HOA Legi-Slate

Junior Lien Bill Heard in Senate Committee

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:

Do you think the ability of associations to assign lien rights is an important collections tool?
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?

Senate Bill Addresses Junior Liens

On January 20th, Senate Bill 93 was introduced in the Colorado General Assembly by Senator Lundberg. This bill would require all junior lienors to accept tender of payment of the junior lien amount from the purchaser of the property at a public trustee foreclosure sale. In the association context, if a purchaser tenders payment to an association to satisfy the association's lien - that payment must be accepted, would extinguish the association's lien and eliminate the association's right to redeem the property or assign the lien.

Under the current version of the legislation, associations are required to:

Submit with the notice of intent to redeem, a signed statement of the amount payable to the association on the association's lien;
Accept payment of the lien amount which is tendered by the purchaser within 10 business days following the public trustee foreclosure sale;
Execute a release of lien upon receiving tender of payment.

This bill, as currently written, would likely impact the feasibility and time-frames of associations assigning their lien rights to investors.

We will keep you updated on the status of SB 93 as it progresses through the legislative process.

Legislative Session Off to Quick Start on Issues Important to Associations

It has been less than one week since the Colorado General Assembly convened for the 2010 legislative session and at least four bills of interest to associations have already been introduced.

House Bill 10-1084: Introduced in the House by Representative Acree, this legislation promotes the ability of individuals to go onto the unoccupied property of another to trim or water vegetation and to remove accumulated weeds, brush, trash, or debris from the property.

House Bill 10-1086: Introduced in the House by Representative Curry, this bill prevents attractive nuisance claims from being brought against landowners for injuries and damages related to the use of land for recreational purposes by the public and from facilities relating to water rights.

House Bill 10-1118: Introduced in the House by Representative James Kerr, this legislation gives Boards of County Commissioners the authority to regulate distressed real property.

Senate Bill 10-045: Introduced in the Senate by Senator Morse, this bill requires lenders to work with homeowners to attempt to find mutually acceptable agreements to avoid foreclosures.

To learn more about these bills and to stay in the loop on the latest legislation of interest to associations, check out our Legislative Tracking Report on a routine basis.

2010 Colorado Legislative Tracking Report

Ready, Get Set, Go!

The Colorado General Assembly convened today for the 2010 legislative session. To what extent associations will be the subject of legislation remains to be seen. However, we do know this much - bad press and complaints to legislators about associations drive legislation. Do you think associations will be front and center again this legislative session? Tell us what you think.

HindmanSanchez remains committed to providing you with up-to-date information on legislation affecting associations. Keep your eye on HOA Legi-Slate for updates and information as it becomes available.

Units in Foreclosure Present Problems for Condominiums

What happens when utilities are turned off in the winter and the area experiences a freeze? Pipes burst of course. What happens when you own a unit in a condo and the unit above you is in foreclosure, the property has been abandoned, the utilities have been turned off and the area experiences a freeze? Pipes burst and the homeowners around and under the unit are forced to contend with flooding. 7 News reported on an elderly couple who were left to deal with the aftermath of such a water intrusion.

What can condominium associations do to try to minimize the risks of this happening?

Determine whether the association has any contact information for the owners who abandoned the unit and attempt to make contact with them to ensure the unit is winterized.
Inform the attorney handling the lender's foreclosure when a unit has been abandoned and ask that immediate steps be taken to winterize the unit.
Review the Declaration to determine if there is a provision which allows the association to enter the unit for inspection or emergency purposes. If so, seek legal guidance to determine whether the association has the authority to take remedial steps.

As reported recently on HOA Legi-Slate, the Governor is planning to have a bill introduced soon to deal with abandoned properties in foreclosure. Whether the legislation will address problems which arise in condos is yet to be determined.

New Year Resolutions for Boards

In addition to your personal new year resolutions - consider making resolutions for positive change in the communities you serve! Here are some ideas:

Take Stock of 2009. As a board, sit down and discuss what went well and not so well during the past year. Talk about what your board can do to improve in governing the association and commit to making positive changes.
Create Goals for 2010. Instead of flying by the seat of your pants, create goals for your board. Once your board has agreed upon goals for 2010 - identify benchmarks in reaching your goals, create timelines for benchmarks and identify who will be responsible for reaching them. Goals might include: building a sense of community; changing, adding or improving services to residents; facing tough financial challenges head-on and dealing with them.
Dust Off Governing Documents and Use Them. Locate the most recent version of the governing documents for your association, put them in a binder (or a paper bag if necessary), take them to every board meeting, consult them and comply with them. As a director - it's your fiduciary duty to comply with your governing documents. Enough said.

All of us at HindmanSanchez wish you a Happy New Year and look forward to partnering with you to create positive change in 2010!

Governor Ritter Unveils Abandoned Homes Legislation at Pre-Christmas Press Conference

On Tuesday, December 22nd, Governor Ritter appeared at a press conference held at the Clements Community Center in Lakewood to unveil legislation that will permit lenders to expedite the public trustee foreclosure sales of abandoned properties. Representative Dianne Primavera, Representative Jeanne Labuda and Senator Michael Johnston will sponsor the legislation.

The intent of the legislation is to cut down on the problems associated with abandoned properties which are being foreclosed upon. Governor Ritter noted that the negative consequences associated with these properties include blight, being a magnet for criminal activity and a reduction of property values in the neighborhoods where these properties are located.

Chad Otto, President of the Grant Ranch Master Homeowners Association, was introduced by Governor Ritter and spoke on the challenges that community associations face with abandoned properties. Mr. Otto described the difficulties associated with collecting unpaid assessments from the owners of these properties. He also addressed the problems associated with maintenance of lawns, shrubs and structures. Mr. Otto concurred with Governor Ritter's conclusion that the best way to protect property values is to get owners into these abandoned homes as quickly as possible.

This legislation will be introduced during the upcoming legislative session which begins on Wednesday, January 13, 2010. We will keep you up-to-date on this legislation as it proceeds through the legislative process.

4 Necessary Revisions to Your Collection Policy

Times are tough and collecting delinquent assessments has become even more difficult in many situations. As countless homeowners struggle to pay assessments, we are seeing more and more judges looking for ways to give owners “breaks” and looking at association policies with much greater scrutiny.

Over the past year we’ve recommended that these revisions be made to collection policies to better protect associations:

Indicate owners are responsible for payment of tracking fees, processing fees or other fees charged to the association by management companies, if any;
Make sure your interest and late fees do not equal more than 45% per annum as this is considered usury in Colorado;
Provide that if an owner communicates via email, text, fax, phone or any other method, the owner authorizes the association and its agents to communicate via the same method in the future;
Provide that owner consents to credit reports being pulled in the event the owner’s account is turned over for collection by the association to an attorney or agency.

If you’d like specific language for any of these additions or our assistance in modifying your collection policy, please contact one of our attorneys at 303-432-9999 or send us an email to hoalaw@hindmansanchez.com.

Higher Costs, Tougher Standards In Store For 2010 FHA Mortgage Financing

Last week HUD Secretary Shaun Donovan announced applicants seeking FHA financing are going to face higher costs and tougher credit standards. What does that mean for home buyers? Changes being proposed include higher down payments – currently 3.5% but could go as high as 5%; seller concessions cut to 3%; mortgage insurance premiums as high as 3% and a minimum acceptable FICO score not much lower than 620 (which is the score currently used by both Fannie Mae and Freddie Mac.)

In addition, Wells Fargo also announced changes to its’ FHA Condo criteria which went in to affect on 12/8/09. One item to note is “no more than 50% of the units are occupied by units other than the primary residents.” Does your condo association currently have a process to track rentals? How will your association answer this question on the form? There are many other questions that my be difficult to answer or a "wrong" answer could result in a loan being denied? If you'd like to know more about the new FHA guidelines see our checklist.

SB 09-87

Don’t forget that Senate Bill 09-087 (“SB09-87”) requires that all special districts must provide to their electors a notice containing certain basic information about the district by January 15^thof each year.

SB09-87 authorizes several methods by which a district can make its notice available to its constituents.

* Posting the information on the official website of the Special District. SDA members may have their notices posted on the SDA website at www.sdaco.org;

* Mail the notice to each household where one or more electors of the Special District resides;

* Include the notice as a prominent part of a newsletter, annual report, billing insert, letter, voter information card or other notice of election or informational mailing.

This notice must be filed with the county Clerk and Recorder and be available at special districts principal business office.

It's That Time Of Year - Holiday Decorations!

Starting the day after Thanksgiving, I settle in for my favorite neighborhood entertainment - watching the men in our culdesac begin the process of creating their outside holiday displays. I have watched men on ladders in howling winds stringing lights while simultaneously looking out of the corner of their eyes to see what their buddies are up to. I look forward to coming home in the evenings to see who has made an addition to their displays. I have also held onto my husband's belt loop while he teetered off the edge of the porch railing in the dark carefully placing a string of lights. Our homeowners association is alive with lights during the holiday season and I love it. However, I'm sure that not everyone in the community shares my sentiment.

The manner in which community associations address the issue of holiday decorations can be a touchy subject. If the governing documents of an association permit the regulation of holiday displays, it's essential that the regulations be reasonable. Holiday Decorations - Being Reasonable and Holiday Decorating: A Time to Build Community Spirit - Not Stomp on It provide guidance on how associations can reasonably regulate holiday displays in their communities.

Renewable Energy v. Aesthetics & Property Values

A homeowner living in a community association in Pitkin County is passionate about cutting his consumption of fossil fuels. As a result, he has been going through the approval process with his association to install solar panels on the roof of his house which will provide energy to heat his home and water. He is also planning to install a photovoltaic system in his yard that will consist of four free-standing poles with 12 solar panels. This system will be used to power his house, studio and apartment. The Aspen Times has reported the homeowner was granted a variance to install poles over the 10-foot limit and the County Commissioners will debate whether to permanently boost the overall height limitation from 10 to 16 feet.

It's hard to argue with the goals of this gentleman. In fact, it's well settled law in Colorado that associations cannot prohibit the installation of solar energy devices on property owned by an individual. However, associations are permitted to impose reasonable aesthetic restrictions on the dimensions, placement and external appearance of the solar panels that do not significantly increase the cost of the panels or decrease the performance or efficiency of the devices.

But just how far is too far in the community association context? Should associations be able to prohibit the placement of free-standing poles and panels in the yards of homeowners? Are roof-mounted solar energy systems enough? Should homeowners be able to have a voice in how their communities look? Will the development of large solar and wind farms ultimately render this debate moot? The one thing we know for sure - is time will tell.

New Federal Legislation Makes Receiverships Less Risky As A Collection Tool

The Protecting Tenants at Foreclosure Act, which went into effect on May 20, 2009, was designed to provide protections for tenants in the event of foreclosure. In the past, tenants had little or no right to retain their lease when their landlord lost the unit through foreclosure. The new law affords a greater notice period for eviction (increased to 90 days) and allows renters to stay for the remaining term of their lease except in the event that the new title holder intends to occupy the unit as a primary residence.

How does this effect community Associations? For one thing, it makes the collection remedy of receivership less risky than it has previously been. In the past, there was always a substantial risk that costs would be expended to get a receiver appointed, find a renter, and enter into a lease only to have that lease terminated prematurely by a foreclosure. Often the time frames proved too limiting to guaranty the Association would recoup its delinquent assessments and costs. Under the new law, in most cases where a bank forecloses, that tenant will be allowed to remain in the Unit until the lease term naturally expires. The receiver must enter into a valid lease with a tenant for a fair market rent. And if possible the receiver will want to try to enter into a lease term long enough to be sure the association recoups all or a majority of its delinquent assessments and costs.

Contact the knowledgeable collection attorneys at HindmanSanchez, P.C. for more information on receiverships.

New FHA Guideline Implementation Delayed Again

The FHA announced yesterday that it is once again delaying the implementation of the requirements found in Mortgagee Letter 2009-19 until December 7, 2009. As we posted previously, these new guidelines for condominium projects are likely to have a significant impact on condominium communities. FHA has indicated that revisions to the 2009-19 Letter will be forthcoming in the next two weeks and will offer leniencies because of current market conditions and provide clarification to some of the proposed new provisions. We will continue to monitor these new requirements.