Beginning January 1, 2014, Colorado homeowners’ associations (“HOAs”) face new requirements to collect unpaid assessments, dues, and other debts from homeowners.
House Bill 13-1276 (“HB 13-1276”), which was approved May 28, 2013 and which amended the Colorado Common Interest Ownership Act (“CCIOA”), requires that in order for an HOA to use a debt collection agency or take legal action to collect unpaid assessments from homeowners, the HOA must adopt and adhere to a written debt collections policy. This policy must contain certain provisions, including that before an HOA can submit a homeowner’s delinquent account to a collection agency or refer it to an attorney for legal action, the HOA is obligated to send the homeowner a notice of delinquency delineating specific information.
CCIOA will also require two things before an HOA can foreclose on a lien. First, the balance of assessments and charges secured by the lien must equal at least six months of common expense assessments based on a periodic budget adopted by the HOA. Second, the HOA board must formally resolve to file a legal action against the specific unit owner on an individual basis.
As for collecting the debt, the HOA must make a good faith effort to coordinate with the unit owner to set up a payment plan that meets the statutory prescriptions of C.R.S. § 38-33.3-316.3. Among other things, such a plan must allow a unit owner to pay off the debt in equal installments over at least six months. Importantly, however, an HOA will not be precluded from pursuing legal action against a unit owner if the unit owner defaults under the payment plan. Additionally, the HOA does not need to negotiate another payment plan with a unit owner who has previously entered into a payment plan under the statute.