Register your HOA
In addition to the annual Secretary of State Registration, HOAs are required to register annually with the Colorado Division of Real Estate. An HOA that fails to register timely, renew or pay the required fee may be precluded from imposing or enforcing a lien for assessments.
Meetings of the unit owners, as the members of the association, shall be held at least once each year. Frequency of meetings shall be determined by the members of the board unless an association’s governing documents state otherwise.
Elections and Voting
Elections and voting procedures are an important aspect in the existence and operation of an HOA. Owners vote for board of director members and officers of the association, as well as many other issues that come up for consideration that need owner approval. There are many detailed procedures that must be followed concerning voting and elections, which are covered in the CCIOA and in the association’s governing documents.
Managing HOA Budgets and Finances
One of the main functions of the HOA board of directors is to handle the finances of the association and to create an annual budget for its operation. The association assesses dues to the owners for its operation based upon that budget. The board of directors is responsible for making sure that enough income comes into the association by way of owner dues in order to meet its operational expenses and reserve requirements.
Common interest communities can be self-managed or they can hire a professional manager to undertake the day-to-day management operations of the association. If an association decides to self-manage its operations, then those duties fall upon the board of directors. In the alternative, an association may need someone experienced to handle these functions, so then the board of directors may hire a professional manager. Community association managers are not licensed in Colorado.
Hierarchy of Governing Docs and Laws
The hierarchy of governing documents is:
- Articles of Incorporation,
- Bylaws, and
- Rules and Regulations, Governance Policies, Resolutions, and Design Guidelines.
Responsible Governance Policies
The CCIOA requires an association to adopt nine (9) policies, procedures, and rules and regulations concerning multiple areas of governance:
- Collection of unpaid assessments;
- Handling of conflicts of interest involving board members;
- Conduct of meetings;
- Enforcement of covenants and rules;
- Inspection and copying of association records by unit owners;
- Investment of reserve funds;
- Procedures for the adoption and amendment of policies, procedures, and rules;
- Procedures for addressing disputes between the association and owners; and
- If the association has a reserve study prepared; whether there is a funding plan for any work recommended; the projected sources of funding; and whether the study is based on a physical analysis and financial analysis.
Amending Governing Documents
The CCIOA states that the declaration may be amended only by the affirmative vote or agreement of unit owners of units to which more than fifty percent of the votes in the association are allocated or any larger percentage, not to exceed sixty-seven percent, that the declaration specifies.
Any provision in the declaration that purports to specify a percentage larger than sixty-seven percent is hereby declared void as contrary to public policy, and until amended, such provision shall be deemed to specify a percentage of sixty-seven percent (67%). The declaration may specify a smaller percentage than a simple majority only if all of the units are restricted exclusively to nonresidential use.
The bylaws of an association must provide a method for amending the bylaws. The CCIOA prohibits boards from unilaterally adopting certain amendments and requires owner approval for such revisions to be valid. Specifically, boards cannot act on behalf of the association to take the following actions:
- Terminate the community
- At least 67% (or more) of all allocated votes in the Association must affirmatively agree to terminate the common interest community in a Termination Agreement. The declaration may have a percentage requirement higher than 67%.
- Elect members of the board (except to fill vacancies)
- Change qualifications of directors; Change powers and duties of directors; and, Change terms of the directors
In addition to the above, the Colorado Revised Nonprofit Corporations Act prohibits boards from unilaterally amending their documents to change quorum and requires all quorum changes to be presented to the members for approval.
Rules and Regulations
Typically, rules and regulations can be changed by a vote of the Board of Directors. Committees may also be used to create or change rules and regulations, which then may be adopted by the Board. Using a committee may create an environment of transparency and foster positive relations between the Board and the membership. Look to your governing documents for information specific to your community regarding any process required for amending the rules and regulations.
The Colorado Common Interest Ownership Act and the Colorado Nonprofit Act outline the type of documents required to be maintained by an association.
- Board and owner meeting minutes, permanently;
- Records of all actions taken by the owners or board without a meeting (i.e., actions by mail or electronic mail), permanently;
- Financial statements as described in section 7-136-106, C.R.S., for the past three years and tax returns of the association for the past seven years, to the extent available;
- Current written contracts to which the association is a party and contracts for work performed for the association within the immediately preceding two years;
- Ballots, proxies, and other records related to voting by unit owners for one year after the election, action, or vote to which they relate;
- All written communications within the past three years to all unit owners generally as unit owners.Please see Document Retention: When to Shred by Altitude Law for more information.
General Insurance Requirements
The Colorado Common Interest Ownership Act requires communities formed after July 1, 1992, to purchase and maintain certain property and commercial general liability insurance policies “to the extent reasonably available.” However, the requirements in CCIOA do not mention or require anything in relation to Federal Housing Administration requirements, which are separate and distinct and which HOAs are under no obligation to follow.
Fidelity Insurance or Bond Requirements
CCIOA also requires communities with 30 or more units to obtain and maintain fidelity insurance in an amount of at least 2 months' current assessments plus reserves, to provide protection against losses that are caused by fraudulent or dishonest actions by:
- An owner or employee that controls or disburses funds; or
- A person that is employed as an independent contractor to manage the association, unless the association names and covers them as an insured.
- An association may carry fidelity insurance in amounts greater than required and may require an independent contractor managing the association to maintain more coverage.
Also, if the association delegates powers of the board or officers relating to collection, deposit, transfer, or disbursement of funds to other persons or a managing agent, the bylaws shall require those persons to maintain insurance coverage or a bond of $50,000, unless the board requires a greater amount.