Colorado moving closer to licensing HOA managers

Colorado moving closer to licensing HOA managers

Colorado, starting July 1, will join nine other states that require community association managers to obtain a license and comply with a long list of rules.

The last big leap toward licensing happened this week, when the Colorado Division of Real Estate held a final rule-making session to iron out the details.

"I am anti-regulation down to my toenails, but this is something that needed to happen," said Dee Wolfe, chair of the legislative committee of the Rocky Mountain Chapter of the Community Associations Institute. "What will come out of this are trained and professional managers."

To obtain a license, managers must, among other things, pass a fingerprint-based criminal background check; pass a two-part exam showing they have expertise in community management and state homeowner association rules; and carry insurance.

Previously, anyone could hold themselves out as a community manager, contributing to a string of HOA horror stories that convinced legislators to pass a state licensing law in 2012.

"If you don't know what you are doing, you can do a lot of harm," said Carmen Stefu, owner of 4 Seasons Management Realty Group in Thornton and president of CAI-RMC, a trade group trying to boost the professional standards for the industry.

Big rush expected The state has debated licensing seriously for at least a decade, and the industry has toyed with the idea of requesting regulation in Colorado since the 1980s, Wolfe said.

The state estimates it will issue about 1,200 licenses, said Marcia Waters, director of the division.

But she concedes that is, at best, a guess.

A big rush to comply is expected between now and July, especially by managers at smaller HOAs. But the costs in time and money are not minor, and it appears some managers are resigning rather than completing the training and background checks.

What disruptions that turnover will cause in the short term to the 2.5 million homeowners in Colorado living in communities governed by HOAs remains to be seen.

But backers of licensing argue that over the long term it should greatly improve how communities large and small are managed in Colorado.

The state received 1,440 complaints related to HOAs last year, of which 548 were directed at community association managers, according to a report from the state's HOA Information and Resource Center.

Chief among them were managers not maintaining a community, poor communications with homeowners and not following the governing HOA documents.

And while licensing doesn't specifically target HOA boards, who generate even more complaints

than managers do, the expectation is that more professional managers will do a better job at educating and advising board members, many of whom are volunteers.

Last-minute changesMore than a dozen people told the division Wednesday of the last-minute changes they would like to see in the final rules.

The CAI-RMC, for example, would like renewals to come every three years instead of annually.

"If you can't offer three years, would you consider two years?" asked Denise Haas, the CAI-RMC's president-elect.

While Waters didn't preclude that, she said regulators typically start with an annual renewal when a new licensing program is launched.

"We don't have a good idea of the licensee population," Waters said. "We need to make sure the program is properly funded."

The CAI-RMC would like its most common certification, the CMCA, to substitute for state training requirements. That would simplify compliance for the estimated one-third of community managers who already carry the designation.

One big change the division accommodated prior to the hearing was eliminating a requirement that community managers carry a fidelity bond large enough to replace two months' of HOA dues and a community's reserves.

Managers at several Colorado HOAs have embezzled funds over the years, something criminal background checks should cut down on. But insurance is still needed to protect homeowners when theft does occur.

Managers argued the fidelity bond requirement would be cost-prohibitive and duplicative, given than HOAs already carry that coverage. The division agreed to allow managers to be added as additionally insured to association fidelity bonds.

Not everyone is happy with the way the regulations came out, even if they supported licensing.

No specific rulesStan Hrincevich, who runs the Colorado HOA Forum, a group that counts about 1,000 homeowners as members, said there is no specific rule stating managers are to comply with existing state law on community associations or the rules of the HOA they are supervising.

He also said managers aren't required to report on boards that are violating state or community rules.

"This is very basic, but missing in the licensing program," Hrincevich said.

He also argues that the division failed to require a more detailed disclosure on the transfer fees that HOAs charge when a property is sold, something he said was promised when a bill to limit those fees was shot down last year.

Even the CAI-RMC acknowledges at least one major hole that needs to be fixed even after the final rules come out and hopefully before licensing kicks in July 1.

The original statute didn't clearly spell out who is excluded from licensing, leaving the door potentially open to clerical workers and maintenance staffers at an HOA falling under the rules, said Molly Foley-Healy, an HOA attorney active with CAI-RMC. Waters, however, said she can make the call in any gray areas. And it is unlikely the division would expend limited resources pushing licenses on people who really don't need them.

"We really want to make sure we are clear in statute who is not a manager," said Foley-Healy, adding the group isn't trying to do an end-around the division and its final rule-making.

Aldo Svaldi: 303-954-1410, asvaldi@denverpost.com or twitter.com/aldosvaldi http://feeds.denverpost.com/~r/dp-business/~3/EG5X1KKP6xc/colorado-moving-closer-licensing-hoamanagers