April 11, 2013
Colorado Property Managers collect, account for, and disperse nearly one-billion dollars a year in fees from nearly 800,000 H.O.A. Home Owners. They do this with no regulations, oversight, licensing, competence standards, or sanctions. The responsibility for accounting and books reside with the management companies. H.O.A boards of varying oversight ability depend on them to supervise their decisions and run their complexes. Malfeasance and violations of Colorado C.I.O.A. Laws are common place and remedy through courts is beyond the reach of most homeowners. Action has been too long delayed.
.Changes needed for Bill 13-1277 before being passed.
1. A HOA that has over $50,000 annual assessments must retain the services of a Public Account to manager the monthly books for the Board of Directors.
A. Some Property Management Companies have the management of over 20 HOAs and they perform the accounting services for all HOAs. This means the Community Association Manager aka “CAM” may have a total of $2,500,000 to $3,000,000 in association dues and does this accounting without any oversight by an accounting firm. In this bill it must state all HOAs accounting records must be performed by a public accountant hired by the Board of Directors. The CAM will have no accounting duties with the management and bookkeeping of the HOA’s assessments. The Bookkeeping function is where all the thief of HOA fund occurs. A board of Directors are average members of the HOA community and do not understand how to read a financial statement as a businessman.
B. CPAs are the weak link in this operation. A CAM will contact a CPA and offer the Auditing Services of 20 HOA contracted at $5,000 each. The CAM will hold $2,500 for himself and pay the CPA the remaining $2,500. This arrangement is on the condition the CPA agrees during his audit if he fines something out of order he will not report it in his audit. For $50,000, many CPAs will agree to this deal and this makes the Audit worthless. Most audits for an HOA are 5 pages or less. Very seldom are reserve funds flow and application reports included.
Transfer Certificates are a major means of theft by a CAM. Most Bylaws now state that Transfer Certificate will be prepared by the accounting service and the Treasurer will sign the Certificate. This will be performed at a nominal fee ($15.00). All money collected under the name of the HOA must be deposited in the Association General fund. For years now the CAM bookkeeper researches the selling owner’s assessments records to determine if any money is owed. If no delinquent balance is noted a letter transfer certificate will be sent to the title company noting the seller owes no monies to the Association. The document is signed by a clerk in the CAM’s office and a fee for this service will be charged the seller ranging from $150.00 to $500.00 and the money goes into the CAM’s pocket not the Association General Account. The Seller doesn’t receive this bill until closing and by this time can’t do anything about the fees without stopping the closing. It is suspected the CAM does not report his income to IRS since records are not maintained in the CAM’s books of the income.
2. Page 9. 5a. No certifications named from CMCA or AMS or PCAM are to be listed in this bill. No certifications are to be required as means of circumventing the requirements of taking the test. No school in the business of teaching how to pass the state test for receiving a “CAM license will be recognized by the agency to license applicants. Schools for this teaching may exist but they are not authorized by the Real Estate Commission. One in particular is the CAI (Community Association Institute) whose past performance in this industry is not reputable. This is a means of having these organizatios set their own qualification standards The CAI must be named ineligible of any involvement with teaching or testing applicants for this license.
3. Page 12. No license from another state is acceptable by Colorado Real Estate Commission in lieu of taking the Colorado exam. This date there is only 12 states that have license laws. These states license laws are not the same as what Colorado laws will require. The blanket approval of all other state license laws which are unknown cannot be accepted as substantively equivalent to Colorado States future laws for Licensing. This State cannot afford the time and cost of reviewing all other state’s licenses to determine how equal they are. A Real Estate license from another state does not wave the requirement to pass a Colorado license test.
4. Page 14 12-61-1006 must be deleted. All Licensed CAMs must be a resident to be licensed in the state of Colorado. There is no such classification called Nonresident Licensee. All licensees must maintain an office in this state. There is no purpose served to allow nonresident licensee without an office in this state. An Office is not a PO Box address as CPA accountants get away with.
5. A proposal to include a MANDATORY DISPUTE RESOLUTION in this bill is a brilliant move on the part of the CAI. This inclusion will kill this bill and make it worthless. The word Mandatory means a homeowner with a dispute can’t go to the Real Estate Commission with his dispute or complaint until he has what is called a (mediation) Dispute Resolution which has no guide lines of how it is run by who and what authority a decision rendered by the Mediator who in truth could be a member of the CAI. This suggestion is based on the claim it saves litigation attorney fees in a court filing to resolve a dispute. There are no legal fees when a Homeowner files a compliant against the CAM or Board of Directors with the Real Estate Commission. This suggestion comes from the fox in the chicken coop. It must not be approved or this bill is worthless and the citizens of Colorado which not get justice for this legislature. If C. C. I. O.A., after all of these years cannot be enforced in Small Claims Court, how is mediation going to provide a better remedy?
Democratic Party leadership and the Republicans must come together with this bill to correct 15 years of malfeasance, fee-raping, and plundering the citizens of this State. The Democrats can lead as protectors of long victimized Homeowners in HOAs. If the HOA Lawyer-Property management lobby is again served, the Legislature will have failed to provide a law that really protects the more than 800,000 HOA Owners in this state.
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Aurora, CO 80014
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Also See: hoaowneradvocates.com