2022 CCIOA Amendments Affect HOA Enforcement
Colorado House Bill 22-1137 became law on August 10, 2022. It amends the Colorado Common Interest Ownership Act (“CCIOA”), and adds new requirements covering HOA notices, collections, enforcement, fines, and foreclosures.
CCIOA is normally a reasonable statute that for the most part strikes a fair balance among the rights of owners, the board, and the developer. It is based on a uniform act that has been adopted in many other states. These recent CCIOA amendments, however, depart from the uniform act and are unique to Colorado.
With undoubtedly good intentions, HB 22-1137 is protective of owners in default of HOA assessments or in violation of HOA covenants. The statute does, however, add to the burden of HOA management. As well, the new law limits HOA remedies and makes collection and enforcement of covenants that much more difficult. The result will be increased costs for owners in a Colorado common interest community.
Here is a summary of HB 22-1137.
1. Owner Options for HOA Communications For all HOA notices and correspondence, an owner can designate a language preference, additional methods by which the owner wants to receive notices (including via text and email), or a third-party to receive the owner’s notices.
2. Monetary Default Notices Notices of monetary default must be sent via certified mail and physically posted on the unit, plus one of: first class mail, text (if provided by the owner), or email (if provided by the owner).
3. Record of Association Contacts with Owner HOAs must track and keep a record of their contacts with a defaulting owner, including the method of contacts.
4. Public Safety or Health Violation For covenant violations that threaten public safety or health, before the HOA can impose fines or take legal action, the HOA must send a notice of violation (certified mail is not required), provide a 72-hour cure period, and conduct an HOA inspection.
5. Other Covenant Violations For non-monetary covenant violations that do not threaten public safety or health, notices of violation must be sent via certified mail, a 30-day cure period, another 7 days for an HOA inspection if not cured, the opportunity for the owner to present visual evidence of cure, owner notice of no further fines if the default is cured, and two mandatory 30-day cure periods before taking legal action, which cannot be foreclosure. Thereafter, the HOA must send a detailed monthly statement balance of fines, fees and charges.
6. Owner Payments Owner payments are not deemed in default until 15 days after the due date.
7. Fine Policy To fine an owner, the HOA must have a written Fine Policy. The Fine Policy must: a) provide for a notice of violation that describes the nature of the violation, the owner actions requested for cure, and a timeline for fair and impartial fact finding, and b) the fine intervals if the violation is continuing in nature.
8. Fine Limits For covenant violations that do not threaten public safety or health, HOA fines are limited to $500 per violation and fines can be imposed only every other day.
9. Collection To send a delinquent owner account to collection requires:
a. A majority vote of the board (at a board meeting that may be held as an executive or closed session meeting);
b. Written notice of delinquency specifying the type of delinquency, and if for unpaid assessments, that it may lead to foreclosure;
c. A description of the steps the HOA must take before legal action, and a description of the cure process;
d. A description of the legal action the HOA might take; and
e. An explanation of small claims court jurisdiction, including injunctions.
10. Closed Board Meetings The board can hold a closed meeting (executive session) for hearings on covenant violations and owner delinquencies.
11. Foreclosure Process To foreclose, HOAs must first follow the statutory requirements related to the owner’s default, and also give the defaulting owner a written offer to enter into a payment plan. HOAs must wait for 30 days after a) offering the payment plan and the owner declines the plan, or b) the owner has accepted a payment plan and fails to pay 3 monthly installments within 15 days after the date due.
12. Lien Foreclosure HOAs cannot foreclose an HOA lien based solely on fines or collection costs (including attorney’s fees).
13. Purchasing Foreclosed Unit The statute prohibits the board, the HOA, and the HOA’s attorney (and their immediate families) from purchasing a foreclosed unit.
14. 18-Month Payment Plan The payment plan offered by an HOA must allow the defaulting owner to choose the monthly payment amount, but minimally $25, which can be paid over 18 months (changed from 6 months). In theory, the delinquent owner could pay $25 a month for 17 months and then a lump sum payment in month 18.
15. Application of Owner Payments HOAs must first apply owner payments to past due assessments, then to fines fees or other charges.
16. Late Fees HOAs may not charge an owner late fees.
17. Default Interest HOA default interest is capped at 8%.
18. Attorney’s Fees HOAs may not seek attorney’s fees incurred before complying with the requirements for delinquency and foreclosure.
19. Statement Charges HOAs may not charge owners a statement fee.
20. Violation of Foreclosure Provisions Violations of the foreclosure provisions are subject to a civil lawsuit by an aggrieved owner against the HOA filed within 5 years, damages up to $25,000, plus costs and attorney’s fees.
21. Policies HOAs must update their Responsible Governance Policies and add a Fine Policy.
This summary is not exhaustive, and there are a great many more details in the statute. Developers, boards, and managers will have to comb through the provisions very carefully and consult with their attorneys to make sure they are following every excruciating requirement.
Failure to comply with HB 22-1137 impairs the HOA’s ability to pursue its remedies, and in the context of a foreclosure, gives rise to a private right of action and liability up to $25,000 in damages.
In addition to the procedurally burdensome nature of the new law, we have a few other practical concerns.
Owners can now elect to receive HOA notices and correspondence in “any language.” If there are multiple languages requested, that means every communication must be translated into all those languages at association cost. There is also the potential for abuse by owners requesting translation in an effort to make the HOA's job more difficult.
Also, HOA attorney’s fees are not collectible unless incurred after compliance with the foreclosure notices and periods. This shifts the burden of initial attorney’s fees from the defaulting owner to the entire association.
As well, the statute could create disruptions to an HOA’s cash flow. First, by extending the due date of assessments by 15 days, every owner can now pay 15 days late with impunity.
Second, the payment plan provisions effectively mandate an involuntary loan by the HOA to a defaulting owner (with no questions asked or a credit check), a $25 minimum monthly payment, and interest capped at 8%. If multiple owners take advantage of the 18-month payment plan, an HOA might be unable to timely pay its bills. As mentioned, owner payments are not in default until 15 days late, and another 30-day period (to offer a payment plan) is required before filing a foreclosure action. Thus, there could be a minimum cash flow hiccup of at least 2 months assuming the HOA acts swiftly. Except for default interest (capped at 8%), there is no penalty if an owner pays assessments late and then either cures or accepts a payment plan within the 30-day payment plan offer period.
To address cash flow, HOAs could pro-actively build a working capital fund sufficient to cover these new risks of late assessments.
If you are a common interest community developer, board member, or manager, then you will want to closely read and understand these recent changes to HOA procedures covering notices, collections, enforcement, fines and foreclosures.
DISCLAIMER: This article does not constitute legal advice. Please contact your attorney to discuss how to comply with this statute and its legal requirements.
Diane Wolfson is the managing partner of Sphere Law Firm. She specializes in real estate, business and commercial litigation.
© 2022 Diane Wolfson/Sphere Law Firm