HOA managers face new rules in July

DENVER — Managers of homeowners’ associations must be licensed by July 1 or face disciplinary action and possible fines from the Colorado Division of Real Estate.

Chief executives of management companies providing those services and their executives who directly supervise managers also are subject to the new rules.

Brian TerHark, chief financial officer of Westwind Management Group Inc. in Englewood, which manages about 70 HOAs in the Denver metro area, said the licensing requirements could improve service to HOA members.

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“Generally speaking, this has the potential to be positive for the industry,” TerHark said.

Industry representatives have been in front of the Legislature for several years seeking ways to reduce HOA mismanagement, he said. In 2013, House Bill 1277 was passed to address complaints the state received from HOA members. The law gave the Division of Real Estate the power to control and monitor those who serve as HOA managers. Colorado is the ninth state in the nation to require licensure of HOA managers.

“The state had been receiving complaints, but has had no authority to regulate,” TerHark said. “Now, the state is trying to achieve a balance between regulating the industry and controlling costs to HOAs and community association managers.”

Complaints received, in order of frequency, included managers not following governing documents, not performing maintenance operations, improper or selective enforcement of covenants, lack of communication with homeowners, poor accounting practices, failure to produce records, as well as using intimidation, harassment or retaliation methods, according to a review conducted by the HOA Information and Resource Center, which is managed by the Division of Real Estate.

Seventy-three percent of complaints were made against boards of homeowners associations, and the rest were brought against individual HOA managers.

To receive a license, applicants must pass exams on management and Colorado laws pertaining to the industry as well as undergo background checks, obtain insurance and pay an annual license fee, all of which costs nearly $1,000, including the $205 annual license fee. Those who are not already certified by one of several industry organizations will need to take 24 hours of course work before taking the exams.

After July 1, if someone is found to be operating without a license, the state has the authority to issue an injunction, forcing them to stop practicing until they obtain one.

Licensed managers may be subject to discipline for a variety of offenses. Depending upon the severity of the offense, the discipline may include an administrative fine not to exceed $2,500 for each separate offense, censure of a licensee, probation with terms, temporary suspension of a license or the permanent revocation of a license.

With the new law, the Division of Real Estate has the authority to conduct audits, look at the books and investigate, said Maria Waters, director of the division.

This could be achieved through random audits or by responding to consumer complaints, even those that come in anonymously. “I don’t anticipate a shortage of complaints,” she said.

The real-estate division primarily is funded through fees and assessments paid by the entities it regulates. It arrived at the annual license fee of $205 based on the estimated cost to run the program divided by the number of licensees. Waters said her agency expects about 1,200 managers to seek licensure. “Right now,” she said, “we don’t know for sure how many managers need to be licensed.”

Waters said the annual fee could go up or down in the future, based on the number of licensees.

Other costs associated with securing a license will be spent on education, tests, filing fingerprints with the Colorado Bureau of Investigation and obtaining insurance.

Managers must complete 24 hours of course work created by the division that covers financial, risk and facilities-management, governance and legal documents, ethics, bid requests, contract provisions and state law covering common interest ownership and nonprofits.

The course work is conducted by several companies selected by the division. Tuition ranges from $395 for an online class to $495 if special prepping sessions are included.

People are exempt from taking the educational course if they hold a Certified Manager of Community Associations certification awarded by the National Board of Certification for Community Association Managers, an Association Management Specialist designation awarded by Community Associations Institute, or a Professional Community Association Manager designation, also awarded by the institute.

All applicants must pass a two-part exam administered by Las Vegas-based PSI Services LLC. Cost to take the exam is $90 for the general test and another $90 for a state-specific test. The general test assesses general management competence, and the state test covers legal documents and statutes essential to the operation of a community association in Colorado.

Testing became available Feb. 1, and 118 people had taken the test as of March 26, according to Sean Rhyne, licensing director for the Division of Real Estate. Another 97 people are signed up to take the test. “I expect there will be a rush in June,” Rhyne said.

Applicants also must pay $39.95 to have their fingerprints submitted to the Colorado Bureau of Investigation for the purpose of conducting a criminal-history records check.

What is a community association manager?

A community association manager manages the common property and services of condominiums, cooperatives and planned communities through their homeowners’ or community associations.

In many respects, the work of community association managers parallels that of property managers. They collect monthly assessments, prepare financial statements and budgets, negotiate with contractors and help to resolve complaints.

In other respects, the work of these managers differs from that of other residential property and real estate managers. Community association managers interact on a daily basis with homeowners and other residents, rather than with renters.

Hired by the volunteer board of directors of the association, they administer the daily affairs and oversee the maintenance of property and facilities that the homeowners own and use jointly through the association. They also assist the board and owners in complying with association and government rules and regulations.

Some associations encompass thousands of homes and employ their own onsite staff and managers. In addition to administering the associations’ financial records and budget, managers may be responsible for the operation of community pools, golf courses and community centers, and for the maintenance of landscaping and parking areas.

Community association managers also may meet with the elected boards of directors to discuss and resolve legal issues or disputes that may affect the owners, as well as to review any proposed changes or improvements by homeowners to their properties, to make sure that they comply with community guidelines.

Doug Storum can be reached at 303-630-1959, 970-416-7369 or dstorum@bizwestmedia.com.