If you fail to pay your HOA assessments in Colorado, the organization will most certainly get a lien on your property and may foreclose on it.
When you purchase a single-family home, townhouse, or condominium in Colorado that is part of a planned community with covenants, you will almost certainly be required to pay fees and assessments, which are sometimes referred to as “assessments,” to a homeowners’ organization (HOA). If you fall behind on your assessments, the association will most likely attempt to recover the debt by regular means first. For example, the HOA will most likely contact you and send you letters.
If such efforts don’t work, the association will most likely attempt another method of collecting from you. The HOA may revoke your usage of the common facilities or initiate a lawsuit to obtain a monetary judgment against you.
Most HOAs have the authority to place a lien on your property if you fall behind on your assessments. Not only would an assessment lien obscure the title to the property, making it difficult to sell or refinance, but the property may also be repossessed to compel a transfer to a new owner—even if the property is mortgaged.
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Summary of Colorado HOA Law
On Colorado, if your house is part of a HOA and you fall behind in assessments:
If you become behind on your assessments, the HOA may file a lien on your house.
The HOA may levy assessments, late fees, collection expenses, lawyers’ fees and costs, penalties, interest, and other fees.
The association must supply you with a statement detailing the amount of past-due assessments if you request it.
The HOA may foreclose if you fail on the assessments, but only if the total amount secured by the lien is equivalent to six months or more of common expenditure assessments and the HOA obtains board permission.
If a HOA lien is foreclosed, the priority of other liens, such as a mortgage debt, is determined.
In addition, Colorado has regulations that protect members who live in a HOA from debt collection techniques and landscaping, among other things.
If the HOA files a foreclosure case, you may have a defense, or you may be able to negotiate a means to catch up on the outstanding payments and keep your property.
Colorado HOA Regulations
The Colorado Common Interest Ownership Act (CCIOA) (Colo. Rev. Stat. 38-33.3-101 through 38-33.3-319) governs condos, co-operatives, and planned communities in Colorado, including condominiums built after July 1, 1992. (C.R.S. 38-33.3-115, 38-33.3-103). However, C.R.S. 38-33.3-316 applies to all condos, and an organization formed before July 1, 1992, may choose to have the development subject to the CCIOA (C.R.S. 38-33.3-117, C.R.S. 38-33.3-118).
The Colorado Condominium Ownership Act (CCOA) (Colo. Rev. Stat. 38-33-101 through 38-33-113) was amended by the CCIOA and supplanted much of the CCOA for communities built under the CCIOA. Only sections of the CCOA remain in existence for new condos, the most of which pertain to timeshares. The CCIOA is the subject of this article.
Furthermore, HOAs are often formed as nonprofit companies and are subject to the Colorado Revised Nonprofit Corporation Act (C.R.S. 7-121-101 and subsequent).
In General, How Do HOA Liens Work?
An HOA may typically get a lien on a property if the homeowner fails to pay the assessments in accordance with the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and state law. When a homeowner falls behind on his or her assessments, a lien is generally automatically attached to the property.
In certain circumstances, regardless of whether state law mandates registration, the organization will register its lien with the county registrar to give public notice that the lien exists.
Colorado HOA Liens
The recording of the Declaration of CC&Rs, often known as the “declaration,” in Colorado represents record notice and perfection of the lien. There is no need to document the claim of lien for assessments again. 38-33.3-316(4) (Colo. Rev. Stat.).
Charges That the HOA Could Include in the Lien
The sorts of charges that the HOA may include in an assessments lien are specified by Colorado law. 38-33.3-316(1) (Colo. Rev. Stat.). Unless otherwise specified in the declaration, the organization may levy fees for:
Assessments. Of course, the HOA might include overdue assessment amounts in the lien.
Charges for late payments. Assessment late payment penalties may also be included in the assessments lien.
Reasonable legal expenses and charges. In addition, reasonable lawyers’ fees and expenses spent by the HOA may be included in the overall lien amount. However, it cannot include expenses spent prior to the HOA meeting certain notification requirements. 38-33.3-316(7) (Colo. Rev. Stat.).
Fines. Fines for breaches of the declaration, bylaws, or rules and regulations of the association may be imposed by the association. However, the HOA may not punish any owner for an alleged infringement unless the association has a documented policy controlling fine imposition that includes a fair and impartial fact-finding procedure about whether the violation happened and whether the owner should be held liable for the violation. 38-33.3-209.5(2)(b)(I) (Colo. Rev. Stat.).
Interest. The HOA may additionally include interest on past-due common cost assessments at the association’s specified rate, not to exceed 8% per year. 38-33.3-315(2) (Colo. Rev. Stat.).
Additional charges. The organization may also levy additional fees, such as those for preparing and recording modifications to the declaration or statements of unpaid assessments. (C.R.S. § 38-33.3-302(l)).
HOAs in Colorado are required by law to have a consistent debt collection policy.
Most HOAs in Colorado are required by law to develop a policy guiding the collection of delinquent assessments, including engaging a collection agency or initiating legal action to collect unpaid assessments. Colorado Revised Statutes 38-33.3-209.5, 38-33.3-316.3).
How to Obtain an Assessments Due Statement
The association must furnish you with a statement of the assessments due if you submit a written request. If the HOA fails to provide a statement, it cannot issue a lien for unpaid assessments that were due at the time the request was made. 38-33.3-316(8) Colorado Revised Statutes .
Before pursuing legal action, HOAs must provide written notice.
An HOA shall send a notice of delinquency in the chosen language of the homeowner (see below) by certified mail with return receipt requested, post a copy at the residence, and provide notification via first-class letter, text, or email. 38-33.3-209.5 (Colo. Rev. Stat.
Also, before the HOA can refer a delinquent account to an attorney for legal action or a collection agency, the HOA must provide a notice to the homeowner stating, among other things, the total amount due, as well as an explanation of how the total was calculated and whether the opportunity to enter into a payment plan exists. 38-33.3-209.5 (Colo. Rev. Stat.
An HOA must give a written notice of any infractions in the homeowner’s chosen language, allowing the homeowner 30 days to fix the problem before incurring a punishment. (If a violation endangers public safety or health, it must be corrected within 72 hours.) Before pursuing legal action, the group must offer the homeowner another 30-day period—two consecutive 30-day periods—to rectify a violation. 38-33.3-209.5 (Colo. Rev. Stat.
An HOA must provide homeowners monthly notices (in their preferred language) of any outstanding balances with an itemized description of all assessments, penalties, fees, and charges that the homeowner owes via first-class mail and, if the HOA has an email address for the owner, by email. 38-33.3-209.5 (Colo. Rev. Stat.
HOAs Must Provide Payment Plans
Before commencing a foreclosure, a HOA must seek to work out a repayment plan with the homeowner. The repayment plan must enable the homeowner to settle the loan in monthly payments over the course of 18 months. The owner may determine the amount to be paid each month under the repayment plan, as long as each payment is at least $25. 38-33.3-316.3, 38-33.3-209.5 (Colo. Rev. Stat.
However, a HOA is not required to provide a payment plan to a unit owner who has already agreed to one. Colorado Revised Statutes 38-33.3-316.3.
Colorado HOA Lien Foreclosures
In Colorado, a HOA may foreclose on its lien in the same way that a lender can. 38-33.3-316(11) (Colo. Rev. Stat.). Because mortgages in Colorado must be foreclosed in court, a HOA must file a lawsuit to do so.
This procedure varies from the majority of Colorado home foreclosures. Colorado house loans are often backed by a deed of trust rather than a mortgage, and residential deeds of trust foreclosures are frequently nonjudicial.
HOA Foreclosure Restrictions
In some cases, Colorado law restricts a HOA’s authority to foreclose.
There will be no foreclosure for a debt consisting simply of penalties or associated charges. An HOA may not foreclose on its lien if the debt backing the lien includes any or both of the following: (1) penalties or (2) collection expenses or lawyers’ fees incurred by the organization that are exclusively related to assessed fines (Colo. Rev. Stat. 38-33.3-316(1)).
The amount of the delinquent is limited. An HOA (or the assignee of the HOA’s lien, similar to a third-party debt collector) may only foreclose if the total amount secured by the lien is equivalent to six months or more of common cost assessments based on the association’s monthly budget (Colo. Rev. Stat. 38-33.3-316(11)).
Before a foreclosure may occur, the board must approve it. Before proceeding with a foreclosure on any particular outstanding account, the HOA executive board must vote in favor of it and may not transfer this power to an attorney, insurer, manager, or any other individual. The board must explicitly determine, by recorded vote, to allow the launching of an individual legal action against the specified unit. 38-33.3-316(11) (Colo. Rev. Stat.).
The limitation period. To keep the lien legitimate, the HOA must file an action to enforce the lien within six years of the entire amount of the assessments becoming due. 38-33.3-316(5) (Colo. Rev. Stat.) .
Your Mortgage and HOA Liens
A widespread misperception is that the association cannot foreclosure if your mortgage payments are current. However, whether or not you are current on your mortgage does not affect an association’s power to foreclose. Instead, what occurs in a foreclosure is determined by lien priority.
What Exactly Is Lien Priority?
The priority of liens affects who gets paid first after a foreclosure auction and, in many cases, whether a lienholder gets paid at all.
Liens normally follow the “first in time, first in right” rule, which states that the lien that is registered first in the land records takes precedence over subsequent recorded liens. A first-lien has a higher priority than other liens and receives first dibs on the earnings of the foreclosure auction. If any funds remain after paying off the first lien, they are distributed to the second lienholder until that lien is paid off, and so on. A low-priority lien may get nothing from a foreclosure auction.
However, state law or the governing papers of an organization might change lien priority.
Colorado HOA Lien Priority
Under Colorado law, an association lien takes precedence over all other liens, with the exception of:
Liens recorded prior to the declaration include a first mortgage or deed of trust recorded before the date the assessment sought to be enforced became late, as well as liens for real estate taxes and other governmental charges. 38-33.3-316(2)(a) (Colo. Rev. Stat.).
However, a HOA receives a super lien in the amount of the common expenditure assessments that would have been payable during the six-month period prior to the HOA or a lender with a senior lien initiating a foreclosure action. 38-33.3-316(2)(b) (Colo. Rev. Stat.).