Homeowners Associations – Frequently Asked Questions
What is a Homeowners Association / Common Interest Community?
A homeowners association (“HOA”) or Common Interest Community, (“CIC”) as further defined under the Colorado Common Interest Owneship Act (“CCIOA”) is a not-for-profit private corporation established in order to provide maintenance for common elements, protect property values through restrictive covenants, and collect assessments from owners to operate the HOA.
There are three general types of HOAs:
- Planned Unit Development (“PUD”) – the HOA owns the common areas of the community.
- Condominium – each owner owns a percentage of the common area as defined in the Declaration of Covenants. Typically exterior maintenance of the homes is included in a Condominium HOA.
- Cooperative – each owner owns a share in the corporation. Example: high rise building.
What are the powers of the board of directors?
Generally, board members have the authority to do the following:
- Enter into contracts on behalf of the association with various vendors;
- Control the maintenance of common areas, which includes the right to decide on how the common areas will be maintained, when they will be maintained, and who will perform any service on them;
- Initiate legal action on behalf of the association;
- Control the maintenance of unit exteriors (generally in condos and townhomes);
- Enter into management agreements with management companies with or without input from the membership;
- Obtain insurance for the benefit of the community, including property and liability policies, as well as directors’ and officers’ liability policies;
- Enforce covenants and rules, including imposition of fines and initiation of legal action in accordance with its covenant enforcement policy;
- Adopt budgets for presentation to owners for ratification;
- Collect delinquent assessments and impose late fees in accordance with the association’s collection policy;
- Adopt rules and regulations governing use of common areas, and to a certain extent, of the units within the association (i.e. rental and leasing restrictions);
- Grant easements and licenses over common area, and;
- Create and disband committees and appoint committee members;
What are the powers of the members of an association?
Generally, association members have the authority to do the following:
- Elect a board of directors;
- Remove of the board of directors (see section 38-33.3-303(8) of the Colorado Common Interest Ownership Act);
- Approve amendments to governing documents (details are usually found in governing documents);
- Approve/ratify special assessments (details are usually found in governing documents);
- Approve/ratify budgets (details are usually found in governing documents); and
- Approval of the sale/transfer of common areas (details are usually found in governing documents).
What information must an HOA disclose and how often must they do so?
The Colorado Common Interest Ownership Act requires common interest communities to disclose the below information to their membership within 90 days after the end of each fiscal year. This is often referred to as the annual disclosure.
- Name of the association;
- Name of the association’s designated agent or management company, if any;
- Valid physical address and telephone number for both the association and designated agent or management company, if any;
- Name of the common interest community;
- The initial date of the recording of the declaration and the reception number or book and page for the declaration;
- The date on which the association’s fiscal year commences;
- The association’s operating budget for the current fiscal year;
- A list, by type, of the association’s current assessments – including regular and special assessments;
- The association’s annual financial statements, including any amounts held in reserve for the fiscal year immediately preceding the annual disclosure;
- The results of the association’s most recent available financial audit or review;
- A list of all association insurance policies, including, but not limited to property, general liability, association director and officer professional liability, and fidelity policies. This list must also include the company names, policy limits, policy deductibles, additional named insureds, and expiration dates of the policies listed;
- The association’s Bylaws, Articles of Incorporation, Rules & Regulations;
- The Minutes of the Executive Board and Membership Meetings for the fiscal year immediately preceding the current annual disclosure; and
- The association’s Responsible Governance Policies adopted pursuant to section 38-33.3-209.5 of The Colorado Common Interest Ownership Act.
Associations must make the information above available to its members at no additional cost to unit owners and may do so by one of the following ways:
- Posting on an internet web page with accompanying notice of the web address sent via first-class mail or email to all owners;
- The maintenance of a literature table or binder at the association’s principal place of business; or
- Mail or personal delivery to all owners.
The costs associated with these methods of delivery and making the disclosures available shall be accounted for as a common expense liability of the association.
What is the General Hierarchy of an association’s governing documents?
Generally, the hierarchy of governing documents is 1) Declaration of Covenants, Conditions, and Restrictions (“CCRs”), 2) Articles of Incorporation, 3) Bylaws, 4) Governance Policies, 5) Rules & Regulations, and 6) Design Guidelines. Note that #1 is the highest level of authority.
Note: The plat map and Colorado Common Interest Ownership Act succeed all governing documents listed above.
What are responsible governance policies?
Section 38-33.3-209.5 of the Colorado Common Interest Ownership Act requires an association to adopt policies, procedures, and rules and regulations concerning multiple areas of governance. Most of the required policies do not have substantive requirements other than their existence. However, the Colorado Common Interest Ownership Act does mandate some substantive requirements for a few policies.
- Collection Policy
At minimum, an association’s collection policy must contain the due date of the assessment as well as the date it is considered past due; late fees and interest that may be charged, amount of any fee if a payment is not honored by a financial institution and any payment plan options, keeping in mind that the Colorado Common Interest Ownership Act requires that an association, upon request, make good faith efforts to coordinate a payment plan with a delinquent unit owner who has not already entered into a payment plan with the association. A collection policy should also include information on how payments are applied to owners’ accounts, notice requirements and a description of the action required to cure a delinquency, keeping in mind that the Colorado Common Interest Ownership Act requires an association to provide at least 30 days to cure a delinquency.
- Covenant Enforcement Policy
A covenant enforcement policy is going to be unique to the individual community it governs. However, the Colorado Common Interest Ownership Act requires that, at a minimum, a community’s covenant enforcement policy contain notice and hearing procedures, as well as the schedule of fines.
- Conduct of Meetings Policy
As best practice, this policy should include how long homeowners are allowed to speak about a particular issue; what constitutes inappropriate behavior at a meeting; notice requirements; information regarding issuance and provision of proxies; and information about electronic voting, etc. An association’s conduct of meeting policy should also include information related to the board making decisions outside of a meeting.
- Inspection of Records Policy
Section 38-33.3-317 of the Colorado Common Interest Ownership Act defines what records must be kept by the association, for the purposes of retention and production to unit owners. You may want to review a summary of House Bill 12-1237, which has subsequently been incorporated into the Colorado Common Interest Ownership Act Section 317. It may help understand which association records “must be produced”, which “may be produced” (at the discretion of the Board), and those which “must be withheld”.
The Colorado Common Interest Ownership Act also states that all records maintained by an association must be available for examination and copying by a unit owner or the owner’s authorized agent. As such, owners must be provided access to association records, with limited exceptions.
Any inspection of records policy should clearly address how a member should request records. An association may require unit owners to submit written requests, describing with reasonable particularity the records sought, at least ten (10) days prior to inspection or production of the documents.
Examination and copying times can also be limited to normal business hours or the next regularly scheduled board meeting if the meeting occurs within thirty (30) days after the request. Additionally, the policy cannot require owners to demonstrate a proper purpose for the inspection and cannot request that a purpose be stated. A reasonable charge may be imposed and can be collected in advance to cover the costs of labor and materials incurred for the production of requested documents. The policy should clearly state how the association will calculate charges for production.
- Conflict of Interest Policy
Conflicts of interest may exist in a variety of circumstances and even the perception of one is enough to create discord within homeowners associations. The Colorado Common Interest Ownership Act requires that an association’s conflict of interest policy address, at minimum: when a conflict of interests exists; procedures to follow when a conflict of interest arises, including procedures regarding disclosure and a description of circumstances under which a conflicted board member must recuse themselves from voting. It should also require a periodic review of the policy.
- Investment Policy
The Colorado Common Interest Ownership Act requires that homeowner associations have a policy regarding the investment of reserve funds. Boards should consult with a qualified financial planner and/or CPA to determine the most appropriate investment strategy for their community.
- Adoption of Rules and Policies Policy
Homeowner associations must also have a policy which describes the procedures for the adoption and amendment of policies, procedures, and rules. This policy should clearly state the process for adoption and amendment of an association’s policies.
- Alternative Dispute Resolution (“ADR”) Policy
While The Colorado Common Interest Ownership Act requires an association to have an ADR policy, it does not specify what needs to be included. Although mediation is encouraged, if an association does not wish to engage in ADR, they may have an ADR policy which states so.
- Reserve Study Policy
Although the Colorado Common Interest Ownership Act does not require reserve studies to occur, it does require an association to have a policy which states when a reserve study is going to take place; whether there is a funding plan in place for the work recommended by the study, and whether the study is based on a physical and financial analysis. Additionally, the Colorado Common Interest Ownership Act states that an internally conducted study is sufficient to comply with this rule.
Does my HOA have to follow the Colorado Common Interest Ownership Act?
The Colorado Common Interest Ownership Act (“CCIOA”) is a set of laws that govern the formation, management, powers, and operation of Common Interest Communities (HOAs) in Colorado. While most of the important provisions in the Colorado Common Interest Ownership Act apply to all Common Interest Communities, regardless of when those communities were created, some provisions apply only to communities created after July 1, 1992. Additionally, common interest communities created before July 1, 1992, are still subject to the older law.
Determining which sections of the Colorado Common Interest Ownership Act apply to a pre-1992 association can be a complex question, as several variables must be considered, including but not limited to:
- the date in which the community was created;
- the type of community (i.e. co-op, condo, planned community);
- the size of the community; and the amount of expenses the community incurs.
For more information on the applicability of the Colorado Common Interest Ownership Act, please see:
- Application of the Colorado Common Interest Ownership Act in Subdivisions and Condominium Communities by the Office of Legislative Legal Services
- The Colorado Common Interest Ownership Act: All, Some or None and Why it Matters – A Webinar from The HOA Information & Resource Center
What are proxies and how may they be used?
Unless otherwise provided in the declaration, bylaws, or rules of the association, proxies may be appointed pursuant to the requirements of section 7-127-203 of the Colorado Revised Nonprofit Corporation Act, which allows for great latitude in the appointment of proxies and provides that an individual may appoint a proxy by: signing an appointment form; transmitting or authorizing the transmission of a telegram, teletype, or other electronic transmission providing a written statement of the appointment which shall include or be transmitted with written evidence from which it can be determined that the individual transmitted or authorized the transmission of the appointment. This is most commonly done in the form of an email appointment.
Proxies can be “general” or “directed.” General proxies simply appoint an individual to vote on an owner’s behalf and authorize such individual to vote as they deem appropriate on all issues. A directed proxy specifies and directs the proxy holder how they must vote on each issue.
With respect to the use of proxies by directors in board meetings, section 7-127-205 of the Colorado Revised Nonprofit Corporation Act (“CRNCA”) provides that in the context of board meetings, for purposes of establishing a quorum and for voting, a proxy may only be used if: the use of proxies for director meetings is specifically authorized in the association’s bylaws; and the director has granted a signed written proxy to another director who is present at the director meeting; and the proxy provides instruction regarding how to vote on specific items. If the association’s bylaws are silent on the issue of the use of proxies by directors then proxies cannot be used at director meetings. In addition, if the proxy form does not indicate how the vote is to be cast on each specific matter (for or against) then the proxy cannot be used for purposes of voting on that specific issue.
What is an executive session of the board?
The Colorado Common Interest Ownership Act allows for closed-door sessions of the board under specific circumstances (see section 38-33.3-308(3) of the Colorado Common Interest Ownership Act). The minutes of the meeting must state that an executive session was held and the general subject matter of the executive session. The specific circumstances under which entering an executive session would be appropriate are:
(a) Matters pertaining to employees of the association or the managing agent’s contract or involving the employment, promotion, discipline, or dismissal of an officer, agent, or employee of the association;
(b) Consultation with legal counsel concerning disputes that are the subject of pending or imminent court proceedings or matters that are privileged or confidential between attorney and client;
(c) Investigative proceedings concerning possible or actual criminal misconduct;
(d) Matters subject to specific constitutional, statutory, or judicially imposed requirements protecting particular proceedings or matters from public disclosure;
(e) Any matter, the disclosure of which would constitute an unwarranted invasion of individual privacy, including a disciplinary hearing regarding a unit owner and any referral of delinquency; except that a unit owner who is the subject of a disciplinary hearing or a referral of delinquency may request and receive the results of any vote taken at the relevant meeting; or
(f) Review of or discussion relating to any written or oral communication from legal counsel.
What are meeting minutes?
Meeting minutes are notes that are recorded during a meeting. They highlight the key issues that are discussed, motions proposed or voted on, and activities to be undertaken. The minutes of a meeting are usually taken by the board secretary or community association manager. Their task is to provide an accurate record of what transpired during the meeting.
Are there any rules regarding how minutes should be taken or what information they should contain?
Section 38-33.3-317(1)(c) of the Colorado Common Interest Ownership Act states that the association must keep, as permanent records: minutes of all meetings of the unit owners and executive board; a record of all actions taken by the unit owners or executive board without a meeting; and, a record of all actions taken by any committee of the executive board. The only section of the Colorado Common Interest Ownership Act which speaks to the contents of minutes is section 38-33.3-308(7) which states that minutes of all meetings at which an executive session was held shall indicate that an executive session was held and the general subject matter of the executive session.