Colorado HOA legislation – manager licensing, xeriscape (March 2019)

By Deborah Goonan, Independent American Communities

Highlights of two important HOA-governed, common interest community bills in Colorado Legislature: Extension of manager licensing and xeriscaping of limited common elements.

HOA property manager licensing law

The Legislature is considering an extension of community association manager licensing, which became active in 2013, under the “COLORADO COMMON INTEREST OWNERSHIP ACT” (CCIOA), ARTICLE 33.3 OF TITLE 38.

As previously explained here on IAC, July 2018 was the start of a sunset process for licensure of community association managers. If no legislative extension is enacted this session, the manager licensing requirement will expire as of July 1, 2019.

Efforts in 2018 session

Last year, HB18-1175 was introduced to extend manager licensing for another 5 years, until 2023. The bill was considered in the House, where it was amended with new requirements for licensure qualifications, and also allows for an “apprentice” to a manager — a management or clerical assistant without authorization to handle association money — to work without a license.

The amended version of the bill passed in the House on March 23, 2018, with recorded votes of 38-24. On April 4, 2018, the Senate Committee on Finance voted to postpone consideration of the bill indefinitely.

2019 Session

This year, HB19-1212 seeks to extend licensing of community association managers (CAMs) under the Department of Real Estate, through Augst 31, 2024.

As stated in the official bill summary, HB19-1212

…recreates and reenacts the CAM licensing program and the duties and responsibilities of the division of real estate and its director with regard to CAM licensing, as they existed on June 30, 2018, with amendments reflecting an extended sunset date of September 1, 2024

This year’s version has several notable changes:

First, the bill defines community association “apprentices” and the licensing exceptions for employees performing ministerial or clerical tasks. It also allows reduced standards for supervision of apprentices.

Specifically, the bill states:

COMMUNITY ASSOCIATION MANAGEMENT” DOES NOT MEAN THE PERFORMANCE OF ANY CLERICAL, MINISTERIAL, ACCOUNTING, OR MAINTENANCE FUNCTION

Second, the bill would require the Director to “specify acceptable credentials” for licensure by rule, eliminating the “automatic” licensure of certain credentialed managers.

Third, and most notably, the current bill would create a 7-member advisory committee “to make recommendations to the director of the division of real estate regarding changes to the rules, adoption of guidelines and processes for the handling of complaints, and other matters on which the director seeks input.”

But, to use a cliché, the Devil is in the details.

CAM licensure advisory committee

That advisory committee would consist of volunteers, who must be residents of Colorado, appointed by the Director of the Division of Real Estate.

Although the committee would have no direct enforcement power, it would have much influence over rule making.

Here’s who would serve on the advisory committee:

  • One (1) unit owner who has not a served as a board member or worked as a manager for at least one year prior to appointment
  • One (1) unit owner who has served as a board member or worked as a manager for at least one year prior to appointment
  • Three (3) CAMs who obtained their licenses at least three years prior to appointment
  • One (1) Colorado licensed CPA, with at least 5 years experience working with community associations
  • One (1) Colorado licensed attorney, with at least 5 years experience working with community associations

Notice how the committee is a wee bit unbalanced in favor of licensed management industry professionals?

As proposed, the 7-member committee consists of only two housing consumers, one of which is an HOA board member. The rest of the members  will be credentialed professionals.

In all likelihood, they will be members of the HOA industry trade group, Community Associations Institute, which provides training for professional credentials.

 

Director of licensing authority and powers

The Director would have some mandatory duties, and many discretionary (optional) duties.

Here’s the important nugget in HB19-1212:

[the] DIVISION MAY REGULATE, INVESTIGATE, AND TAKE DISCIPLINARY ACTION AGAINST ANY MANAGER OR, IF THE MANAGER IS AN ENTITY, A PRINCIPAL OF THE ENTITY FOR A VIOLATION OF THIS SECTION.

Notice the use of the word “may,” as emphasized above. The Director may enforce Colorado law with regard to licensure standards, but the Director is not compelled to do so.

Summarizing the bill, the Director…

  • “Shall” maintain a list of all licensed community association managers and management companies in Colorado.
  • “Shall” make rules defining “appropriate” supervision of an apprentice, and “may” make other rules as necessary
  • Conduct due process hearings on licensees who are the subject of complaints filed by consumers
  • “May” enforce licensing standards by:
    A) Obtaining a court order to stop a manager from violating this licensing act, or from practicing without a license, and
    B) auditing financial records of the licensee, subject to rules, established as advised by the committee.

 

Good and bad provisions of licensing legislation

Good provisions:
HB19-1212 requires a criminal history and background check before submitting an application for a CAM license. If the applicant has a criminal conviction, no license will be issued. Of course, that’s an advantage and an important safeguard for all members of HOA-governed communities.

NOTWITHSTANDING SUBSECTION (3)(c) OF THIS SECTION, AN APPLICANT IS INELIGIBLE FOR LICENSURE IF THE APPLICANT HAS, WITHIN THE IMMEDIATELY PRECEDING TEN YEARS, BEEN CONVICTED OF AN OFFENSE INVOLVING UNLAWFUL SEXUAL BEHAVIOR AS LISTED IN SECTION 16-22-102 (9); A BURGLARY OFFENSE, AS DEFINED IN SECTION 18-4-202 OR 18-4-203; OR ANY FELONY INVOLVING FRAUD, THEFT, LARCENY, EMBEZZLEMENT, FRAUDULENT CONVERSION, OR MISAPPROPRIATION OF PROPERTY.

This bill also requires management companies or agents to fully disclose all fees they intend to charge in their management contract with an HOA . All subsidiary and affiliate vendor relationships must also be disclosed to the HOA in the management contract.

The intent is to prevent the management company from making a lowball bid on the contract, and then charging dozens of extra fees for services not covered in the basic contract.

Licenses must be renewed every three years, with subsequent criminal record checks, and requirements for continuing education, with reexamination. Again, the intent here is to periodically re-evaluate each manager for competence, and a clean background. In general, good for housing consumers.

Apprentice licenses, for managers in training, would only be valid for one year and not renewable. So a management company would have to prepare each apprentice to qualify for the licensing exam within one year.

Bad provisions:
The current bill states that a manager is not eligible for a license if a license has been revoked within 10 years prior to application — but the Director can reduce that period of ineligibility to as little as two years. That opens doors for HOAs to hire managers of questionable professionalism and character.

Reading between the lines, qualifications of a licensed professional are based upon continuing education and examination. But the Advisory Committee will influence rules for licensure, and play a key role in setting professional standards.

Most of the required training will be provided by the prominent trade group in Colorado, Community Associations Institute. They’re basically the only organization granting the credentials needed for licensing — the CMCA, AMS, or PCAM.

It’s possible that management companies will cycle through new Apprentices each year, who may work hard, and take required licensure courses, but not pass the exam.

There’s no doubt thatca fees for manager training will boost revenue for the trade group. And CAI membership fees (required in order to take courses) will support its Legislative Action Committees (LACs).

Many housing consumer experts agree that CAI LACs promote policies that financially benefit management and legal professionals, and lobby against homeowner/consumer friendly legislation.

Track and read CO HB19-1212
Sponsors: Brianna Titone (D) and Monica Duran (D)
Current status: Introduced In House – Assigned to Transportation & Local Government


Xeriscaping, water conservation in HOAs

Colorado law already prohibits an HOA from denying a homeowner the right to plant a drought-tolerant landscape — also known as xeriscaping.

But, like the American Flag Act of 2005, this law starts from the assumption that HOAs have broad authority to restrict use of private property, and then makes some minor exceptions.

Colorado law states that, while an HOA restrictions cannot outright forbid xeriscaping, it can still enact and enforce rules about the type and number of plants that can be used.  And an HOA can still require approval from an architectural standards committee.

The current bill seeks to allow the same restricted “freedom” of owners to plant xeriscapes, use alternative hardscape surfaces, or use drought tolerant potted plants, for limited common elements, such as private-use yard spaces, cluster housing courtyards, patios, or balconies used by one or a few members of the association.

Interestingly, the bill also extends the same provisions to Special Districts, units of local government that may also enforce design or aesthetic standards and rules.

The bill has passed the House 25-9, with one non-vote.

Track CO HB19-1050 Read House-approved version. Sponsors:   Brianna Titone (D), Kevin Priola (R), and Faith Winter (D)