House Bill 1237 – A Good Step for HOA Owners

In his May 16, 2012, column, Stan Hrincevich bemoans the legislative process and the lack of enforcement mechanisms in the Colorado Common Interest Ownership Act (“CCIOA”), which governs homeowners associations. I agree with Mr. Hrincevich: the legislative process can be frustrating. That frustration is not limited to HOA legislation. Bills get amended in committee, voted down on the floor, and filibustered until time runs out in the session. We saw each of these things happen during the 2012 general session. Even so, the Colorado legislature managed to pass laws that benefit Coloradoans.

House Bill 12-1237—the HOA Records Bill—is one of those laws that specifically benefits homeowners living in community associations. The HOA Records Bill clarifies what constitutes a record of the association and what records associations must be produced to owners, creates a list of documents excluded from mandatory disclosure to owners, and removes the requirement that owners state a “proper purpose” for seeing the records they request.

As a legislator, I heard loud and clear from my constituents that the old laws concerning HOA records were confusing and contained too many hurdles for homeowners who wanted access to HOA documents. Among other things, HOAs failed to keep adequate records, or they refused to release records because they determined unilaterally that owners did not state proper purposes for their requests. The HOA Information Officer’s first annual report substantiated this concern—17% of complaints logged by the HOA Information Office during its initial year of operation related to transparency and records. The types of complaints also suggested that the existing statute did not lend itself to enforcement. The statute contained ambiguities that warranted clarification. A clearer statute could achieve more consistent application and greater compliance by HOAs.

In other words, the old HOA records statute did not suffer from an ineffective enforcement mechanism. Rather, the old statute was open to interpretation and, in some ways, invited abuses. Through HB 12-1237, I sought to correct the ambiguities in the statute and remove the sometimes inappropriately applied provisions that prevented owners from accessing information they should be entitled to receive. My co-sponsor, Senator Harvey, who represents constituents in Highlands Ranch (the biggest HOA in the state and one of the largest community associations in the country), recognized the clear benefits of HB 12-1237 too. Together we achieved unanimous committee and House and Senate approval, with the House concurring with Senate amendments on a 62 to 3 vote, during a highly contentious and partisan session. That’s no small victory for homeowners living in HOAs.

The HOA Records Bill is based on a uniform act created by content experts from across the United States. As in the uniform act, early versions of the HOA Records Bill excluded certain documents related to pending or threatened litigation, which, as Mr. Hrincevich notes, could serve as a broad catch-all for associations to refuse to produce records. That language was removed from the final version of the HOA Records Bill. Attorney work product, on the other hand, remains protected from disclosure. Just as Broncos fans cannot expect John Fox to publish his play book for the next big game, homeowners should not expect access to privileged and confidential documentation prepared by their association’s attorney when advising the board on legal matters or in preparation for litigation. This is only fair: an HOA board is not permitted to obtain attorney work product from the lawyer representing an owner against the HOA.

While I can agree with a concern about inadequate enforcement provisions in CCIOA, I cannot agree that improved enforcement mechanisms alone would solve problems arising from unclear statutes. Additionally, the jury is still out on what enforcement mechanisms CCIOA should include. House Bill 12-1237 was a necessary first step before going down the enforcement road. Unclear provisions of CCIOA, like the records provision, need to be clarified before associations can be penalized for failing to comply. As legislators, it is our duty to ensure that the laws in Colorado make sense, are balanced, and can reasonably be complied with. Our efforts relating to consumer protections and HOAs are just beginning. However, as with most things, we must proceed one step at a time.

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