HOA Legi-Slate

On Monday, February 1st, the Colorado Senate Committee on Business, Labor and Technology heard testimony on Senate Bill 93 which we discussed in our January 25th posting on HOA Legi-Slate.  In short, the bill would require an association - or an investor who was assigned the association's lien rights - to accept payment of the lien by the purchaser of the property following a public trustee foreclosure sale.  Payment of the lien would act to extinguish the redemption rights on the lien.   

Testimony on the bill included assertions that associations are essentially auctioning off these lien rights to the highest bidders and are making money hand-over-fist.  There was also testimony that the investors who purchase these lien rights are unscrupulous in driving down the purchase price of properties at foreclosure sales - thereby reducing their costs to redeem.

In addition to considering the remedies outlined in the legislation, Senators kicked around the idea of extinguishing the redemption rights of all junior lienors and to require them to protect their liens by bidding at the foreclosure sale.  Obviously, requiring an association to bid on property at a foreclosure sale to protect the association's lien would be a horrendous result.  The bill was ultimately tabled by the Committee and Senator Lundberg was directed to meet with stakeholders to hammer-out a mutually acceptable solution.  

Tell us what you think:

1. Do you think the ability of associations to assign lien rights is an important collections tool?
2. Would you support the termination of redemption rights which would require associations to bid on the property at a foreclosure sale to protect the value of the association's lien?

I am currently on an HOA board of directors. That said, I believe that many boards are led to believe that foreclosure is the best option by their managing agents, and their CAI lawyers.

I believe that a junior lien holder should not have the ability to foreclose for amounts less than $10,000. Secondly, I believe that foreclosure should be an option only available after other alternatives have been attempted. Alternatives MUST include:
- Mediation
- Judgment by a court seeking direct payment
- Wage garnishments as approved by a court

Only after these methods have been exhausted, should foreclosure be an option.

Additionally, total legal and late fees should not exceed 50% of the total bill. It is not uncommon for management agencies and their CAI lawyers to add several thousand in fees, where the original HOA fee was only $300 or $400.

Without some common sense, management companies, as backed by their CAI lawyer / lobbyists are pushing HOA boards into actions that hurt everyone.