COLORADO NEEDS AN HOA COURT
POSTED: 04/11/2012 01:00:00 AM MDT
By Joe Felice
Last November, the Colorado Legislative Action Committee (CLAC) of the Community Associations Institute (CAI) submitted a "sunrise" review application to the Colorado Department of Regulatory Agencies (DORA) requesting a determination as to whether community-association managers should be licensed in our state. The action taken by CLAC was unilateral. It was done without seeking the input of the general membership, and it completely caught the local chapter off guard. Community managers and homeowners were far from unanimous in their support for this type of regulation.
Following a thorough, five-month study and investigation of this issue, and after receiving input from many affected parties, Brian Tobias and the rest of the staff at DORA accurately concluded that an alternative to manager licensing would be more appropriate and effective in the goal of protecting the public. That alternative is regulation of management companies. This conclusion was spot-on, and correctly identified each of the issues that had been raised by CLAC. In fact, most people outside of CLAC were impressed with DORA's ability to identify all the problems and devise a solution to minimize them. It is important to note that DORA recommended this regulation instead of manager licensing. DORA felt that manager licensing would not accomplish its goals, but regulation of management companies would.
CLAC had frequently and consistently stated that it would not pursue manager licensing if DORA did not recommend it. Now, however, CLAC disingenuously states that it does not agree with DORA's findings, and will instead pursue manager licensing at a later date, presumably in 2013. Many have called upon CLAC to accept DORA's report and actively pursue its recommendation of regulation of management companies. This may consist of either licensing or accreditation.
In its sunrise review, DORA noted that harm can be, and often is, inflicted by management company employees who are not necessarily community managers. Therefore, it is reasonable to regulate management companies. This would impose greater accountability for back-office functions, such as accounting, banking and reporting.
Additionally, any regulation could require management companies to ensure that the property managers they employ are properly trained. All of the types of harm identified by CLAC could be addressed by placing responsibility on management companies for the people they employ. "It is logical to conclude that the best course of action is to regulate management companies."
Management companies are ultimately responsible to their clients for the acts, errors and omissions of all of their employees, including, but not limited to, community managers. "The affirmative obligation to employ qualified people, including, but not limited to community managers, should rest with the management company." Regulation of the management companies would provide a clear line of accountability, both to those with whom the management companies contract, and with the regulating entity.
CLAC raises a false concern that regulation of management companies would not apply to individual, independent managers (of which there are few in Colorado), who are not employees of management companies. However, this concern is groundless, as independent mangers could easily be treated a "company" of one for the purposes of any legislation that would create some type of regulation. In fact, the cost to the management company should be based upon the size of the company (i.e., either the number of associations it manages or the number of people it employs). This all seems simple enough. Regardless of what the legislature ultimately decides to do, and in addition to any type of regulation, what is sorely needed is an administrative-hearing process — a type of "HOA court," if you will — in which problems could be addressed and resolved expeditiously and inexpensively, without the need for hiring attorneys and going to civil court. This process would be available to hear cases of alleged violation of state laws, community governing documents and written rules only, not cases of poor "customer service." Complaints could be brought by any aggrieved party to an HOA dispute, and an independent solution could be devised. If either party is dissatisfied with the outcome, that party would still retain its rights to pursue litigation.
However, once the proposed solution has been accepted by the parties, it would be binding upon them. This seems like a reasonable manner in which to resolve disputes within community associations. It is, in the end, what aggrieved homeowners really desire: a chance to have their say, to have someone hear their complaints, and to reach an independent resolution to the problems. Such a process for resolution would break ground and place Colorado squarely in the forefront in the HOA industry. However, it has not occurred to CLAC to recommend or support this type of resolution. We are left to wonder why this is so.
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