HOA Task Force Meeting 1/16: The Subject of Deterrence

I thought today's meeting had a different feel and tone, which might have to do with some absences for most of the meeting. I found the topics covered by Ms. Van Dorn were particularly well thought out and organized, and it stirred good discussions about the pros and cons. Her emphasis, however, was on consensus, and there were many examples that were disappointing to see, in particular, Industry advocates who took absolute positions.

Ms. Jackson stated at one point that she did not believe that any HOA enforcement could ever be "petty". It seemed to trigger her into this absolutist opinion that if something is in the governing documents, then it must be enforced, therefore it cannot be petty.

This is known as a strict compliance approach to the governing documents. When a homeowner asks for leniency, the excuses is that if they were given leniency, then EVERYONE would need to be given leniency as a matter of consistency. And, if the rules are not enforced consistently, then they cannot be enforced at all - known as "selective enforcement". Discretion, in this POV is disallowed because according to this logic, even such things as broken blinds, grease stains, and the oft-repeated example of "garbage cans" must be absolutely enforced all of the time.

Ms. Jackson then was asked about her opinions on fines, and she felt that HB22-1137 created fines that were too low to be a "deterrent". According to her, and later when Mr. Freedman arrived, he chimed in as well, the word was used many times in this segment beginning here: https://youtu.be/hyDa3Rh0J4U?t=7841

According to HOA Industry Thought Leaders, $500 isn't a lot of money to people. I mean, except "low-income" people. The "wealthy" scoff at such amounts, so such fine amounts don't bother them. They present a long list of things people can do, almost giving such homeowners who may be listening ideas.

Funny thing is, we never actually see any data. We just hear about these legendary situations where, all of a sudden, people who were following the rules before HB22-1137 suddenly realized that if they only paid $500 per year, they could get away with bad behavior. One rationalization was that, for instance, Boats and RVs would cost MUCH more to store elsewhere, so now HB22-1137 has created this bargain - and there is absolutely nothing the poor HOA can do.

Except that's not really honest.

Because, the problem is, if the scofflaw is truly that defiant and pays the fine, the HOA still has an option - go to Court for injunctive relief. In fact, Ms. Jackson advised one homeowner testifying at the 1/2/24 meeting to do.

But, when we discuss the topics surrounding HOA Directors who may not be following CCIOA, the Non-Profit Act, or even their own governing documents, it is amazing how quickly Ms. Jackson and Mr. Freedman reverse their logic. You see, Ms. Jackson emphasized that when a homeowner purchases the home, they agree to these rules.

And, it's literally the exact same rules that a Board of Director Member must agree to follow - not just for purchasing a home, but as a contingency for being a Director of the Board. You are not free to ignore or break any rules or laws because you are elected to the position.

So, when there is a discussion of any requirements that a Board be knowledgable, the Industry representatives repeat this prediction that IF there were education requirements, then there would be less people wishing to join the board. They've already agreed to know the rules that apply to them as homeowners, which in turn necessitates knowing that they often arise from state laws.

But, if you join the Board, you are literally ENTITLED to ignorance. Not just about the details, but the entire thing. You can have full blown rules amnesia. And, there's this magical non-statutory legal thing called the Business Judgement Rule, which says that even if you drive the HOA into a ditch, you can't be personally liable for not knowing the rules or following them.

Again, often, we are talking about the exact same rules that MUST be strictly applied to a homeowner. The Director can literally say, I wasn't aware that I could not fine you and send it with the first notice, and there's literally zero consequence. Even if this is in both the governing documents and CCIOA, if the Director says "I didn't know that was the law or rule.", they are off the hook. 100% guaranteed.

So, this then makes me wonder about how honest we are about the subject of fines being a deterrent. Because, their argument is that a $500 cap is insufficient.

However, when there is discussion about a $1000 fine for an HOA not, for instance, registering with DORA, well, then that deterrent effect is simply not a thing. Same people, volunteers on Boards, as homeowners. Again, they ALL agreed to ALL the rules. But, the one that requires them to take 30 seconds to fill out a form from Dora and pay online (or send a check) - nah. Why should there be any deterrent effect?

And, this gets to the deeper point about how some of these topics are framed and narrated by Industry advocates. You see, if a Board or individual Directors are out of compliance - you know, not following the rules, the only party who literally has the job of enforcing that rule on them is . . . the homeowner.

And, that is a very ill-defined job. It's basically implied by deductive reasoning.

Is it DORA's job to enforce CCIOA or the governing documents? No! Like don't even ask for legal advice! Just fill out a complaint that goes nowhere. And, get an attorney!

Is it the Attorney General's job? No! They do not enforce Civil statutes, and certainly not private contracts! Get an attorney!

Is it the job of local or state Law Enforcement Agencies? No. We already told you it is a Civil matter! Stop calling the police! They are sick and tired of HOA calls! Get an attorney!

How about is it the job of . . . ? No! We told you to get an attorney!

Well, why do I need to pay for an attorney, which costs WAY MORE THAN $500-1000, when I am not the one who is breaking the rules or law? We can't tell you! Get an attorney!

So, because this is a civil matter in a private non-profit corporation, any member who is NOT a Director must then attempt to enforce the rules on the Directors who literally have all of the power, documents, and access to resources, to inform them that they are breaking the rules. And, of course, any Director who is told they are breaking the rules is going to say they are sorry and agree to never to it again.

You see, HB22-1137 turned all sorts of rule-abiding homeowners into scofflaws overnight because of a measly $500 fine limit. But, Directors, who have literally no reason to ever fear that they will ever be held accountable, or ever pay a personal fine, or frankly, even have to pay for a legal defense if it ever did go to court - because D&O Insurance provides a cutthroat legal defense that will grind even the so-called wealthy into submission 99% of the time.

Because the burden is on the homeowner and solely the homeowner to enforce the rules on Directors, and because the legal expense is so extraordinary with no cap whatsoever (and the prospect of cases being dismissed because "substantial compliance" means that the Court can literally judge a Plaintiff's case as "petty" - not worth enforcing!), it means that any Director who does bother to learn this whole system of governance is then unleashed to have no fear of any accountability if they break the rules - which they are allowed to be ignorant of anyways because of the BJR!

I mean, I have always hoped to meet one day the genius who sold this system to millions of Americans as some way to protect their home values. As Ms. Van Dorn stated, I think we are beginning to see the Emperor Wears No Clothes.

The issue of strict compliance for homeowners, while this bizarre system of "substantial compliance" per Loonan v. Woodley (1994) creates this bizarre contrast on enforcement of the SAME set of documents. If you are a Director, you can be both ignorant or partially comply - with zero consequences.

The industry says, on the other hand, if there are CAPs on fines (not no fines, just caps), then people will get away with ignoring all the rules because $500 is nothing to some huge majority of the 2.7 million Coloradoans livings in HOAs. I think it is possible that this is psychological projection from wealthy attorneys who have been collecting legal fees from HOA homeowners that majority of their adult lives.

The rest of us commoners, however, think $500 is a huge sum. And, perhaps those of us who do are the actual majority. Because majority logic is another lynchpin of Industry logic. If it's not happening to the majority, then it doesn't matter.

LIterally, if a fine of $1000 is an appropriate deterrent for bad faith actions from homeowners, then there MUST be SOME deterrent for bad faith or even ignorant actions by volunteer directors. Because in my experience, a Director is equally likely to be a scofflaw - and it is more logical that a Board that does not follow the rules has a bigger detrimental effect on home values than any homeowner who has left their garbage can out all night.

It's just disingenuous to hear the industry folks on this panel repeat the same tired catch-phrases that they've used in stake holding for years. Even when their logic is unable to withstand simple logic tests.

Ms. Van Dorn repeatedly said she was disappointed that consensus could not be found on matters as simple as this. If the rules apply strictly to homeowners, and there's no reason for leniency on garbage cans cause it is in the rules, then how is it that a Board can be found guilty of manipulating an election (to preserve their own power), and not be held accountable? I mean, shouldn't there be a fine for being found guilty of violating CCIOA and holding an invalid election to be at least in proportion with being fined $500 for leaving your garbage can out?

If we can't get at least agreement that this is a problem from the industry representatives, then I doubt the sincerity of their participation in this HOA Task Force. This is supposed to be about HOMEOWNER RIGHTS, and they are spending hours of our time preaching to us about how we agreed to rules that, in many cases, were changed long after we bought homes.

And, for those of us who took enforcement on the Board seriously, we are treated as though we are not just the enemy, but as "harassers" who need to have fines and legal fees aimed at us for enforcing the rules on Boards.

If this Task Force is unwilling to take a hard look at this, then it is a huge missed opportunity. I wish the moderators would have the courage to call these things out. Not every opinion voiced here is rooted in facts or even logic. Bothsiderism is not an asset, but a liability.

I hope to see a change at the next meeting, the issue of balanced compliance standards for homeowners and Directors addressed explicitly.