Dereliction of Duty by our Governor and Legislature

Homeowners associations have been called private governments because they do many things that governments do. HOAs hold elections, provide services, tax residents, and regulate behavior within their jurisdictions, but as legal entities, they are not governments.

To raise revenue for goods and services, HOAs lack taxing authority but not the power to charge assessments, which makes their inability to tax more a legal distinction than a real constraint. HOAs’ enforcement powers for failure to pay assessments equal those of local governments and allow them to place liens or foreclose on property, a power that the courts have upheld repeatedly.

- Barbara Coyle-McCabe, “Homeowner Associations As Private Governments”. Public Administration Review. July/August 2011 , at pages 535 and 537.

With the prospect of property taxes increasing by 40% next year, Governor Jared Polis called a Special Session of the Colorado General Assembly to address the problem.

From: Office of Governor Jared Polis
Date: Friday, December 01, 2023 at 9:26 AM
Subject: Property Tax Relief

To my fellow Coloradans,

As we approach the holiday season, people across the state are facing property tax increases of about 40% on average due next year, which is why the state has taken action to deliver immediate property tax relief and I am continually elevating this issue to save people money.

Last week, following the special session, the state delivered property tax relief for Coloradans that, combined with previously passed property tax relief, will subtract $55,000 per home from state property tax valuation. This action along with other state property tax relief will reduce the residential assessment rate to 6.7% and save Coloradans living in a $500,000 home an average of $505 on their 2023 property tax bills (without dipping into the TABOR surplus).

It is worth noting that the legislature considered 15 bills over the course of just 4 days.

Given that half of Colorado's population is governed by some type of H.O.A. corporation:

• Why are the Governor and the legislature unable, or is it unwilling, to provide homeowners relief from rising H.O.A. fees?

• Why is the state's worse-than-useless H.O.A. Information & Resource Center not even collecting data about H.O.A. fees?

How can our policy makers -- including the current H.O.A. Task Farce -- even address the issue without having any idea how much H.O.A.-burdened homeowners are paying in

- - regular H.O.A. assessments
- - special H.O.A. assessments
- - H.O.A. fines
- - H.O.A. attorney fees
- - other H.O.A. fees

especially given the Enron-style accounting explicitly allowed and encouraged by the Colorado Communist Interest Ownership Act (C.C.I.O.A.); which allows H.O.A. corporations to classify all fees as regular assessments.

Colo. Rev. Stat. § 38-33.3-316. Lien for assessments. The association has a statutory lien on a unit for any assessment levied against that unit or fines imposed against its unit owner. Unless the declaration otherwise provides, fees, charges, late charges, attorney fees, fines, and interest charged are enforceable as assessments under this article.

1992 - 2022

The language of the statute was changed by Colorado House Bill HB22-1137 to prohibit foreclosure for H.O.A. fines, but not to prohibit the "priority of payments" accounting scheme which conflates fines and attorney fees with assessments.

Colo. Rev. Stat. § 38-33.3-316. Lien for assessments. The association has a statutory lien on a unit for any assessment levied against that unit or fines imposed against its unit owner. Fees, charges, late charges, attorney fees, fines, and interest charged may be subject to a statutory lien but are not subject to a foreclosure action under this article 33.3.

2022 - present

Even the bill's sponsor recently admitted that the H.O.A. industry is still engaging in "shenanigans" to circumvent the intent of the new law.

To go around 1137 people are now making stuff parts of the dues. Like they're just doing: it should be a special assessment but now they're actually couching it as a regular assessment. So there's some shenanigans being played right now within H.O.A.s.

- Colorado State Representative Naquetta Ricks, November 21 2023

Which was entirely predictable -- and was predicted -- by anyone familiar with how H.O.A. law actually works, and how H.O.A. law does not work, and how legislatures across the country have been ineffective at protecting homeowners from the abusive, fraudulent, predatory, and criminal business practices of the H.O.A. industry special interests.

The stories that lawmakers tell the public, and what actually goes on in court rooms where their laws are enforced, are two very different things.

Five years ago, the Boulder Weekly reported that

With HOA Costs Surpassing Their Mortgage Payments, Owners of Affordable Housing Appeal to City of Boulder

Angela K. Evans. Boulder Weekly. November 21, 2018

When Adam Perry got home one afternoon in August, he had a notice on the door from his homeowners’ association (HOA) announcing the roofs around the Iris Hollow condominium complex were in dire need of repair. The notice said, “there’s a special assessment coming and it’s going to substantially increase your dues,” Perry recalls. “I completely freaked out.” He bought the place in 2014 through the City of Boulder’s Permanently Affordable (PA) Home Program, and this was the second time he was being hit with a special assessment.

“The people who own condos at Iris Hollow who bought in through this program are suffering right now,” Perry says. “It’s not called the permanently affordable mortgage program, it’s called the permanently affordable home ownership program.”

One of his neighbors, he says, is simply unable to pay the HOA fees and there is a lien on their home. Another one is trying to sell and get out of the program but is worried they won’t be able to with both the current and upcoming assessments.

“I thought this would be the next best thing, but it’s a black hole,” PA owner Amy Gahran says. Her current HOA payments almost equal her monthly mortgage. For Perry, it’s more than his mortgage.

“My monthly HOA right now is $844, and starting in March, it’s going to be just under $1,200. That’s insane,” Perry says. “I don’t think any reasonable person would call that affordable.”

As a matter of comparison, Perry is currently paying a combined monthly payment equal to that of a mortgage on a $480,000 home on the open market.

Unfortunately, this problem isn’t new.

Back in 2010 Boulder City Council created the Affordable Housing Task Force (AHTF), which spent 14 months reviewing affordable housing programs in Boulder. HOA fees were one of the eight topics that the AHTF explored in its report, which stated, “Rising HOA fees can present a challenge for owners of affordable homes, and can jeopardize a home’s long-term affordability. Consequently, the city has a role in exploring ways to potentially mitigate these costs for affordable buyers.”

“What happens when you buy a quote ‘permanently affordable’ home and then it’s not affordable anymore?” Perry asks. “How can the City just wash their hands of that and say, ‘Well, you bought the place.’”

The City has no regulatory authority over HOAs (that falls under state jurisdiction).

A year later, on November 25 2019, reader Scott Cejka wrote in the comments section that

A year later and it's just gotten worse. "Affordable" housing units are not affordable anymore. When HOA's get that high and resale of the units is capped by the city, there's no way a homeowner can sell their property to anyone else once you tell them what the HOA is...It truly is a black hole that will leave the "owner" probably broke and on the street.

In a follow-up story three years later, the Boulder Weekly reported that

The City of Boulder, however, has long heard about the issue of rising HOA costs for homeowners, not just in its affordable program but in market rate units as well. According to a 2019 survey of registered HOAs in the city, the average monthly HOA fees are $308 per month, up significantly from $177 in 2012, the last time the City looked at HOA costs. In addition, the average cost of special assessments — additional costs that can’t be covered by the HOA reserve fund — was about $3,000 per unit, per year.

- “Pressure Points. High HOA Fees Are a Challenge for Affordable Owners”, June 17, 2021

It is worth noting that in 2017, I met with Colorado House Majority Leader K.C. Becker ( Democrat - Boulder ) to bring H.O.A. issues to her attention. She -- along with the rest of the fauxgressive Boulder County Democrat Party -- denied that there was a problem and refused to support my proposal for legislative protections for consumers of H.O.A.-burdened housing.

From: KC Becker
Date: Tuesday, June 06, 2017 at 11:16 AM
Subject: Re: H.O.A. : B.C.D.P. Resolution
To: Robert Racansky

Regarding your resolution below: I think you are asking folks to adopt a policy on an issue they may not have much personal experience with (since we don’t have a lot of HOA’s in Boulder) and if they do have personal experience with HOA’s, it may not be negative. So adopting such a broad policy might be difficult. It also may not be enough of a priority to include. I’d also say that adopting this policy may not really aide your efforts in any significant way. I’m sorry that I cannot support adoption of this resolution by the local party right now.

Best,
KC Becker
House Majority Leader
Colorado House District 13

No amount of reserve studies or disclosure documents is going to fix these problems that Becker et al. denied even existed, because homeowner associations are a failed and unsustainable business model.

Contrary to assertions made by the sponsors of Colorado House Bill HB23-1105, which created the current H.O.A. Task Farce,

problems such as the inevitable increase of H.O.A. fees -- along with their affects on the affordability of housing and seniors living on fixed incomes -- were predicted decades ago. For just one example, see The Uncertain Future of Community Associations which was published in 2005.

That was nearly 20 years ago.

There has been plenty of comprehensive analyses of H.O.A. issues over the past 30 years. It's just that our public policy makers, including Governor Polis, the past and current General Assembly, and the Department of Regulatory Agencies (DORA), choose to ignore them because too many special interests are profiting from the dysfunction of H.O.A. governance and the unfettered predation of H.O.A.-burdened homeowners.

And DORA has plans to be one of those parties that profit from the dysfunction of H.O.A. privatized corporate governance, so it has a perverse incentive to not solve those problems.

But that's a topic for a separate comment.