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.

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

ehow.com offers this simple outline of what to look for in buying a condo or townhouse.

Legal books worth a look

Condominium and Homeowner Association Practice: Community Association Law, by Wayne S. Hyatt. ali-aba.org. The book is out of print.

Privatopia, Homeowner Associations and the Rise of Residential Private Government, by Evan McKenzie, 1994, Yale University Press.

Duties and responsibilities of HOA board members

This article is worth a read.

Reserves of $3,000-$6,000 per unit recommended

HOA Boards should accumulate reserves of about $3,000-$6,000 per unit, according to this article. I take these recommendations as being a bit extravagant, driven, perhaps by the wishes of the banking industry, which salivates at the thought of receiving such huge sums of money. Richard Thompson writes,

"As a rule of thumb, the average garden variety condominium should have around $3000-$6000 per unit in reserves, depending on amenities. There are many HOAs that should have much more than that because of deferred maintenance or extensive common elements. Even the most modest properties should have tens of thousands of dollars socked away in reserves. Larger, more complex properties should accumulate reserves in the millions. To truly know what level of reserves applies, a reserve study must be performed by an experienced and qualified reserve analyst. (See www.apra-usa.com for a list.)"

Resources for HOA boards

This Old House offers a wealth of information about home and building maintenance and repairs.

Regenesis publishes a newsletter and offers paid subscribers access to what appears to be a lot of info. I haven't subscribed yet.

What should go in an HOA owners' handbook?

Creating an HOA owners' handbook can be as simple or complicated as you want to make it. The mission of a handbook is to make it easy for owners and residents to follow the HOA's rules and to get things done. The trick is to keep a handbook small and readable so that people will use it.

One way to start is to simply rewrite the HOA's bylaws or covenants into understandable language. This can be done by making a list of topics and writing simple explanations. Another is to write a list of Frequently Asked Questions and answering them.

After the HOA's basic rules have been covered, you can expand your book to summarize rules that have been created and updated by the board of directors since the HOA was formed. The easiest way to do this is to make a list of topics and then research board minutes to find the answers to the questions created by the topics, say pets or parking.

What are the most common topics? Here's a list, which will be edited over time:

1. What can I do to my home without getting permission from the HOA board or a delgated authority?
2. When to I need to get permission before I do something to my home?
3. How do I apply for permission?
4. How long does it take to get permission?
5. Why do I have to get permission?
6. What happens if I do something without getting permission? Are there penalties?
7. How do I get help from the HOA or the management company?
8. Who do I call?

9. Is there a web site?
10. I want to get cable TV. How do I do this and do I need permission?
11. I want to get satellite TV. Where do I put the dish, and how do I get permission?
12. I want to put in some plants. What is the process for getting permission?
13. Are there rules regarding planting flowers, bushes and trees?
14. Do I own any of the land outside my unit, or is it owned by the HOA?
15. What does the HOA do for me when it comes to maintaining my unit?
16. What maintenance responsibilities are mine?
17. Can the HOA require me to spend money to maintain my unit?
18. Snow. When is snow plowed and under what conditions?
19. Trash. How and when is trash picked up?
20. Are there limits to what trash will be picked up by our service and HOA?
21. Pets. What are the rules?
22. Parking. What are the rules?
23. Painting. Can I paint the interior of my unit without permission?
24. Painting. Are there any rules about painting my interior?
25. Painting. Can I paint the exterior of my unit?
26. Remodeling. Do I have to get permission to remodel my kitchen, bath, basement or whatever?
27. Garage doors. Do I have to keep my garage door closed?
28. Holiday decorations. Any restrictions regarding lights and other holiday decorations?
29. Peddlers and solicitors? What are the rules?
30. Parties. What do I do about parking when I have a party?

What house paint to use for townhomes?

Sorting through the exterior paint options for an HOA townhome complex is time consuming, but once I've done my research, we'll have a useful report for all to use.

This Old House explains how to select a paint.

This Old House explains how to select a contractor.

Our management firm doesn't have much painting and paint contracting experience. As a result, I'm talking to paint suppliers and contractors, using my reporting and research skills to figure out how the painting industry works in the Denver area.

Here is what I think happens:

Paint manufacturers all produce pretty much the same product with similar warranties, application processes and life expectancies.

Paint manufacturers market through painting contractors and stores. To attract contractors who will help sell their paint and then apply it appropriately to minimize warranty claims, paint manufacturers try to make using their products as profitable as possible for painting contractors. They do this by giving price discounts that vary depending on the volume of business they do with each contractor. The contractor keeps the discount and marks up the paint. Manufacturers produce paints that require five applications—power wash, primer, coat one, rollback, coat two—plus caulking and other repair work. This creates work and billable time.

In addition, manufacturers work with HOAs and other commercial prospects in developing job specifications, and they share the names of their favorite contractors with prospects. This creates a bond and co-dependence between manufacturers and contractors. It also can be helpful to consumers who know the paints they want to buy and are looking for dependable contractors and vise versa.

We've started by creating specifications for bidding painting contractors. Our process began when I e-mailed specs to our HOA management firm. Our manager then combined my specs with her ideas, and we reviewed them at our board meeting. I'll publish them later.

Now I'm shopping for paint. It is important to talk to and meet with each painting company's representative for your area. Each company offers various degrees of consulting to HOAs, and they all have similar but different requirements about how you have to use their products to qualify for their warranties.

Consumer Reports gives Glidden paints, which are distributed through Home Depot, their highest ratings. HD says it sells its Glidden paints to consumers and contractors at the same price, regardless of quantity. I have contacted the Glidden representative for this area's HD stores. He is visiting our property and will send paint recommendations and a description of Glidden's warranty qualification process.

Lowe's sells a house brand made by www.Valspar.com. Valspar's a publicly-owned company and says it's the sixth largest paint maker in the world. In Denver, Lowe's doesn't have any regular contacts with painting contractors who paint exteriors. This suggests that the contractors are getting better deals elsewhere. The Warranty deal at Lowe's looks pretty simple. Your contractor pressure washes the building and lets it dry 72 hours. Then a Lowe's primer is applied followed by a Lowe's paint. Lowe's offers its top paint, American Prospect, which has a "lifetime warranty" and can be expected to last 12 to 13 years here in Colorado.

Kwal is a paint company based in Texas that serves the Rocky Mountain states. It's claim to fame is that it has established relationships with contractors who follow the processes that it specifies for a job to qualify for its 5 year warranty. It's warranty document is quite detailed, and it requires that a Kwal represenatative sign off on each stage of the job. Its local rep asked to meet with me and faxed me a lot of information about her products and warranty process.