JOINT RELEASE: Law Takes Effect to Protect Homeowners in HOA Communities

DENVER, CO - On October 1, legislation goes into effect to strengthen safeguards for homeowners with HOAs to help them retain the equity they built in their property and avoid HOA foreclosures.

“Homeownership is an important way to build generational wealth, but our current laws allow HOAs to strip away everything Coloradans worked hard for, which threatens the stability of hardworking families,” said Rep. Naquetta Ricks, D-Aurora. “If a homeowner suffers from a medical emergency, loses their job, or experiences other financial hardships that impact their HOA payments, their home can be foreclosed and sold for just cents on the dollar, and the owner’s hard-earned equity disappears instantly. This law helps create critical safeguards to ensure better notice, transparency, and accountability around HOA foreclosures so Coloradans can stay safely housed and protect their equity.”

“Homeowners deserve the certainty and stability of knowing that their home will not be sold out from under them without an opportunity to retain their equity - regardless of whether or not they have an HOA,” said Sen. Tony Exum, Sr., D-Colorado Springs. “Becoming a homeowner is a way to build generational wealth and secure housing stability for the long haul. By adding measures to increase transparency, strengthen homeowner protections, and prevent hasty enforcement and foreclosure actions from an HOA, we can keep Colorado families in their homes.”

“Colorado HOA homeowners, especially in my district, have had their largest asset taken from them and sold at an auction for a fraction of its worth over sometimes very small amounts owed to the HOA,” said Assistant Majority Leader Jennifer Bacon, D-Denver. “It can be difficult to recover after a foreclosure, especially with high housing costs and no equity to fall back on from the foreclosed property. With this law going into effect, we’re helping hardworking Coloradans from being senselessly displaced and ensuring that homeowners can recover some equity from the house they paid for.”

In cases where an HOA pursues a foreclosure against a unit owner, HB25-1043 allows an owner to file a motion with the court to delay the sale of their home at auction for up to nine months, during which time the owner could sell the home at market price. Currently, an HOA may sell the unit at auction for only the cost of unpaid assessments and attorneys’ fees, leaving the homeowner with little to no equity from the sale.

Before taking legal action or referring an HOA homeowner to a collection agency, the law strengthens the requirement that an HOA have a written policy of sending a unit owner the HOA’s ledger verifying the amount owed within seven business days after a homeowner requests it. Under HB25-1043, an HOA must also provide information from the HOA Information and Resource Center about its ability to foreclose and force a sale of a unit before taking legal action against a unit owner.

The law also requires an HOA to provide homeowners with a notice regarding the right to participate in credit counseling at least 30 days before initiating a foreclosure.

HOAs are now required to include additional information for the previous year when submitting their annual registration with the Department of Regulatory Affairs. This includes the number of unit owners who were late on payments of assessments, judgments obtained against unit owners, payment plans entered into with unit owners, and foreclosure actions filed by the HOA.

Reps. Ricks and Bacon have passed numerous laws to protect HOA homeowners, including protections to prevent HOAs from quickly foreclosing on homeowners because of late or unpaid HOA fines and fees. Rep. Bacon and Sen. Exum also passed a law to create safeguards against foreclosure and protect HOA residents from having to pay excessive attorney fees that can result from enforcement actions.

Homeowners in Colorado Springs are currently protesting an unexpected $20,000 special assessment fee from their HOA. Under HB25-1043, these homeowners would have additional protections if their HOA pursues foreclosure for nonpayment of the special assessment fee.