Saturday, August 21, 2010

Are Colorado HOA’s violating state law?

In April, I testified on behalf of a homeowner (a very unusual procedure for a management company to do) against a homeowner association and their management company in El Paso County Court. During the trial the plaintiff counsel was asked by the defense counsel if the homeowner association had a Mediation Policy. To date, no one has seen or read any form of a Mediation Policy. In 2005, Governor Bill Owens signed Senate Bill 100 (SB100) into law. Senate Bill 100 modified the Colorado Common Interest Ownership Act (CCIOA) by adding a series of governance guidelines.

The purpose of these guidelines was to provide homeowner protections that, when implemented, would provide greater rights for homeowners. Enumerated into statute, these Responsible Governance policies appear in section 38-33.3-209.b of the Colorado Revised Statutes. The mandate by the Colorado legislature is quite clear in item 1 which reads: “To promote responsible governance, associations shall….” The operative word is “SHALL”. Nowhere is the word “MAY” utilized. Thus, associations are required by law to enact these policies and procedures.

Subsection VIII requires associations to adopt “Procedures for addressing disputes arising between the association and unit owners.” This entire section was later added and became effective on January 1, 2006. Why, in April 2010, hasn’t the association enacted a Mediation Policy? If the association Board of Directors has known about SB 100, the managing agent for the association is aware of SB100, and the legal counsel for the association has known about it, why wasn’t one adopted by the association Board of Directors?

Worse yet, what are the ramifications for failing to implement the governance guidelines contained in SB 100? The answer is none. As part of the responsible governance guidelines, the associations are responsible for adopting policies relating to 1) the collection of assessments, 2) handling of conflicts of interest involving board members, 3) protocols for conducting meetings, 4) enforcement guidelines surrounding covenant violations , hearings, and the implementation of fines, 5) inspection of records, 6) investment policies surrounding reserve funds, 7)procedures for the creation, amending, and adoption of rules and policies, and 8) a mediation policy. All of which is to be communicated to the homeowners within the association.

Today, nearly five years later, homeowners within associations are being asked to take their grievances to a court of law. Why should homeowners be required to seek justice at their expense? After all, they pay dues which are being used by the association Board of Directors (who has a vested interest in the outcome) against them. Nowhere contained in the Colorado Common Interest Ownership Act (CCIOA) is there a remedy in the form of injunctive relief for the victims. Nor is there any form of civil penalties for associations, their managing agents, or legal counsel for failing to implement said policies. If they are lucky, CCIOA does allow, if the judge rules, reimbursement of court costs. However, there is no guarantee that they will receive reimbursement of “ALL” court costs, attorney fees, and or compensation for lost wages, etc.

Section 38-33.3-123(1) (b) C.R.S. Enforcement –limitation reads as follows:

"For any failure to comply with the provisions of this article or any provision of the declaration, bylaws, articles, or rules and regulations, other than the payment of assessments or any money or sums due to the association, the association, any unit owner, or any class of unit owners adversely affected by the failure to comply may seek reimbursement for collection costs and reasonable attorney fees and costs incurred as a result of such failure to comply, without the necessity of commencing a legal proceeding.” (Emphasis added).

Ironically, the last sentence of CRS 38-33.3-123(1)(b) further provides the home owner with the ability to defend themselves or bring an action against the association without "...the necessity of commencing a legal proceeding."  Am I missing something?  What part of this am I missing that isn't clear to legal counsel and the courts? If the association Board of Directors refuses to mediate a dispute. If the managing agent refuses to recommend mediation, and if legal counsel refuses to recommend mediation, and then a judge fails to order mediation as part of the process, where is a home owner to go in their search for justice? While SB 100 was a step in the right direction, it was only a step in a long march for truth, fairness, and reason.