Is An HOA a Good Thing In Colorado?
If you live in a condominium, townhome, or a home regulated by a homeowners association, also called an HOA, you may ask yourself, is an HOA a good thing in Colorado—or wherever you live. This article looks at HOAs from the perspective of how HOA legislation translates into law and the responsibility of HOA boards. Additionally, you’ll find links to past and current legislation in Denver and the state of Colorado regarding HOAs plus a list of questions to ask if you are considering living in an HOA community.
Sam Wilson Realtor and Past HOA Board Member Shares Thoughts on Homeowners Associations
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Learn about HOA Disclosures in Real Estate Contracts
To set the foundation for answering the question is an HOA a good thing in Colorado, advance your knowledge by reading Section 7 of the Contract to Buy and Sell Real Estate (Residential) in the state of Colorado. If you currently live in an HOA community, purchasing your condo, townhome, or single-family home was guided by the disclosures in this real estate contract.
Every HOA Issue Has Two Sides
As with every issue, like is an HOA a good thing in Colorado, consumers will say yes and no. All issues have two sides to the story that should be thoroughly considered, researched, and vetted when looking at living in common interest communities.
Not all consumers take an ongoing interest in politics except for what they see and hear on the news. In simple terms, politics is how people living in groups make decisions and set policy.
Policies are guided and laws influenced by special interest groups, corporations, and their lobbyists with financial backing who may not prioritize the best interests of consumers. Taking this to the most basic level and relating this to HOA management, many HOA boards are staffed by community residents who are volunteers.
In addition, some HOA boards are members of a paid organization. Some HOA boards hire an HOA management company to assist with much of the day-to-day work.
Conflicting Interests of Residents in HOA Communities
Not all residents in HOAs have similar interests in maintaining or improving the community. These interests include property maintenance which is supported by accumulating financial reserves for future needs like roof replacements, paint, and other significant repairs in addition to quarterly HOA fees called dues.
Quarterly dues may include everyday items like water and sewer, basic cable and internet, lawn care, snow removal, maintaining tennis courts, swimming pools, clubhouses, exercise rooms, and maintaining common areas. A special assessment may be issued to pay for major property repairs in some years.
In addition to a monthly mortgage and quarterly dues, these costs are often where relationships in an HOA community become conflicted. Depending on the vote of residents, HOA board members can be constricted from doing what is best for the property as the result of residents who can pay their mortgage but vote against property repairs or assessments because of the additional costs.
This is when many HOA residents become frustrated and ask, is an HOA a good thing? What happens when the property is not be maintained or improved because some residents refuse or cannot contribute financially? Can a lack of resident support lead to declining property values?
HOA Covenants and Restrictions
Owners in HOA communities are subject to covenants and restrictions. All homeowners associations must have governing documents, records of expenses, annual meeting minutes, liability insurance, and other documents that follow the rules and regulations for HOA management.
How state legislation for HOAs is put into law may provide insight into how and why smaller HOA boards and organizations struggle. Imagine living in an HOA of 12 units versus 120 units and the complexity of supporting common interests with expenses spread across a small number of owners versus a larger number of owners.
For example, what happens when the goal of the HOA board is to keep dues and reserve payments as low as possible without planning for future roof replacements and projects? When residents vote against exterior maintenance plans for paint, siding, or window replacement projects due to the cost, what happens?
Who takes responsibility when the exterior of the building and the foundation begin to decay? All great questions when considering if living in an HOA community is a good thing.
How HOA Legislation Becomes Law
How do rules or legislation changes occur in any state without the general public realizing what’s at state before it’s time to vote? Bringing a bill to a vote and becoming a law begins with an idea.
All of the formalized ideas have sponsors who are state Representatives or Senators. The ideas are brought forward by consumer groups, special interest groups, and lobbyists for industries like real estate, healthcare, and pharmaceuticals.
Consumers Can’t Compete With The Financial Power of Lobbying Groups
According to Statistica, in 2020, the National Association of Realtors spent 84.1 million dollars, followed by the U.S. Chamber of Commerce, $81.9, Pharmaceutical Research & Manufacturers of America $25.9, the American Hospital Association $23.6, Blue Cross/Blue Shield $22.6 and Facebook $19.6. One might wonder why a social media platform needs lobbyists? But that’s a topic for another day.
So imagine that your HOA board is made up of state of Colorado Representatives or Senators. Which side do they take when attempting to balance the interests of small communities with a few owners, larger communities with many owners, and lobbying groups offering financial and non-financial incentives.
Homeowners association management represents a balancing act of fiduciary responsibility to maintain the community and property values while attempting to keep residents happy. If this is the case, why are elected officials not required to have a fiduciary responsibility to the public they represent?
If you weren’t aware, Realtors have a fiduciary responsibility to the clients they represent, although some take this commitment more seriously than others.
Who Do Special Interest Groups Work For?
Special interest groups fund the campaigns of legislators. What happens when legislators lack experience in HOA management but receive funding from the National Association of Realtors? Who are the legislators representing homeowners or NAR or other special interest groups who fund their campaigns?
All great questions to ask. How many legislators supporting HOA bills live in an HOA and experience the pros and cons consumers face? The same question relates to other areas where legislation is controversial, including the pharmaceutical industry and healthcare.
Legislators who advance bills are on committees. Examples of committees in the state of Colorado include local government, transportation, business affairs and labor, energy and environment, and others.
If you’re curious, read about the legislative process and How are Laws Made. This link presents the process of lawmaking from a big picture view in the United States. Learn more about how your state operates by researching your local government.
Past and Current State of Colorado Legislation Regarding HOAs
If you are curious about all bills passed specifically to HOA legislation you can learn more by looking at the Colorado General Assembly List of HOA Bills.
In 2022 there are five HOA bills up for consideration. Here’s a list of historical bills and bills for 2022. Click on the name of each bill to read the background about each bill and learn about the legislative sponsors. .
HB22-1137 Homeowners’ Association Board Accountability and Transparency
HB22-1040 Home Owners’ Reasonable Access to Common Areas
SB22-060 Limit Home Owners’ Association Fee Increases For Common Elements
SB22-059 Home Owners’ Association Voting Proxy Limitations
HB22-1020 Customer Right To Use Energy
Is an HOA a Good Thing in Colorado?
Last but not least is a shortlist for homebuyers interested in living in an HOA community:
- Request a copy of the bylaws, rules, and regulations of the HOA
- Ask for a ten-year history of dues, reserves, and special assessments
- Ask for copies of the annual board meeting minutes from the last five years
- Inquire about the previous replacement date of the roof, HVAC, and other large maintenance items that may result in a special assessment
- Talk to neighbors in the community to ask their opinion of the HOA board management and governance and their experience living in the community
- Request police records for the community to avoid any unexpected surprises
- Have the property you consider buying inspected by a professional familiar with construction, electrical, plumbing, etc.
- Ask about building codes in Denver and the state of Colorado. For example, older condos or townhomes may be constructed with firewalls. Imagine having a flood or a fire and your unit open to your neighbor’s unit until repairs can be made.
- Look at the common areas to see if they are maintained or in need of repairs
Working with a Real Estate Specialist Who Provides Home Buyers and Sellers With Peace of Mind
Buying and selling a home is a major financial decision. Unfortunately, it’s usually not possible for the average consumer to keep up with all aspects of real estate. This is why using a real estate specialist like Sam Wilson and the Sam Wilson Home Selling Team gives homebuyers and home sellers the information they need to know when making one of the most critical decisions of their lives.
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