The Following list of rules has been developed by Jim Burneson for consideration of the Rule Drafting Committee For the Regulation Manual and Rulebook governing the actions of H.O.A. management companies in the State Of Colorado. A H. O, A. Owner Advocate editorial has pointed out that recent passage of Colorado 13-1277 falls far short of protecting Colorado Homeowners from predatory H.O.A. lawyers and property managers. The writer agrees.
The H.O. A. Owner Advocates site states:
“Property managers collect and spend over one billion dollars a year in assessments for H.O.A. owners in the state of Colorado. Obtaining homeowner rights in Colorado should not just concerned with establishing property manager competence, but rather, should be equally concerned with providing and assuring an atmosphere that assures honesty, ethics, and protects homeowners from a host of predatory actions and practices by unscrupulous lawyers and property managers.
The new state regulation process has, thus far, been a disappointment in that it allows the property manager advocate organization, the C.A.I. (Community Associations Institute) to set standards for competence and determine qualifications for licensing. Further, it does little to help H.O.A. homeowners preserve the few rights they have in an atmosphere of predatory lawyers and unconstitutional H.O.A. compulsory coerced governing documents. We suggest that all involved in H.O.A. law and rule making review H.O.A. Owner Advocates paper, “Position Paper On H.O.A. Property Manager Licensing” prepared for Colorado D.O.R.A Prior to the drafting Of CO 13-1277.”
H.O.A. homeowners must look to the regulation drafters for protection. Here is this writers list of suggested rules:
1. Many property managers are not trained in accounting and the license exam, if standards set in similar states are a guide, will not to test the knowledge of accounting principles for a prospective property manager. All property managers should be required to use an independent Public Accountant to maintain the books for each H.O.A, managed. Further, each H.O.A. should hire and maintain an independent Certified Public Accountant for audits not affiliated with or chosen by the management company. Theft and manipulation of funds is too common where management companies keep the books and have unlimited access to contracting services for H.O.A.s.
2. All checks issued by the board of directors must designate who is to receive the payment, the amount of payment, and the purpose for the expenditure along with the check number. This information must be approved by the board of directors and included in the board packet and or the minutes of each monthly board meeting. The bank statements and current obligations should be discussed and included in the board packet as well.This information should bemade available free of charge to any homeowner that requests it in the same format provided the Board.
3. Ideally, a lawyer should be appointed by the board of directors to represent the association on retainer basis or governed by a standard fee schedule that pre-prices standard services required by H.O.A. organizations. Lawyer legal fees charged a homeowner must be approved by the board at a monthly board meeting. A lawyer should never charge legal fees directly to a homeowner and they should not be added to an individual’s owner assessment. Legal fees must be accounted for separate from the H.O.A. owners’ assessment account in actions against individual Homeowners. Lawyer’s fees must be for a stated amount and for a stated reason and approved by the board of directors.
4. Mandatory mediation to settle disputes between and H.O.A. member and the board of directors or officers of the H.O.A. Board is an unconstitutional and arbitrary violation of individual homeowner civil rights. In the event two parties agree to seek settlement by mediation it will be without forced mediation by the board of directors. Forced Mediation can be used to circumvent violations of Governing Documents, the C.C.I.O.A. or published Real Estate Commission regulations
5. Property managers are paid a fee, usually based on the number of units in the H.O.A. and any transfer fees should fall within the scope of services provided to the association. Certificate of Transfer charges must have set amount for this service and the funds paid at closing are to be deposited in the General Fund of the H.O.A. For purposes of Legality, Any transfer certificate must be signed by the treasurer of the certifying H.O.A. A fee for this service will then be paid from the General fund by the Board of Directors to the property manager to create a paper trail for these expenses. (A nominal fee for issuing a Certificate of Transfer would be $15.00). Some property managers have been charging $500 for a Transfer Certificate which takes less than 5 minutes to determine what is owed by a member of the H.O.A. on his/her sale of their unit and prepared with a boiler plated letter merge. A PROPERTY MANAGER SHOULD NEVER RECEIVE DIRECT PAYMENTS FROM ANYONE EXCEPT THE BOARD OF DIRECTORS FOR THIS OR ANY OTHER SERVICE.
6. The Architecture Committee is to be a standing committee which means the appointment of the membership will be by the Board of Directors. They may include themselves in discussions and meetings, but once a standing committee is appointed, the Board abrogates responsibility and control of standing committee decisions. Decisions that extend or modify Governing Documents can only, then, be overruled by a 2/3 majority of the membership.
7. All property managers should be required to advise that a public accountant be appointed by the Board of Directors whose responsibility is to manage the monthly assessments paid a lock box at a bank The bank will credit the H.O.A.’s members account at the bank and these credits will be emailed by the bank to the public accountant who will enter all payments in the H.O.A. accounting books for a monthly accounting activity that is forward to the Treasurer of the H.O.A. for the monthly board meeting. The public accountant will prepare the monthly financial statement for the board. This will assure that an unqualified property manager is not responsible for malfeasance in the management of the general accounting records of the H.O.A..
8. Homeowner Agreements and Governing Documents should provide for publishing the names of dues delinquent Homeowners in the monthly newsletter. When the delinquent account is paid the H.O.A. owner’s name will be deleted. Homeowners should be aware that membership payments will be a matter of total membership knowledge. This of course will limit the collection fees. Homeowner documents should specify a meeting with the Board before the sixtieth day of delinquency. The Association Treasurer is responsible to determine what has caused the delinquent accounts to exist and set a payment schedule. Legal fees don’t get a single delinquent assessment paid.
9. There must be a reserve account for long term repairs of H.O.A. properties such as roofs, parking lots, etc. The Treasurer and all Board Members are responsible along with a committee appointed to maintain the fund at a level of accountability to have enough funds to pay all future expenses of the H.O.A.. If there is no such account the Board of Directors should be held personally liable for what funds are missing. Reserve study and a long-term Replacement Budget must be included in the documents that are provided by the board of directors to potential buyers before a unit is purchased.
10. Annual meetings must have a set of rules on how these meetings will be conducted. There will be no proxies printed with a Director name listed who will be given the proxy to vote if sent to the H.O.A. Secretary without a nominated name for the vote of a director for the board. Roberts Rules of Order is a good place to start for rules of the Annual meeting
11. A single CPA Accountant cannot be allowed to audit over 5 H.O.A.’s managed by one property manager. Some property managers have up to 40 H.O.A.’s being managed and a single CPA will be under too much pressure to do an accurate audit of 40 H.O.A. Accounts.
12. A property manager is responsible to advise a board of directors when they are in violation of the covenants and bylaws and his best understanding of Colorado C.I.O.A. Regulations. After three times the property manager has ordered the Board of Directors to cease wrongful acts and if the board refuses, the property manager must resign from managing the H.O.A.. His reason for resigning must be reported to the Real Estate Commission to protect the property manager’s standing and license with the commission.
13. All bids submitted to the board of an H.O.A. must be reviewed and approved on site by at least three board of directors. The Bids and Awards must be discussed in open meeting including reasons for rejecting lowest bid. All Bids and awards must be summarized in the Board packet.
14. Kickbacks to the property managers from companies servicing the H.O.A. should be classified as a felony if reported to the Real Estate Commission. Bid contracts should clearly state that they are entered into free of any remuneration monetary or otherwise. Property managers and Board of Directors have been known to demand 10 to 15% of a contract from a company providing a service or insurance companies before the Board of Directors are given the approval to sign a contract for the service. In other cases the servicing company has been required to provide complete landscaping of a Director or property managers ’home or there will be no contract approved for the H.O.A. When a property manager has 40 H.O.A.’s under contract he has a lot of money power to make demands of companies whose business is providing services to his serviced H.O.A. companies.