Coming to the Neighborhood: Colorado Passes New HOA Laws

The Colorado legislature recently enacted several new laws that will significantly impact the conduct of homeowners’ associations (HOAs) across the state. These changes range from detailed procedures governing the collection of unpaid assessments, fines and fees, to limitations on the use of common elements. Almost as interesting are the bills that did not pass muster at the legislature this year. A summary of the key legislation that passed and failed is provided below.

New Laws Enacted by the Colorado Legislature

House Bill 22-1137 – Homeowners’ Association Board Accountability and Transparency

One of the landmark bills from this past legislative session amends Colo. Rev. Stat. § 38-33.3-209.5 and changes how an HOA may collect association assessments, fines or fees. The bill imposes detailed notice and procedural requirements for the imposition of certain fines and actions to enforce payment of any delinquencies.

Some of the major changes are summarized below, but this article is not intended to be an exhaustive description of all such changes and requirements, which are numerous. Careful examination of the revised statute is required.

• One of the bill’s standout features is the creation of a notice requirement. The HOA must first “contact” the unit owner regarding the delinquency of payment of any HOA assessments, fines, or fees before seeking to collect. There are several requirements and parameters for such contact. Under the new statute, an HOA may refer any delinquent account to a collection agency or attorney only if a majority of the executive board votes to refer the matter at a meeting conducted pursuant to Colo. Rev. Stat. § 38-33.3-308(4)(e). Thus, a community manager or property management company may not refer a delinquent account to a collection agency or attorney without the board’s approval.
• The bill introduces several new limitations on fines and fees that can be charged to HOA members.
• For violations that do not threaten public safety or health that the unit owner does not cure within the 30 days, the fine for such violation may not exceed $500. In addition, an HOA may no longer pursue foreclosure against a unit owner based solely on fines owed, whether for violations that threaten public safety or health or not.
• Unit owners now have an opportunity to cure a violation of the HOA’s governing documents, and the statute provides for a procedure that unit owners can follow to demonstrate that the violation has been cured. Upon cure, the HOA must provide a detailed notice to the unit owner that complies with the statute.
• The new statute provides that an HOA must adopt certain written policies and procedures regarding the imposition of fines and use of a collection agency or other legal action to collect unpaid assessments. Close examination of the statute is necessary to ensure compliance with these requirements.
• Probably one of the biggest changes is that the bill creates a private right of action for unit owners. An HOA may be subject to a civil suit for any violation of any foreclosure laws for a period of up to five years after the violation occurred. In such action, a court may award the unit owner damages up to $25,000 plus costs and reasonable attorneys’ fees if the violation is proven by a preponderance of the evidence.

House Bill 22-1139 – Homeowners’ Associations Cannot Regulate Use of Public Rights-of-Way

This bill amends Colo. Rev. Stat. § 38-33.3-106.5. It forbids any HOA from prohibiting the use of a public right-of-way that is in accordance with applicable laws and regulations. Thus, an HOA may not impose such restrictions on the use of public rights-of-way, through any declaration, bylaws, or other rules or regulations.

Colo. Rev. Stat. § 38-33.3-106.5 already barred HOAs from prohibiting certain speech-restrictions — such as patriotic, political, or religious expressions — including the displaying of a flag or religious item. The existing provision also forbade HOAs from prohibiting certain vehicle parking.

Senate Bill 22-059 – Homeowners’ Association Voting Proxy Limitations

This bill tweaks the existing language of Colo. Rev. Stat. § 38-33.3-310, which allows a unit owner in a common interest community to designate a proxy to vote on the unit owner’s behalf. The revised language clarifies that the 11-month duration of a proxy is the maximum duration, but the proxy may indicate an earlier termination date.

HB 22-1040 - Regulation of Use of Common Elements

Under Colo. Rev. Stat. § 38-33.3-302, HOAs may “regulate the use, maintenance, repair, replacement, and modification of common elements.” Under HB 22-1040, such regulations must comply with a new provision under Colo. Rev. Stat. § 38-33.3-302.5. Under that provision, an HOA must preserve and protect unit owners’ ability to use and enjoy the common elements under such HOA’s control, and cannot unreasonably restrict access to or enjoyment of such common elements. But, an HOA may restrict access to common elements for maintenance or modification if necessary and to (a) “[p]rotect the safety of any individuals, including unit owners, their guests, and individuals performing the maintenance, repair, replacement, or modification of the common element; or (b) [p]reserve the structural integrity or condition of a repair, replacement, or modification.” If such maintenance or modification will take more than 24 hours to complete, the HOA must provide notice to the unit owners per the Statute, which includes an explanation of the restricted use and an estimated time during which use will be restricted.

Unsuccessful Legislation

Almost as telling as the legislation that was passed during this session is the legislation that failed to become law. For instance, House Bill 22-1387, which concerned measures to ensure that an HOA has adequate reserve funds, passed the legislature, but was vetoed by the governor. The bill would have mandated that HOAs with major shared components prepare a reserve study and account for reserved funds in their annual budgets. In particular, declarants would have been required to disclose the study, along with the HOA’s budget, to potential purchasers, and provide funds as recommended in the study at the time they turned the property over to the HOA.

Other bills that failed included HB 22-1020, which would have prohibited a state agency, local government, or HOA from restricting a customer’s use of certain kinds of energy, and SB 22-060, which would have established a cap on any increase in fees charged for the use, rental or operation of common elements unless approved by a majority of the unit owners.

In conclusion, several laws were enacted by the legislature to address certain issues and to clarify others in regard to HOAs, while others were not enacted but contain information of interest to Colorado residents. These changes impact the collection of unpaid assessments, fees and fines, limitations on common element restrictions, and transparency regarding HOAs.

If you have questions or need help with any of the above considerations or others, please contact Rachel Burkhart, Carla Martin or Sharena Smith at Faegre Drinker.