News 5 Investigates

Jan 21, 2014 9:05 PM by Andy Koen

News 5 Investigates: State powerless to discipline HOAs

COLORADO SPRINGS - The State of Colorado is powerless to discipline homeowners associations that don't follow the law. When the News 5 Guardians uncovered proof that a local association wasn't following the Colorado Common Interest Ownership Act (CCIOA,) we were told by the Department of Regulatory Agencies that they have no oversight or enforcement authority.

The Woodmen Hills Filing Number 11 Design Review Council in Peyton doesn't consider its homeowners to be members. The existing bylaws do not allow homeowners to vote for the board, they can not attend board meetings and are not given hearings over disputes. Additionally, board members have no term limits and appoint themselves to office.

The Design Review Council is one of 8,857 covenant controlled communities registered with the Department of Regulatory Agencies as a homeowners association. However, Division of Real Estate Director Marcia Waters explained in an email that the registration process does not require the state to inspect governing documents of the applying agencies.

In fact, the Design Review Council's attorneys told us they don't have to follow the CCIOA law because, technically, they are not an HOA.

Attorney Jerry Orten explained that because the council collects less than $400 per year in annual dues, it can be considered a limited expense planned community exempt from all but three narrow provisions CCIOA.

We questioned Orten about that claim after discovering that his firm asserted super lien authority while foreclosing on Christopher and Amanda Wright last year for back due assessments.

Super liens are a unique privilege given only to homeowners associations. The CCIOA law mandates that courts must give those liens priority above all other debts and claims against a property.

Orten admitted in an email that the super lien was referenced in error in the Wright's case. His lawyers must have also erroneously asserted super lien authority in two other foreclosures cases against a Joanne Cook and Robert Dias. Those cases were dropped after the debts were settled out of court.

The Guardians also uncovered six different lawsuits filed last year by the Design Review Council in which the attorneys again reference CCIOA as giving them legal authority to collect attorney's fees. Regardless of whether those assertions were made in error, the debts are likely to hold up in court because Design Review Council Covenants also grant the power to collect attorney's fees.

After our report aired, board member Micah Howell emailed us to say homeowners are now invited to attend the board meetings. He also claimed that the board operates with transparency.

He stated the Design Review Council tried on three separate occasions to hold elections of the homeowners to implement new governing documents, but never reached the two-thirds majority vote Howell believes is necessary to override the existing documents.

However, the same bylaws that prevent homeowners from electing board members also contain an article giving the board the power to repeal their articles of incorporation and bylaws at any regularly scheduled meeting.

The Design Review Council drafted new bylaws in October of 2010 but never put them in place. Howell did not respond to our follow up email.

In fact, it seems the board is trying to force its homeowners into voting for new governing documents. Former board member Bill Crist told the Guardians in an email that he resigned because of differences with other board members.

He said the board is trying to enforce its covenants to the letter in an attempt to, "anger the homeowners to the point they can get a new set of covenants passed."

The next board meeting will be held at Wednesday evening at Falcon High School, 10255 Lambert Rd in Falcon.

A report written by Department of Regulatory Agencies to state lawmakers recommends eliminating exemptions such as the Limited Expense Planned Community loophole claimed by Design Review Council. The report authors seem optimistic that a new licensing requirement for HOA managers will result in better compliance from HOA boards.

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