Senate Bill 11-253 (“SB 253”), sponsored by Senator Morgan Carroll and Representative Angela Williams, was just introduced in the Colorado General Assembly. The purpose of the bill is to clean up and clarify provisions of HB 10-1278 which last year created the HOA Information and Resource Center (“Center”) and the HOA Registration to fund the Center – both of which are under the auspices of the Colorado Division of Real Estate (“Division”).

CAI’s Colorado Legislative Action Committee (“CLAC”) supports SB 253 and worked hard to get the legislation introduced. Here’s what you need to know about the bill:

Information Submitted at Time of Registration

The information HOAs are currently required to submit to the Division when registering can be extremely confusing and time consuming to gather. SB 253 limits the information that HOAs are required to submit when registering to the following:

(1)   Name of the association as listed in the records of the Secretary of State;
(2)   Name of the association’s management company, managing agent or designated agent;
(3)   Valid address and telephone number for the association or its management company, managing agent or designated agent.

Clarification of Penalty Provision for Failing to Register

Among other things, the penalty provision of HB 10-1278 affects the ability of an association enforce its statutory lien (including the superlien) when the association is not registered with the Division. There has been a difference of opinion on how the penalty provision of HB 10-1278 is to be interpreted. Some have argued that an association is not able to enforce its lien to recover delinquent assessments incurred during the time the association was not registered. Others believe the penalty provision simply suspends the ability of an association to enforce the lien for the full amount of the delinquency until the association becomes registered.

It was the intent of Senator Carroll, the original sponsor of HB 10-1278, that the penalty provision motivate associations to register and not be overly punitive. Consistent with her original intent, SB 253 provides that the right of associations to enforce the statutory lien for the full amount of a delinquency is suspended until the association is validly registered.

Clarification of Valid Registrations

In order to lessen the likelihood that courts will find an association is not validly registered and apply the associated penalties, SB 253 clarifies “valid registration” as follows:

(1)   A registration is valid when the Division accepts the information required to be submitted by an association and payment for the registration;
(2)   An association’s registration number, and an electronic or paper confirmation issued by the Division, are prima facie proof of registration; and
(3)   A court is not permitted to find that a registration is invalid as the result of a technical or typographical error.

Clarification that Pre-CCIOA Communities Are Required to Register

The intent of HB 10-1278 was that every association in Colorado is required to comply with the HOA Registration. However, the Division published a Position Statement with the opinion that associations created prior to July 1, 1992 (commonly known as “pre-CCIOA communities”) are not required to register. SB 253 makes it clear that pre-CCIOA communities are required to register. This provision is important for the following reasons:

(1)   The Position Statement is not binding upon the courts which will ultimately make the determination of whether an association is required to register. As a result, experts believe it is entirely possible that courts could disagree with the Position Statement and impose penalties upon pre-CCIOA communities for failing to register.
(2)   The intent of HB 10-1278 was that all associations would be required to register and this was factored into the equation when determining registration fees. As a result, it would be fundamentally unfair to associations created on or after July 1, 1992, to exclude pre-CCIOA from registering since it would necessarily increase registration fees to cover the costs of operating the HOA Information and Resource Center.

Since the Colorado General Assembly is currently scheduled to adjourn for the session on May 11, 2011, we expect SB 253 will proceed swiftly through the legislative session. The bill will next be considered by the Senate Judiciary Committee which is expected to schedule a hearing soon. As always, we will keep you updated on important developments to the bill.

In other news, SB 11-234 (“SB 234) – the residential transfer fee bill – after interesting testimony a couple of weeks ago in the Senate Committee on Local Government (“Committee”) is expected to be voted on today by the Committee. It is anticipated that the Committee will vote to support an amended version of the bill. To learn more about HB 234 as it was introduced, check out our April 7^th blog posting. Finally, we’ll post an update on the action ultimately taken by the Committee.