What are HOAs for?
Many neighborhoods in Colorado—especially those built within the past couple of decades—have homeowners associations (HOAs). In theory, the HOA is set up to benefit residents. For example, through the power of combined assets, many HOAs can negotiate lower rates for services such as trash removal than individual homeowners could receive. Some HOAs are set up to oversee neighborhood amenities such as swimming pools, clubhouses, tennis courts, and walking trails. And often, the properties in neighborhoods with HOAs are better kept than in neighborhoods without, because homeowners are held to the governing standards, which helps with resale value throughout the neighborhood.
Unfortunately, the board members of an HOA can sometimes engage in illegal or abusive behavior toward neighborhood residents. And although the Colorado Common Interest Community Act (CCIOA) governs how most HOAs are created and operated, it also gives HOAs powers that the board members, the neighborhood management companies and the HOAs’ attorneys sometimes abuse. But that doesn’t mean you don’t have recourse if you feel that the HOA has it out for you. At Robinson & Henry, we can help you face your unlawful HOA and win. Call us at (303) 688-0944 for a consultation.
Fighting an HOA
Depending on the situation, we have a variety of strategies to use against an abusive HOA.
Remove one board member or the entire board
Homeowners have the right to remove board members with or without cause. Your HOA’s governing documents should outline steps to call a special election in your neighborhood. To keep the HOA’s attorney from being able to stop the process, you must follow the steps exactly. However, once the special election is in place, you can elect a new member or an entirely new board.If the board member’s actions are especially egregious, you might be able to remove that member with court action. Allegations could include claims that the member engaged in fraudulent or deceptive conduct, and that the removal is in the best interests of the HOA or that the board member grossly abused his or her authority. Be aware that removing board members can be time-consuming and expensive. However, once new board members are in place, the old board members don’t have the power to harass you. Furthermore, the new board can fire the management company and their attorneys and start with a more reasonable slate.
Inspect the HOA’s records
All homeowners have the right to inspect certain HOA documents, including:
- HOA records, end-of-year records, and records of receipts and expenditures
- Records of claims and any monies received for the claims.
- Minutes of all meetings and actions taken by the board
- Communications among board members, including written communications and votes each member cast
- Homeowner names and addresses; governing documents, including current declaration, covenants, bylaws, articles of incorporation, rules and regulations and policies
- The most recent three years’ financial statements and seven years’ tax returns; contact information of the current board members and officers; the most recent annual report delivered to the Secretary of State
- Financial records of any unpaid assessments an owner currently has levied against his or her unit; the most current reserves study
- Current contracts the HOA is party to as well as those for work performed in the last two years
- Records of approvals and denials of homeowner requests for design or architectural approval
- Ballots, proxies and other records related to owner voting; resolutions adopted by the board
- The past three years’ written communications sent to homeowners.
If the HOA refuses to give you access to the HOA records, we can demand them for you.
Revoke the management company’s registration
Colorado law requires that HOA management companies register with the Colorado Department of Regulatory Agencies. If the management company loses their registration or if other HOAs learn about the company’s inappropriate behavior, it risks losing business. To determine whether legal action against the management company is warranted, we will first ensure that the company is registered. Then we’ll determine if the principals are properly licensed. If appropriate, we’ll help homeowners file the complaint with the Colorado Department of Regulatory Agencies, Division of Real Estate. Finally, if necessary, we’ll take civil action against the HOA management company.
Determine if the HOA board met its duties
The HOA board of directors has numerous obligations to the homeowners, including fiduciary duties, the duty to act prudently, the duty to act diligently, the duty of care, the duty of loyalty, the duty of confidentiality and the duty to act within the scope of authority. If you suspect that a director, in particular, is acting improperly—especially regarding fiduciary responsibilities—we can investigate the claims. Although a director’s liability might have been reduced if the bylaws indicate that homeowners waived the right to recover against the director, under Colorado law, certain claims against the director will not be eliminated, including claims about:
- Unlawful distributions
- Unlawful loans to the director
- Breach of the director’s duty of loyalty
- Acts or omissions not in good faith
- Intentional misconduct
- A knowing violation of the law
Defend against enforcement actions
If you feel the board is taking unnecessary or unfair action against you, you can defend against it in a couple of ways. If the board failed to follow the set rules in the governing documents, your violation might be considered null. Also, according to Colorado law, the HOA must “guarantee the…owner notice and an opportunity to be heard before an impartial decision-maker,” so you can have a chance to point out what you think is unfair about the action and defend your position regarding it.
Most homeowners and many attorneys are unaware of this portion of the law and end up caving to the HOA’s pressure. Sometimes an HOA’s action against you could be seen as selective enforcement of a rule or enforcement of a rule that has been abandoned. If either case is provable, your HOA is being arbitrary and you have a legal defense against the action.
Seek a declaratory judgment
The court can determine the rights of the parties without ordering anything to be done or without awarding damages. If the HOA has ordered you to make a change or remove something from your property, seeking a declaratory judgment might be for the best.
Damages and remedies
You could receive certain remedies if your HOA is found to be violating the law:
- Monetary damages for your direct and indirect expenses.
- Attorney’s fees.
- Punitive damages.
- Injunctions and restraining orders to stop the illegal actions.
If you believe that your HOA is acting illegally, unethically or inappropriately, contact us. We understand the ins and outs of homeowners’ rights regarding neighborhood associations, and we can help you determine the best course of action for your situation. Call (303) 688-0944 today.