Saturday, May 07, 2005

Colorado: Governor may veto bill giving owners more rights

Amazingly, some HOAs don't allow owners to speak at meetings or to see financial reports. Senate Bill 100 in Colorado's General Assembly, which would correct that problem and has passed the House, may soon hit Governor Owens' desk. He almost never expresses an opinion about a bill like this until he signs or vetoes it. Lobbyists for HOAs oppose the bill, but I wouldn't, because our HOA is open and fair with our owners. The Rocky Mountain News reports:

Carroll's bill started small after constituents complained to her they couldn't post political signs, xeriscape their lawns or even fly the American flag in their yards because of HOA rules.

But it grew to include due-process rights and the rights to see financial reports.

Opponents argued the bill interferes with private contracts between an association and an individual. A late blitz by HOA lobbyists attempted to exempt resort properties such as Vail from the expansion of homeowner rights.

"It was an 11th-hour gigantic lobby feeding frenzy and it might work," Carroll said at midday Friday.

But a legislative committee rejected attempts to weaken the bill, and the House voted 37 to 27 later Friday to approve the stronger version.

Update: The governor may veto vetoe the bill.

Friday, May 06, 2005

Create private neighborhoods from public ones

Robert H. Nelso of the University of Maryland School of Public Affair writes in Regulation Magazine:

In 2004, more than 17 percent of all Americans belonged to a homeowners or condominium association, or were part of a cooperative. This privatizing of the American neighborhood represents a fundamental development in the history both of local government and of property rights in the United States. The rise of private neighborhoods, as Steven Spiegel wrote in a 1998 law journal article, is achieving "a large-scale, but piecemeal and incremental, privatization of local government." I propose to expand this privatization by establishing a legal mechanism by which an existing neighborhood could create a private neighborhood association. It would be similar to the incorporation of a new municipality, but it would result in the creation of a private neighborhood based on a private property relationship among the property owners of the neighborhood.

Click on the head to access the full article.

National standards for HOA and condominium reserves; Colorado doesn't require studies

If you're looking for an outline for a reserve study, this probably is a good start. Click on the headline to find and download the pdf file of the 17-page document. What it is is an application for certification as a reserve specialist who prepares studies for HOA clients. Along with the application forms you'll find the basic outline of a study. I don't think you have to be a construction engineer to do this study. What you do is obtain estimates on doing certain high-cost capital projects such as painting, replacing roofs, concrete work, street repairs, pool repairs, major replantings, etc. In obtaining those estimates, the HOA board or management company can get estimates of the expected lives of various components and work them into their reserve studies.

The question is whether a small HOA has to go through all of these hoops.

HIring an outside firm protects the board in terms of proving that it lived up to its fiduciary responsibility. But this can also be proved by doing your homework and keeping your working papers and spread sheets for review.

Colorado doesn't require reserve studies. At the Association Reserves, Inc. site, click on the State Legislation button and select your state to see what it requires. The Reserves Study Legislation button is here.

Some Q&A about Condo reserves are are offered here.

Things to consider in reserve studies

Association Reserves Inc. outlines its recommendations for HOAs in Florida, and they are worth considering in other states as well.

Community Associations Network offers blogs on HOAs and these resources for those interested in reserves studies.

Ohio bill says condominiums must reserve at least 10% of budget annually

The firm Kaman & Cusimano tells clients that the most significant provisions of Ohio's new condo legislation:

"specifies that “unless otherwise provided in the declaration or bylaws,” the board must adopt and amend budgets for revenues, expenditures, and reserves in an amount adequate to repair and replace major capital items in the normal course of operations, without the necessity of special assessments, provided that the amount set aside annually shall not be less than ten percent (10%) of the budget for that year unless the reserve requirement is waived annually by the unit owners exercising not less than a majority of the voting power of the unit owners’ association."

It notes that many HOAs don't have the reserves they need and they will have to increase home owners' fees:

"For many associations, fully funded reserves in accordance with a reserve study are going to cause a drastic, but necessary, increase in fees. If a board believes that fully funding the reserves will cause too drastic of an increase, it must send a letter and a ballot to each owner. The letter must disclose the amount necessary for fully funded reserves. This disclosure should mitigate any claims against the board by a future purchaser who gets hit with a large special assessment. In addition to disclosing the amount necessary to fully fund reserves, the board should indicate the lower amount the board proposes be put into reserves, and request ownership approval of the alternative, lower amount. A ballot should be included for the owner to sign and return. In the event the board fails to obtain majority approval for the lower reserve amount, the fully funded reserve must be implemented. Current bylaws dictate the date by which the board must have an approved budget for the following year. All balloting must be completed in time for the board to meet the required budget approval date."

Why HOA boards need to build reserves

This is a rather terse explanation.

Track the real estate market at Yahoo!

This is a good resource.

Boards need to know what condo and townhouse buyers are looking for offers this simple outline of what to look for in buying a condo or townhouse.