HOA Legi-Slate

Associations Can Expect Increase in Costs of Litigation

Loura K. Sanchez — 2008-07-03T07:02:34-07:00

The Colorado legislature recently approved increased fees for courts effective July 1, 2008. These increases apply to the initial filing fee for a lawsuit as well as other key filings that may occur in a case. The increases range from $9.00 to $20.00 in county court matters and $15.00 to $204.00 in district court matters. The fees were increased to aid in the construction of the new Ralph L. Carr Justice Center in Denver.

Economy May Lead to Increased Claims of Discrimination

Loura K. Sanchez — 2008-06-27T09:52:54-07:00

Most associations are being affected by the economy in one way or another. The biggest consequence is an increase in account receivables. As associations struggle with ways to collect unpaid assessments it is important to remember that:

your collection policy must be followed
if your policy doesn’t allow for deviations it should be amended
if your policy allows for deviations make sure to document why the board is deviating from the policy.

Deviating from your collection policy – even if allowed- may lead to claims of discrimination. Two situations might be:

Association sues an owner with a Hispanic surname but doesn’t sue an owner with an Irish surname when both owners have similar balances;
Association doesn’t file a lien against builder or developer owned lots but does record a lien on other owners – many who fit within some protected class.

Think before you deviate…

Tax Credit for Wildfire Mitigation Measures

Loura K. Sanchez — 2008-06-25T15:04:39-07:00

Beginning with taxes for 2009, Colorado landowners are entitled to subtract 50% of the costs of wildfire mitigation measures, up to $2500, from federal taxable income. This new law requires that the wildfire mitigation measures be performed in a “wildland-urban interface area” and the plan must be authorized by local government within the interface area. This is just one more step towards the supporting of fire mitigation efforts as set forth in C.R.S. 38-33.3-106.5 (1)(e).

Are You Aware of the Questionable Employment Tax Practice Initiative (QTEP) Implemented By the IRS?

Loura K. Sanchez — 2008-06-18T11:54:20-07:00

Under QETP, the IRS and 29 state agencies have agreed to share information through a centralized database in an attempt to share resources and encourage businesses to comply with federal and state employment tax requirements. The intent is to disincentivise businesses from classifying workers as independent contractors to avoid payroll tax benefits, and workers’ compensation insurance. Auditors will be looking closely at independent contractor agreements and sharing information via the database.

The difference between an employee and an independent contractor lies in your ability as owner or manager to control how a worker performs the job. If you have the right to direct and control the worker’s job, the IRS says the worker is an employee even if you and the worker have agreed other wise. Key factors include:

Amount of training provided.
Amount of supervision needed.
Compensation method (by the job or by the hour).
Whether the worker’s expenses are reimbursed .
Who furnishes the equipment or “tools of the trade.”
How the worker can be terminated.

Protecting the Tree Canopy Or Punishment?

HindmanSanchez — 2008-06-13T09:06:38-07:00

In our post on June 9th, we discussed the fines some homeowners could face for failing to care for trees located in the public right-of-way. Now the Denver City Council, at a meeting on Tuesday, has cautioned a representative from the Parks and Recreation Department to “take it easy with the fines.” According to an article in the Rocky Mountain News, city officials are worried the fines will be burdensome to some homeowners and actually have the opposite effect – discourage people from planting new trees. On the flipside, it’s a law that has been on the books for 50 years and the Parks and Recreation Department wants the authority to move forward with enforcing it to protect the tree canopy as well as pedestrians and traffic from falling trees. The majority of the citations are given for unhealthy, dead or dangerous trees. So, is it punitive? Or can it help to educate homeowners of their responsibilities in maintaining their communities?

Take Care Of Your Trees Or You Could Pay

Trisha K. Harris — 2008-06-09T10:06:48-07:00

Per a recent article in the Denver Post, property owners in Denver who fail to care for trees located in the public right-of-way in front of their homes could face fines ranging from $150 to $999. The public right-of-way is the strip of land between the sidewalk and the curb, sometimes called the “tree lawn.” The goal of the city is to keep trees in the community through proper maintenance. Sometimes, because this right-of-way is dedicated to the city, an association may not have much control over the maintenance of the area. This ordinance will give associations one more avenue, through city enforcement, to ensure their communities are well maintained and preserved.

Is Reserve Legislation Next in Colorado?

Loura K. Sanchez — 2008-05-28T10:26:16-07:00

We are all aware that what happens on the west coast and east coast eventually makes it way to Colorado. Another example may be legislation regarding reserve studies and reserve funding. On June 12, 2008, all residential condominium associations in Washington will be required to have a reserve study, update it annually and have a visual inspection of the community every three years by a reserve study professional. While the new law does not REQUIRE a reserve account it does encourage it and makes it mandatory that associations disclose, as a part of sales, the reserve study and whether a reserve account exists.

Washington joins only 5 other states with statutory requirements related to reserves. This new law, reports the Seattle Times, will uncover “the dirty little secret of the condo world -- that most condos are severely under funded.” Legislators who supported the bill contend that oversight was necessary as the only relief has been litigation against association management companies and anyone connected with the purchase of a condominium.

Help Us Put the "Community" in Community Associations

Loura K. Sanchez — 2008-05-23T11:15:20-07:00

In order to help our clients in Weld county who are victims of yesterday's tornados, HindmanSanchez is collecting essentials for delivery next Wednesday, May 28, 2008. Our hope is to deliver basic toiletries, bottled water, hand wipes, pet food, trash bags, gloves, etc. to associations which sustained damage to their homes and common areas. If you would like to contribute please drop off your contributions to our office by Tuesday, May 27 at 5:00 pm. Or, if you'd prefer to send us a check we will purchase items on your behalf. We will recognize all contributions on our website.

Thank you for your help in strengthening Colorado associations.

HindmanSanchez P.C.
"Strength in Association"

Flying the American Flag in HOAs

Molly Foley-Healy — 2008-05-19T10:56:00-07:00

With Memorial Day, Flag Day and the 4th of July fast approaching, associations in Colorado should be aware that the Colorado Common Interest Ownership Act ("CCIOA") prohibits associations from banning homeowners from displaying the American flag on the homeowner's property, in a window or on an adjoining balcony. However, Colorado does permit associations to adopt reasonable rules regulating the placement and manner of displaying the flag, including regulating the size and location of flags and flagpoles.

Associations should be careful to ensure that rules regulating the display of the American flag are reasonable and do not effectively prohibit the ability of residents to express their patriotism. Here are a couple of examples of restrictions that should past muster in most communities:

Restrictions on the Size of the American Flag

Permitting residents to fly the standard size American flag (3X5 foot) would no doubt be deemed reasonable. Prohibiting residents from flying massive flags on their condominium balconies or in small yards that are commonly found in townhome communities - should also constitute a reasonable regulation.

Illumination of the American Flag

The Federal Flag Code permits the American flag to be displayed 24 hours a day if properly illuminated during hours of darkness. It would be reasonable for associations to regulate the method of illumination to ensure that flood lights are not lighting the yards or homes of neighbors at night.

We are available to assist associations with reviewing and drafting rules regulating the flying of the American flag to ensure compliance with CCIOA.

Study Looks at Foreclosures in Denver

Eric R. McLennan — 2008-05-14T16:12:05-07:00

A recent study “Understanding Mortgage Foreclosures in Denver”, conducted by the Office of Economic Development (OED) of the City and County of Denver, confirms what we have known for some time. The rate of houses in our communities going into foreclosure has skyrocketed. Between 2000 and 2006, the number of foreclosure filings in Denver alone increased more than four-fold, from 917 to 4,745.

The OED study provides a wealth of statistics and information. However, it falls short of proposing the definitive solution to the problem. As Americans we are indoctrinated with the assumption that purchasing a home is the safest investment one can make in one’s lifetime. Today that may not always be the case. What is the cause of the current foreclosure crisis in our communities? Is it the fault of predatory lenders? Are the uneducated and financially unaware buyers to blame? I submit that the solution can be found within.

Living within one’s means is an invaluable survival tool in the current economy. An anonymous quote found in the OED study sums up the way this tool is applied to the purchase and financing of real property: “Fall in love with the loan and not the property.” If you are looking to buy another home or investment property, do your homework. Ask questions if you do not understand the paperwork the lender has provided to you. Shop around for a better deal. No one has your best interest at heart more than you.

SB 1135 Signed Into Law

David A. Firmin — 2008-05-12T08:43:49-07:00

SB 1135, just signed into law by Governor Ritter has established a new requirement mandating that covenant violation hearings be adjudicated by an "impartial decision maker". This law modifies most association's covenant enforcement policies limiting who may participate in enforcement hearings. Existing Board members are not disqualified from being impartial decisions m akers so long as they do not have an interest in the outcome of the hearing. Disqualifying situations may include situations in which a board member is a neighbor, has a personal history with the person in subject to enforcement. Both positive and negative history would disqualify the Director.

To be an impartial decision maker, the board members should not have any interest, either personally or financially with the outcome of the violation hearing. Board members having the above conflicts should abstain from the proceedings. We can assist in making any modifications that may be required to bring a covenant enforcement policy into compliance with the new law.

Manager Licensing Continues to be Trend

Loura K. Sanchez — 2008-05-09T14:00:50-07:00

The nationwide trend of state legislators imposing some form of manager licensing is continuing with Virginia. A bill recently approved by the Virginia General Assembly will go into law on July 1, 2008, if signed by the governor. This bill allows managers to meet licensing standards by holding certification and designations awarded by CAI and NBC-CAM. The bill also creates an ombudsman system, similar to the Florida model, for handling homeowner complaints.

If this is the trend, then perhaps it is advisable for managers and management companies to push to quickly obtain PCAM, CMCA and AMS designations to be “ahead of the curve” if such legislation comes to Colorado?

More Info on Energy Bill

Loura K. Sanchez — 2008-04-30T08:49:07-07:00

The approval of HB 08-1270 has caused us all to be more aware of energy efficiency issues. Is your association doing what it can to reduce energy consumption? Did you know that associations may be available for tax credits of 30% for installing solar devices? The average time to recoup the cost of a solar system to heat your community pool maybe as little of 5 years and loans may be available to make such purchases through banks like Community Association Banc.

In addition, the Denver Water Board offers rebates for the installation of rain sensors or sub-meters and Excel Energy also has various energy efficiency programs with financial incentives available.

Fannie Mae Announcement 08-01 Results in New Underwriting Guidelines in Condominium Communities

Loura K. Sanchez — 2008-04-28T08:56:44-07:00

Fannie Mae Announcement 08-01 became effective on March 1, 2008. The lengthy document provides among many things, that each time a loan is submitted to Fannie Mae by a Lender in a condominium community the lender must warrant that: 1) the project meets all of the applicable eligibility requirements including the new legal, budget and delinquent account requirements that were set forth in Announcement 07-18; and 2) the Lender isn't aware of any change in circumstances that would result in the project not satisfying Fannie Mae's eligibility criteria.

The project eligibility requirements set forth in Announcement 07-18, require that:

1) no more than 15% of the units may be more than one month delinquent;

2) the association budget must have funding for reserves equal to at least 10% of the budget and;

3) the association budget must provide adequate funding for insurance deductible amounts.

These requirements may be impossible for some associations to meet given today's economy and the ever increasing pressure to keep assessments low by not funding reserves. However, this may be much to do about nothing and we may not seen any actual impact on associations. Several years ago Fannie Mae issued an announcement that indicated they would not buy a loan if the association was involved in litigation. This type of broad limitation could have resulted in most loans getting denied just because the association had a pending collection case. However, Fannie Mae turned its head and said "that's not what we really meant."

One also has to wonder whether we will see modifications to Lender Questionnaires as they attempt to comply with this issue. I am not aware of any changes at this time, but with the current sub prime lending issues and lenders being under great scrutiny from the federal government and Wall Street, they may want to improve their image by tightening their processes and attempting to shift risks to others. If so, adding questions of the association addressing these issues will be likely. So be on the lookout for them.

As with many federal laws, you question whether their measurement tools are indicative of anything - including the financial viability of the association. If an association doesn't have monthly assessments but rather annual or quarterly, how do you answer whether more than 15% of the units are more than one month delinquent? If an association has a line item for reserve in the budget but never makes the contribution, how does that help the financial stability of the association? If the association has no capital improvement for which it is responsible are reserves of 10% still required? If an association can borrow to cover reserves expenses or insurance deductibles does that matter? If the payment of insurance deductibles has been allocated to owners, does the association still have to have money budgeting for these deductibles?

After reading this, you may think I have more questions than answers ... that is probably true. If you want to try and find the answers click here to view the recent announcement.

Governor Ritter Signs Energy Bill Into Law

Molly Foley-Healy — 2008-04-25T12:10:30-07:00

Yesterday Governor Ritter signed HB 1270 into law. As you know, this new law governs the installation of renewable energy generation devices and energy efficiency measures in homeowners associations. The effective date of the new law is contingent upon when the Colorado General Assembly adjourns - but is expected for sometime in early August. We will inform you when the exact effective date is know. To learn more about steps associations should take to begin preparing to comply with the new law, we invite you to visit our homepage at www.hindmansanchez.com.