A pair of bills advancing through the Colorado legislature this year would make it harder for homeowners associations to foreclose on their members for unpaid assessments, while giving property owners a better shot at walking away with some of their equity should they lose their homes.
The measures are aimed in part at making good on a promise from the governor and lawmakers to change the state’s HOA laws after a Colorado Sun investigation published in August revealed that Colorado HOAs had filed roughly 3,000 foreclosure cases since 2018, more than 250 of which — or roughly 8% — resulted in properties being auctioned off, most for well below market value.
At least 100 of the auctioned properties sold for $60,000 or less, according to court records analyzed by The Sun, costing homeowners much — if not all — of the equity they had built.
“This is about trying to keep people in their homes as well as being sure they can be held accountable,” said Assistant House Majority Leader Jennifer Bacon, a Denver Democrat and a main sponsor of one of the measures. “Right now, the way to hold people accountable has been putting people out of their homes.”
House Bill 1337, the bill Bacon is working on with Rep. Iman Jodeh, D-Aurora, is the main measure aimed at addressing the findings in The Sun’s reporting.
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It would cap the attorneys fees an HOA can charge a homeowner facing eviction at half of the homeowner’s unpaid assessments and any other money owed to the association, or $5,000, whichever is less. The Sun investigation found that attorneys fees can make up a quarter or more of what a homeowner eventually owes their HOA.
The bill would also impose a “first right of redemption” on HOA-foreclosed homes sold at auction, giving homeowners, tenants, affordable housing nonprofits, a community land trust, a cooperative housing corporation and the state or local government — in that priority order — 30 days to file an affidavit stating their intent to purchase the property. They would then have 180 days after the sale to come up with the money and complete the deal.
“You should get a second chance of getting your home back,” said Elina Rodriguez, manager of policy advocacy at the Community Economic Defense Project, a nonprofit that is backing the measure.
Zach Neumann, who leads the organization, said his hope is that the right-of-first-refusal provision forces the investors who are buying HOA-foreclosed homes at sheriff’s auctions to make higher bids on the properties. That, in turn, would increase the chances that the person or family being foreclosed on would walk away with some money from the sale once their HOA debt and any other liens on the house, including the mortgage, are paid off.
“Our hope and our thought is that with this change in law, houses that are brought to auction will be sold at closer to market prices,” he said.
Rodriguez and Neumann said the long runway for when someone, an organization or the government could intervene and purchase an HOA-foreclosed home sold at auction is meant to combat how opaque the auction process can be.
The Sun found that the sales, while public, are advertised in low-circulation print newspapers, often don’t happen on the date they’re scheduled and sometimes require bidders to show up with large cashier’s checks. In-the-know investors are typically the only ones who show up to bid.
“What became abundantly clear to us was that this public, democratic, accessible process is, in fact, none of those things,” Rodriguez said.
House Bill 1337 passed the House last week on a 43-18 vote and is awaiting debate in the Senate.
Another measure, House Bill 1158, would require that the minimum bid for HOA-foreclosed homes being sold at auction be set at roughly 60% of the property’s market value. Right now, the minimum bid is set at whatever the homeowner owes their HOA, which may only be a few thousand dollars.
The Sun found one HOA-foreclosed home in Aurora that was auctioned off in 2021 for $5,000. The owner owed the HOA $4,889.31, which became the starting bid. About six months later, the condominium was resold on the open market for $420,000.
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“That way a homeowner does not walk away after paying (their) mortgage for many, many years with zero in their pocket, bad credit,” said Rep. Naquetta Ricks, an Aurora Democrat and a main sponsor of the bill. “We cannot in Colorado, if we say we want to keep people housed, continue to let people be robbed.”
Ricks, speaking on the House floor, cited The Sun’s reporting about how at least 100 of the HOA-foreclosed properties between 2018 and June 2023 that were auctioned off were sold for $60,000 or less.
“In Colorado you can’t buy anything for even $300,000,” she said. “So $60,000 is just robbery. This bill is going to fix that.”
House Bill 1158 would also require the state to gather and report data on people who lodge complaints about their HOA with regulators. HOAs would also be responsible for reporting foreclosure and member delinquency data to the state.
The measure is awaiting a final vote in the House.
HOA groups are opposed — or want changes
Approximately 2.7 million Coloradans lived last year in a home subject to an HOA, according to the state. That’s about half of Colorado population.
As a result, HOAs have a lot of political sway at the Capitol, and they and their representatives are fighting House Bills 1158 and 1337, arguing that they could make HOAs insolvent by making it impossible for associations to recoup their debt. They also argue that foreclosures are a rare tool of last resort.
The Colorado Coalition for Responsible Associations and the Community Association Institute’s Colorado Legislative Action Committee have registered opposition to House Bill 1158. So has Associa, a property management company with an international footprint.
“It would make housing even less affordable for those owners who pay for the important functions of their HOAs,” Suzanne Leff, an HOA lawyer representing Colorado Coalition for Responsible Associations, testified in a House committee in February.
Leff said those functions include things like insurance, structural maintenance and water and electrical bills.
“House Bill 1158 would allow a person not to pay HOA assessments and potentially walk away with a windfall while all the other members of the HOA hold the bill,” she said. “Let me be clear: Foreclosure of an HOA assessment lien is an extraordinary remedy. This new bill would effectively remove HOA lien foreclosures from the list of viable options for communities, while leaving more and more costs for paying owners to bear.”
John Krueger, vice president of government affairs for Associa, said Colorado HOAs have many hurdles to clear before initiating a foreclosure.
“Associations don’t want to foreclose and force people out of their homes,” he said. “It’s not incentivized in the law. That’s why this is a last resort to get an owner to pay their dues.”
The opposition to House Bill 1337 is less fierce. The Colorado Coalition for Responsible Associations and the Community Association Institute’s Colorado Legislative Action Committee want the bill changed, but aren’t flat-out opposed.
Leff said the bill won’t make attorneys fees go away. It will just force HOAs to charge their members more to cover whatever they can’t pass along to someone under foreclosure.
“If House Bill 1337 is intended to protect homeowners … why protect only certain homeowners?” she said, adding that her organization would support the bill if its provision capping attorneys fees was removed.
Ed Schoenheit, representing Ridgeview at Stetson Hills Master HOA in Colorado Springs, testified that some of the eviction protection provisions in House Bill 1337 are good. But he’s worried about capping the amount in attorneys fees an association can recoup.
“When we are restricted on the amount that we can collect, that is potentially going to cost our HOA and those non-delinquent owners additional funds,” he said. “I just can’t get behind that.”
Other HOA-related bills being debated by the legislature this year
The legislature is debating a series of other HOA-related bills this year. They include:
- House Bill 1078, which would require that property managers operating HOAs be licensed with the state starting in July 2025. The measure is awaiting a hearing in the House Appropriations Committee. The governor vetoed a similar measure in 2019.
- House Bill 1233, which would roll back a requirement in a bill passed by the legislature in 2022 that HOAs physically post a notice on a home whose owner owes money to the association. The measure passed the House and is awaiting debate in the Senate.
- Senate Bill 134, which would prohibit an HOA from restricting a member from operating a business out of their home. The measure has passed the legislature and is awaiting Gov. Jared Polis’ signature.
- House Bill 1091, which prohibits an HOA from restricting the installation, use, or maintenance of fire-hardened building materials in residential property. It was signed into law by Polis.