Financial Crimes Enforcement Network) a bureau within the U.S. Department of Treasury. This would require each board member to provide their current residential street address, date of birth, legal name and a scanned copy of their driver's license, passport or state-issued ID. Each time a board member would change, the HOA would have 30 days to update their records with FinCEN. From a personal and professional standpoint, I was infuriated. Board members are volunteers and it's hard enough to get members to volunteer for these positions as it is. This would just add to the reasons why not to serve on an HOA board. I also found it to be a huge encroachment by Congress. Luckily, the Federal Courts also agreed that this is an enormous overstep by Congress and on March 5th they held the Corporate Transparency Act as unconstitutional. While it is far from over as Congress will most likely appeal, at this time board members can take a breath. If Congress figures out a way to enforce this act, members have until January 1st, 2025 to file their initial report. This is one law I don't recommend jumping on, or can ethically get behind. I understand the need to control money laundering, but in our little neck of the woods, we are dealing with small, non-profit HOA's who just want to get their lawns watered, not mega-huge corporations that funnel millions of dollars through their entity every year. Election year is always filled with anxiety. Between the hateful commercials "exposing" a candidate's dirty laundry, to neighbors who want to tout to everyone who they are voting for and who others should vote for, it leads to a very contentious time. But how does that affect an HOA?
House Bill 21-1310 aka HB 21-1310 changed the power HOA boards have over what can be flown, when and for how long. It used to be that you could only display political flags during an election year, and they had to be removed after a certain period of time. That all changed in 2021 when Jared Polis signed the House Bill. Now a homeowner can fly their political flags, regardless of the message, year-round. An HOA can no longer bar a homeowner from flying a United States flag, at all. The only power the HOA has over the flag policies are subject only to reasonable, content-neutral limitations such as the number, size, or placement of the flags or signs, or prohibitions against commercial messages. As frustrating as it may be to see your neighbor's "Let's Go Brandon" or "MAGA" flying in the breeze every day, know that they have the legal right to fly that flag proudly. And hey, don't shoot the messenger, I'm just here to clarify the laws. Have a fantastic rest of your January! |
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