Nearly half of Colorado lives in neighborhoods governed by homeowners associations, which have the authority to levy fines and even file for foreclosure against residents. Yet the state has done little to ensure that HOAs are not abusing this power.
Last year, when the Colorado legislature passed a bill aimed at protecting residents in disputes with their homeowners associations, lawmakers had one key goal in mind: reducing the number of foreclosures filed by HOAs.
So far, the reform appears to have had its intended effect. An analysis of state court data by Rocky Mountain PBS and ProPublica shows that HOAs filed 47 foreclosure cases in the nearly six months between Aug. 10, when the law took effect, and the end of January. That’s a significant drop from the same period for the previous four years, when an average of 281 cases per year were filed.
During the 10 weeks between the reform bill’s signing and its implementation, HOAs appear to have been in a rush to start foreclosure motions, filing 151 cases, compared to an average of 98 cases per year in the same 10-week period for the previous four years.
“We see that this is working. It’s preventing people from being foreclosed on, and people are being able to stay in their homes,” said Rep. Naquetta Ricks, an Aurora Democrat who cosponsored the bill.
But advocates and some lawmakers say more needs to be done to address lingering problems with how HOAs are run in Colorado. For one thing, the drop in foreclosure filings might be only temporary. HOA attorneys told Rocky Mountain PBS and ProPublica that the drop may be due to HOAs restarting their collection efforts — the law requires most HOAs to update their collection policies, provide homeowners with several notifications about delinquencies and offer longer payment plans. Once they’ve complied with the new rules, HOAs may decide to restart their foreclosure efforts.
Ricks said she plans to introduce a number of fixes during the current legislative session aimed at undoing some “unintended consequences” of last year’s reform bill. She said the changes would primarily be focused on the aspects of the law that dictated how HOAs can enforce violations of their community rules with fines. The law, for instance, required HOAs to give homeowners more time to fix violations before fining them, but Ricks is considering a proposal that allows HOAs to impose more immediate penalties for acute problems, such as noise nuisances.
“I think the covenant violation side of [the new law] was mangled. … It didn’t appreciate the many different types of violations that could exist,” HOA attorney David Graf said. “I think we need to streamline some of the procedural aspects of it while trying to retain as much owner protection as we can.”
To study if other HOA reforms may be needed, Rep. Brianna Titone, an Arvada Democrat, cosponsored a bill to create an HOA task force that would take a deeper look at issues like foreclosure, fines and communications practices, taking into account the perspective of homeowners. Titone said she hopes the task force can also explore ways to keep HOA disputes out of court.
“What we’re really after here is just trying to figure out the fairest way of keeping efficiency in the process of HOAs, but giving people who are in HOAs relief when they need it,” Titone said. “I think this is something we should have done a long time ago.”